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Chesterton and John Paul II on Capitalism

by Donald Boland, Center for Thomistic Studies, Sydney, Australia

Confusingly, the word “Capitalism” is used both for an economic system that has an abnormal condition in regard to the distribution of wealth or property, and one where the distribution of wealth is not an issue. Both are systems that are based upon the institution of private property, in the one case in a condition that is normal, in the other abnormal.

The distinction between the two meanings of Capitalism is in fact made in the social encyclical (1991) Centesimus Annus ( para. 42 ). And the difference made there comes down to that between the normal and the abnormal. The encyclical is considering whether we can say that Capitalism is good or bad. “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 sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”

The former sense plainly refers to the notion of an economy based upon private property and free exchange of goods and is concerned to oppose these characteristics to their socialist denial. It is thus defending Capitalism in so far as it is opposed to Socialism. But it is to be noted that the word Capitalism is not perhaps the most appropriate name for this economic system. What is evidently intended is simply a social exchange system that is functioning normally which ultimately means justly or morally.

The encyclical itself suggests that the second usage of the word “Capitalism”, which clearly refers to an abnormal condition from the point of view of justice, is the one more appropriate. It is in fact the one used in earlier encyclicals where Capitalism is severely criticised. This is also clearly brought out in other parts of the 1991 encyclical. “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. 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.” (CA 35)

And speaking of the conflict between Capital and Labour in another place the encyclical refers to “a conflict which sets man against man, almost as if they were “wolves,” a conflict between the extremes of mere physical survival on the one side [subsistence-wage labour] and opulence on the other [concentration of capital], the Pope [Leo XIII] did not hesitate to intervene by virtue of his “apostolic office.” (CA 5 Insertions in square brackets mine)

Chesterton’s Distributism comes within the description used by Pope John Paul II: “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”. And the Church speaking of socialism and capitalism in the same terms (socialism as ”state capitalism’) is fully in line with Chesterton’s point that Socialism is simply the monopoly system of Capitalism adopted by the State itself. Both are regimes based upon a monopoly over the processes of the production and exchange and an effective denial of property rights to the majority of the population. Their basic affinity can be seen, moreover, in the fact that the advocates of both hypocritically present such a monopolistic take-over of the economy as being the best way of ensuring the prosperity and freedom of all. Both claim to be ardent supporters of “democracy”.

Chesterton was aware of the ambiguity in the use of the word “Capitalism”. So he says “The word… is used by other people to mean quite other things. Some people seem to mean merely private property. Others suppose that capitalism must mean anything involving the use of capital.” These other uses generally denote the exchange economy operating in a just way without the huge disparity in wealth which puts one of the parties at the mercy of the other not just in regard to employment but also in regard to all types of exchange.

Chesterton’s definition of Capitalism then falls fair and square within the second meaning given in the encyclical. “When I say ‘Capitalism,’ I commonly mean something that may be stated thus: ‘That economic condition in which there is a class of capitalists roughly recognizable and relatively small, in whose possession so much of the capital is concentrated as to necessitate a very large majority of the citizens serving those capitalists for a wage.'” …

Without any concept of distributive justice the ownership of goods and their exchange is discussed entirely in the context of contract and an artificially abstract notion of commutative justice, as if all exchanges were necessarily between equals. In such a mind set there is little or no acknowledgement of anything systematically wrong in the social economy. But the encyclicals make no bones about this. “The crisis of Marxism does not rid the world of the situations of injustice and oppression which Marxism itself exploited and on which it fed.” ( Centesimus Annus 26)

Moreover, the encyclicals explicitly speak of injustice in the distribution of wealth (cf.Centesimus Annus 12: “To remedy these wrongs [the unjust distribution of wealth and the poverty of the workers] …”) and the remedy must include a restoration of justice in the distribution of wealth. This is precisely where Chesterton’s Distributism is rightly to be regarded as a major part of the answer to “the social question”.

Catholics, then, have a problem here of joining issue on this matter with the modern mind. It is a perfect example of equivocation leading to sophis-tical reasoning. The two kinds of exchange or trade or commerce and, correspondingly, the two meanings of profit in the discussion are confused as one. Since the notion of profit has become associated with ordinary or natural exchange (CMC) it must be seen as good. When no distinction is made between this and the other more sophisticated exchange process (MCM) it becomes impossible to assert that profit in any sense, and the corresponding profit motive, is not good. The strictures of the “mediaevals” against profit (lucrative profits) is then made to look ridiculous and out of touch with real economic life in the 21 st century.

To a certain extent Catholic intellectuals writing in this area have been taken in by this sophism. There are some who are uncomfortable with the Church’s critical attitude to Capitalism and read the last encyclical as softening its stance. Indeed, without the necessary distinctions being brought into play it can be seen how it is possible to so (mis)read the encyclical.

The moderns tend to think of Capitalism as a sophisticated money-driven system “creating” wealth and even driving progress in technology and production. The fact that the benefits of such wealth-creation and technical progress seem to be disproportionately enjoyed by a relatively small part of the population is something that does not enter into their considerations. It is just the way things are.

Their world is the world of money, commerce and finance. These are the realities that dominate the economic order. Might it not be that the world that the modern economists believe they are investigating is in fact the unnatural exchange economy known to Aristotle and St. Thomas but “realised” in modern times to an extent that they could not have imagined? Might it not be that the real economy is the natural one that struggles to function under the incubus of such a disordered scramble for wealth (money)?

This would explain why there is such a disconnect between the thought of Chesterton and that of serious students of the modern economy. They are studying two different worlds. It happens that what Chesterton is examining is the fundamental part of the real economic world. The economists are basically studying an aspect of the real economy which has the reality only of a disorder or evil in the exchange system of the body economic; it is a subject matter or economic study only as the study of a disease is a necessary part of the study of health.

These two studies need to be corrected and then re-connected, the first by including once more Aristotle and St. Thomas’s fine analysis of commerce in its twofold nature. We need to know about that part of the economy that the economists study; which today is “where the action is”. But it cannot be studied simply as a socio-economic pathology which is not recognised as such.

Therefore the philosophy of Distributism needs to be supplemented by an explanation of the modern exchange system and a critique of its disordered state. We need to cure modern economic science of its virtue-blindness, the relevant virtue being the social one of justice. As indicated at the start, this abstraction in the name of science or stance of neutrality, in social studies of itself engenders a distorted perspec-tive – which allows many injustices to pass unac-knowledged. There is not much prospect of a rapprochement between the Catholic social moralists and the “scientific” economists whilstever this warped vision persists.

On the other hand, the Catholic moral critique of modern economic life and thought will continue to be hampered without a clearer vision of St. Thomas’s distinctions regarding trade and profit. Without such an addendum to his critique Chesterton’s valuable insights in his social philosophy will continue to go unacknowledged and unappreciated, not just in the academic world, but also among most Catholic intellectuals many of whom are working earnestly in this field of socio-economic studies.

To read the complete article, see “Chesterton and Capitalism” atwww.cts.org.au/articles.htm.


Houston Catholic Worker, Vol. XXIX, No. 1, January-February 2009.