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NewspaperEconomics and Catholic Social TeachingCatholic Social Doctrine Could Save the Day

Catholic Social Doctrine Could Save the Day


When the Catholic Worker began, one of Peter Maurin’s goals was to make the encyclicals “click.” He wanted people to know and understand the wisdom of Catholic Social Teaching in the time of the Great Depression and economic crisis.

With the economic crisis of 2008-2011, we could do worse than to turn to the encyclicals.

Lively discussions have been taking place among Catholics in the press and on the Internet about individualism in economics. A concept called “prudential judgment” has been bandied about by some who indicate that there is no need to listen to concepts from Church teaching or from the Scriptures where economics is concerned. It is true that prudential judgment that should be exercised by lay people in implementing the Catholic Social Teaching expressed in the Catechism of the Catholic Church and in papal encyclicals, but there has never been a suggestion that the guidance of this teaching should be ignored in favor of secular ideologies.

As Pope Benedict XVI said in Caritas in Veritate, “The Church does not have technical solutions to offer and does not claim to interfere in any way in the politics of States. She does, however, have a mission of truth to accomplish, in every time and circumstance, for a society that is attuned to man, to his dignity, to his vocation.”

The Catholic tradition emphasizes a commitment to the common good, the importance of respect for every person, made in the image and likeness of God It affirms a preferential option for the poor and the right of workers to form associations.

The ideas of the philosophers of the so-called Enlightenment and later the Austrian School of economics involve no such commitments, but have a great influence on today’s economic theories. Some Catholics have endorsed these theories without reservation.

Several Catholics have even attempted to recycle the savage, egotistical economic ideas presented in Ayn Rand’s novels. She is the woman who uses the sign of the dollar instead of the sign of the Cross in her book. Many hold Alan Greenspan (the head of the Federal Reserve from 1987 to 2006) responsible for the recession/depression of 2008-2009 which continues into 2011, especially for the unemployed. Greenspan was a close associate and disciple of Rand and in a key position to implement her ideas for a long period of time.

In an article entitled, “The Fall of Phantom Assets,” Peter Chojinowski argues that decisions made by Greenspan at the Federal Reserve regarding financial policy encouraged corporations and speculators constantly seeking higher profits in their business and on the stock market without regard for the consequences for the average person in the economy. His decisions, together with deregulation, encouraged the bankers to be involved more and more in risky mortgages.

Enormous financial trans-actions outside the stock market are difficult to understand. One of these is derivatives.

When stock market crashes or recessions occur, everyone struggles to understand what happened. In recent times words appear which the average person, or even some billionaires do not understand. Speculation on borrowed money, derivatives, dark markets, dark pools, hedge funds, private-equity firms… The words themselves promote conspiracy theories about those who control the economy at the highest financial levels. Perhaps these are not just conspiracy theories.

According to the International Monetary Fund, financial derivatives in the global economy (betting and swapping on stocks, mortgages, investments) had a notional value of $516 trillion. Chojinowski points out that this is more than 10 times higher than the total global Gross Domestic Product of all the countries. With speculation on such a grand scale, it is sad to see our misfortunes blamed on the poor, on immigrants, or on those who are out of work.

After devastating depressions or crashes in the past, the government stepped in to provide some regulation of commerce and banking to protect the people.

One author speaks of deregulation prior to 2008 that allowed mortgage lending to become a casino and decries the practice of allowing unregulated bond agencies to decide what was safe before the crash.

But how is all of this related to the huge debt the government owes? Luigino Bruni, economist of Economy of Communion, noted that in the recent case, with the massive bailouts, “The 2009 big bank bailouts primarily moved the private sector debt to the public sector, without removing the real causes of the problem, which find themselves in the U. S. and world middle class that is progressively impoverished and in debt. Behind the large public debt,” he says, “there is an inequality problem in income distribution that is becoming ‘the’ crucial question in our capitalist economic system.

“In the fall of 2008, when the crisis was about to explode, the 1% GDP share owned by the richest U. S. population reached its peak, just as in 1928, at the dawn of the great Wall Street crash, as Robert Reich reminded us in his latest, valued book (Aftershock, Razi, 2011). When the middle class is impoverished relative to the affluent class, it tends to borrow too much, also because now, unlike in 1929, the financial system proposes and promises magical recipes to maintain or increase, with debt, the levels of consumption.”

Will It Ever Trickle Down?

The “economists” of the Enlightenment and the Austrian School have fostered the belief which has trickled down that a market (corporations, banks, high finance) that is uninhibited by regulation or any control will ultimately be of benefit to most people. These marketeers defend the idea, however, that a certain level of unemployment is necessary for a “free market” economy. Ironically, at the same time as they recommend freedom for the market, they do not advocate freedom for workers to form voluntary associations or unions. The complaint is that unions are sometimes corrupt. That is true, but many enormous corporations or speculators are also corrupt.

Some of the ideas date back to the French Revolution, when in the interest of “equality,” it was thought that all that was necessary was to have a contract between two individuals (supposedly equal). The idea was promulgated that associations of workers such as guilds or unions were unnecessary, since any two people could enter into a contract. The associations were forbidden. What this led to was misery for the masses of workers, who were far from equal to employers in power or resources.

Some of those of the Austrian School go so far as to contend that the worst results of deregulation, such as extreme inequality between rich and poor, must be tolerated as it grows worse because this is intrinsic to a market economy. At the same time they argue against any kind of taxes or government assistance as interfering in business.

Could It BeTrue?

Events of recent years both in the United States and in so many countries around the world in the global economy have shown that the benefits touted by these theorists have not reached “most people.” For example, those who advocated deregulation and privatization told us that deregulating public utilities and allowing “free” competition among energy companies such as electricity would bring prices down for everyone.

At Casa Juan Diego we are unable to pay the hundreds of dollars in bills for electricity each month for the families who come to our doors begging for help. The price for the use of energy has not come down.

We also are made aware through our work of the devastating effect of privatizing prisons and detention centers.

The theory of deregulation for big business, big banks, and big financial dealings together with subsidies to corporations and cutting taxes has been implemented more and more since the 1980’s. If this theory were correct, more jobs and better jobs should be available. The unemployment figures do not even count those who are looking for work for the first time or who are no longer applying for unemployment benefits. Not only the very poor are negatively affected by the crisis in jobs, but new college graduates are finding it impossible to find work in any way commensurate with their education. The hard heartedness of the economic system becomes more apparent as some companies refuse to hire anyone who is not already working.

Where is Your god?

The way marketeers speak of how everything should be determined by the “invisible” hand of the market makes it sound like the “market” is their god. They speak of unchangeable laws and how one must accept whatever comes because the absolutely free market without any interference or regulation is the only ideology to follow. The problem is that the invisible hand of the market often has a knife in it for the poor and the unemployed, and now for the middle class.

Some Catholics, including some politicians, have endorsed extreme economic policies which have often been formulated by agnostics and atheists who have a very different understanding of the human person. Their stance creates some confusion because they appear to present these ideas as a Catholic approach, emphasizing selective ideas from the teaching such as subsidiarity but neglecting solidarity. Michael Novak was the one who suggested that for the new world of “democratic capitalism” we need a new religion.

What About the Workers?

These people, sometimes known as Catholic neo-conservatives, do not address the concern of the Popes and Catholic social teaching for workers. From the time when Leo XIII first defended the workers in a laissez-faire economy that made their working situations dangerous and difficult and wages pitifully small, the encyclicals have declared the right of workers to organize in associations, guilds, or unions. They have also advocated the participation of those who do the work in the ownership of the means of production. John Paul II said in Laborem Exercens that every economy should be judged by the way it treats its workers. In other words, laborers have rights, also, not just corporations, banks and speculators.

Catholic voices are raising issues about the approach of Catholics who advocate individualistic economics. Robert Christian, a fellow at the Catholic University of America, argues that some Catholic individuals mistakenly argue that policies based on the “deification of the market fall within the bounds of legitimate prudential reasoning.” Even Evangelical leader Marvin Olasky has recognized the problem among Christians and written an article entitled “Take a stand against Rand.”

There Are More Than Two Options

Underlying much of the discussion of economics and how it applies to politics is the idea that there are only two economic options, capitalism or socialism, that socialism is bad and therefore we must accept what might be called savage, individualistic capitalism.

Communism and socialism are failures. Marx and Lenin’s ideas and the totalitarian way they were implemented by Stalin and others had horrific consequences. The fascism of the twentieth century was also almost beyond belief in its horrors. Some of those who are against any government interference in regulating the market were trying to respond to the totalitarianism of these systems.

But these collectivist programs did not come out of thin air. They had their roots in the excesses of extreme individualism in savage capitalism in an earlier period, in the misery of workers, the majority of people.

As Peter Maurin said, I do not like capitalism and I do not like Marxism. But, Peter said, Marxism is the child of capitalism.

Who Should People Blame?

As people have become more insecure in this economy, the reaction of some has been to  become more individualistic and to justify again the abandonment of others who may be in need. In our culture, rugged individualism has been historically praised and people have seen it as a good thing. It seems now, though, that what is being advocated is not just everyone for himself, but everyone against everyone.

When presented with Catholic Social Teaching, some have reacted by saying, “Do you mean that after I have worked so hard that I have to give my money to those who don’t want to work? I don’t mind helping those who cannot work, but I don’t want to help those who are just lazy!”

What those who react this way may not realize is that the ideas which have influenced the prevailing economics come from a few agnostic or atheistic thinkers who have a very different view of the human person and the common good than the Judeo-Christian tradition. They may not realize that it is the cutthroat, speculative “free-market” economics which has created their own insecurity and the poverty and unemployment of many.

There are accusations floating around using socialism as an epithet to undermine Catholic social teaching or one’s political enemies. The loose way in which the words socialism or socialist are being today are unrelated to reality. A little government assistance to the poor, or support for associations of workers or cooperatives is not Marxist socialism.

The “Poisoned Spring

In his very readable new book, The “Poisoned Spring” of Economic Libertarianism, Angus Sibley explains the history of some of the ideas so strongly influencing economics today and contrasts these with the Catholic tradition. He speaks of the “disease of excessive individualism” and how that differs from the Catholic social teaching of the Popes. The words “poisoned spring” come from Pius XI’ encyclical, Quadragesimo Anno.

According to Sibley, “the roots of exaggerated individualism are closely entwined with certain misconceptions about the nature of freedom. In the rather extreme slogans thrown around as some advocate absolute freedom in economics (except for workers), freedom seems to be represented as the right to do anything one wishes in economics without any interference from anyone, especially the government or any associations of workers.

The Catechism of the Catholic Church and some of the most respected theologians and philosophers in the Catholic tradition offer a positive definition of freedom as opposed to such a negative understanding of it. The Catechism states: “There is no true freedom except in the service of what is good and just.” Following the tradition of Aquinas and Augustine, modern theologian Bernard Haring described true freedom: “In its essence, freedom is the power to do good…the power to do evil is not of its essence.”

Sibley points out that “This may seem surprising to some of us who too often imagine that freedom necessarily implies the possibility of doing wrong, as the atheist Austrian economist Friedrich von Hayek insists. Hayek’s concept is that freedom is an opportunity to do good, but this is so only if it is also an opportunity to do wrong. But, Sibley contends, “if we think like this, it is we who are mistaken and not St. Thomas.” The negative freedom advocated by those of the Austrian school of economics like Hayek “loses contact with goodness and justice, becoming simply the absence of constraints imposed by other people.” Thus those who follow this thinking present the idea that deregulation is always good and that any regulation by government is always wrong because, they say, “if people are to be free, we must refrain from trying to prevent them from doing wrong.”

Paradoxically, free-market economics with less and less regulation has had in practice the effect of limiting freedom for the many, of forcing “more and more of our activities into a single mould. In the past businesses took a wide variety of forms: public companies, state enterprises, cooperatives, private partnerships, mutual organizations, etc. The era of economic liberalization has seen the decline of most of these and the increasing dominance of one particular format: the limited company whose shares are quoted on a public stock market.”

Those who follow the Austrian School of economics even argue that unemployment benefits should be abolished because, (according to Mises) it generates a strong disincentive to work. Sibley points out by contrast that “Although this might be true for a minority of idle scroungers, it is evident that most of the unemployed to do not wish to remain so; their predicament is forced upon them, often at least in part as a consequence of Austrian economic policies.”

Even when one has a job in today’s market, it is often not ideal. As Sibley puts it, “The ‘free market in corporate control,’ that delights libertarians, is less than delightful for those who have to work for, or live with, inordinately profit-obsessed businesses.”

Catholic Teaching More Profound

Catholic teaching is rooted in a personalist, communitarian worldview rather than rugged individualism. In his encyclical on Catholic Social Teaching, Caritas in Veritate, Pope Benedict XVI outlines the important principles which should guide economics and business for Catholics. He emphasizes concepts like integral human development concerning the whole person, reciprocity, subsidiarity, solidarity, respect for all human persons, and gratuitousness, gift. He asks for a more imaginative and creative approach to economics that will include these ideas. Utilitarianism and redistributing wealth from the poor to the rich do not fit into his teaching.

Those who believe that the answer to our economic problems lies in dismantling or privatizing Medicare and Social Security might be surprised to find that the Vatican bank president recently proposed a more practical, less deadly response. The Vatican bank president explained that because there aren’t enough young people in society to support the increasing amount of elderly, population aging “can be considered the true origin of the current economic crisis.” In the West, where families are smaller and smaller, the undeniable problem is that the smaller younger population will have difficulty in supporting the large, aging population. The best solution to the current economic crisis, according to Ettore Gotti Tedeschi, is for families to have more children—and thus be able to support the older generation in their need. He is especially addressing Europe, where the population is not growing, but lessening each year except for immigrants.

Where Did They Go Wrong?

The answers to some of the erroneous ideas in economics can be found in the Winter 2010 issue of the English-language journal Communio, where papers from a Symposium on Caritas in Veritate are published. The article by Andrew A. Abela, Chairman of the Department of Business and Economics at the Catholic University of America, is of special interest.

In his article entitled “Caritas in Veritate and Economic Theory,” Abela explains that the underlying taken-for-granted assumptions of the theory of most economists present obstacles to the implementation of Caritas in Veritate. The dogma in economics is that of self-interest, and “minimizing costs and maximizing benefits,” what they call the “rational choice theory.” Any other suggestion is challenged and even ridiculed. Abela points out that students are inculcated with the approach of self-interest from the beginning: “A number of empirical studies suggest that students of economics tend to become more selfish the more they study economics—likely because they begin to believe that rational choice theory is an accurate description of the human condition. Students even come to the conclusion that individuals are obligated to act self-interestedly in markets.”

Subsidiarity in Government, But Not in Business?

Catholic apologists for laissez-faire capitalism all emphasize subsidiarity in government. However, they often separate subsidiarity from its essential companion idea, that of solidarity.

The encyclicals have taught us that subsidiarity means that it is an injustice to assign to a greater and higher association what lesser and subordinate associations can do. In its most positive sense, this might be re-phrased as “Small is beautiful”—but the concept of small is beautiful (actually a book by Schumacher followed by Small is Still Beautiful by Joseph Pearce)—was written about business practices. Those who advocate small government in favor of total freedom of the market glaringly neglect to ask businesses to follow the same philosophy of subsidiarity, rather defending the rights of huge businesses, banks, and multinational corporations.

The idea of distributism, with its emphasis on small business and participation of workers in the means of production is an alternative.

Abela points out that Hilaire Belloc and even Frederick Hayek of the Austrian school noted, big business leads invariably to bigger government.

Ideology is Pro-Market Rather Than Pro-Business

Abela argues that the market is not free because of the power of paid lobbyists for enormous corporations. It is also not very well regulated, because large business are able to “recapture” whatever regulations are put in place through their lobbying efforts.

Abela argues that with subsidiarity in business enormous government bureaucracy would not be necessary. He cites the work of Luigi Zingales of the University of Chicago who noted in his article, “Capitalitm after the Crisis” that in the United States “Most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, and not pro-market, in the sense of fostering truly free and open competition.”

Zingales shows that regulation in banking, for example, used to be “pro-market, but not pro-business. It put heavy restrictions, for example, on the number of branches a bank could have, and limits on both intra- and interstate banking.” Abela notes that these limits were all consistent with subsidiarity; they tended to keep banking small and local. He also points out that with subsidiarity in business, little government bureaucracy is required. It doesn’t take many bureaucrats to verify that a bank only has five branches. Thus Abela advocates subsidiarity also in regulation, which would mean that the regulations could not so easily be “recaptured” by big business and big banks.

Large sums spent on lobbying by enormous businesses allows them to control the market and prohibit smaller entities from functioning. The opposite of subsidiarity.

The lack of the principles of subsidiarity and solidarity in large business is glaringly obvious in the area, for example, of health insurance companies and for-profit hospitals and the resulting rationing of health care for great numbers of people.

A practical example of subsidiarity might be helping families care for their elderly – not nursing homes unless absolutely necessary – but not just casting people away into the streets with no help for families.

Abortion “Rights” May Have the Same Philosophical Roots

When one looks closely at individualism of the Enlightenment philosophy which undergirds so much of the libertarian thinking in economics, it becomes clear that libertarianism in sexual morality comes from the same root. Extreme individualism which does not emphasize respect for the person also implicitly gives permission for abortion.

Ayn Rand, for example, emphasized that one could do whatever one chooses in order to further one’s own life and self-interest.

Where Are the Witnesses?

In that same Winter 2010 issue of Communio, the editor, David L. Schindler asks, Where are the witnesses, the examples, to help us out of this mess- to provide examples for living out the encylical, Caritas in Veritate? He answers with the models of Dorothy Day and Peter Maurin and Madeleine Delbrel.

In his encyclical, Holy Father Benedict XVI recommends the Economy of Communion developed by the Focolare movement as one outstanding example of a different type of business, one which reflects Catholic teaching.

Abela says the stories of the business of the Economy of Communion read like those of the parables of the Gospels and the lives of the saints. One third of the profits in Economy of Communion businesses are reinvested in the business, one third go to the poor (including helping them get started in business or in jobs) and one third to build up the Civilization of Love.

For further reading:

A new book from Wipf and Stock Publishers entitled The Crisis of Global Capitalism: Pope Benedict’s Social Encyclical and the Future of Political Economy (Cascade Books) explores today’s economic issues in the light of Caritas in Veritate. Edited by Adrian Pabst.

The Economy of Communion: a New Style of Economic Action: http://www.edc-online.org/index.php?lang=en

The Distributist Review, http://distributistreview.com

Josh Bivens, Failure By Design: The Story Behind America’s Broken Economy. Cornell University Press, 2011.