Liberal Capitalism and Catholic Economic Theory

The so-called American conservative movement is not conservative in the sense that many of its proponents would suggest. In reality, American conservatism, in many ways seeks to preserve and reassert classical liberalism. In fact, the entirety of the American political spectrum is liberal in different ways and varying degrees—but it is unmistakably and manifestly liberal.

This should come as no surprise since many of the Founding Fathers were men of the Enlightenment and there is no more obvious case than that of Thomas Jefferson, the author of that quintessential Enlightenment masterpiece The Declaration of Independence. The philosophical paradigm by 1776 had already shifted—anthropology was evolving toward an increasingly false view of man and the natural law (because the philosophical concept of “nature” was changing) was something different than that articulated by classical philosophers, which had been incorporated into the Christian tradition.

The American legal tradition seeking to adhere to the letter of the social contract, i.e. The Constitution of the United States of America, seems to have individual liberty at issue in every question of law. This, to be sure, is not something to be regarded as a problem in and of itself, insofar as the operative definition of liberty is not philosophically false and the norms of justice, in the classical sense, are not contradicted.

To the learned mind, it is patently clear that the predominant philosophical paradigm, anthropological assumptions on human nature, concept of the nation-state, view of society, of freedom, of responsibility, and so forth found in the Western world is undoubtedly borne of Enlightenment thinking. The United States is most certainly no exception. In America, across the political spectrum, there is a dubious philosophical premise, that of an abstract ideal of autonomy, which, no matter how admirable or attractive it may seem, is radically incomplete. Indeed, man does possess a free will, but the form of freedom requires content.

Freedom is of no use to any rational creature that lacks concepts of which to value things, particularly when living in a metaphysically-solipsistic vacuum, arbitrarily willing “this” or “that,” with no conception of an objective order of things that he should freely act in accord with to his own fulfillment, to which he has an obligation to discover and follow, and to which he must conform all created realities, under his influence, in the temporal order to—including his own government.

St. Thomas Aquinas’ definition of law as “nothing other than a certain dictate of reason (rationis ordinatio) for the common good, made by him who has the care of the community and promulgated” is a view contrary to most modern thinking. In the Catholic intellectual tradition, law is based upon reason, which is in conformity with God; law is not arbitrary human edicts based merely on custom, will, politics, powers, pragmatics, or even negative liberty. The transition from natural law philosophy to legal positivist absolutism—which claims there is no inherent or necessary connection between the validity conditions of law and ethics, rejecting the subordination of human law to both the natural law and the Eternal Law (this is a serious issue in the Western legal tradition)—is resultant of the rise of liberalism. Certainly it is not that the philosophies borne of the Enlightenment do not have some truth to them, and perhaps in some fashion they acutely demonstrate the complexities of human law—particularly its abuse and other practical concerns as laws are fashioned and implemented in certain times and places in history. Yet the unmistakable problem of the philosophical assumptions of which liberalism arose from, in its historical context, presents a rejection, and in fact, a conscious break from the classical philosophical traditions adopted into and transformed by the Christian faith that endured largely unchallenged until the so-called Age of the Enlightenment (hence, the argument, the Western world is distinctly liberal, even its conservatives.)

The objective order of things, to which, we must conform ourselves is direly in need of rediscovery, especially in light of the current economic crisis being faced around the globe. Nearly a year ago, the question was raised, “…given the state of the American economy, it has become a question of Catholic political thought in the American political tradition…what is an authentic Catholic approach to economic life?” It seems that this question can hardly be answered without simultaneously answering a second question, which, of course would be the proper role and limits of government.

With the United States “galloping toward socialism” under Democratic governance according to political conservative observers, it supposedly seems more necessary than ever that “free market principles,” which to some minds is synonymous with laissez-faire practices, be adhered to for the sake of American economic “prosperity.” It is for this very reason that it seems essential that the question of Catholic teaching on economic life be revisited and explored further, with particular attention to underlying philosophical assumptions, particularly given the growing free market fundamentalism brewing, even in Catholic circles.

In the Catholic tradition the purpose of economic life is human flourishing not merely more economic growth. Simply put, the economy is at the service of man, not man at the service of the economy. The service of economic activity then is the common good, which the Church reiterates by emphasizing the “universal destination of goods.”

It goes without question that the presumption that the economy is a freestanding sphere of life with its own rules and that more is better is explicitly contrary to Catholic social teaching. Rapid economic growth, though good, mistakenly becomes equated with the social good. From a Catholic perspective, the economy serves a higher good; if the economy booms, but human dignity suffers, the result is unmistakably evil. Pope John XXIII makes precisely this very point in Mater et Magistra:

“If the organization and structure of economic life be such that the human dignity of workers is compromised, of their sense of responsibility is weakened, or their freedom of action is removed, then we judge such an economic order to be unjust, even though it produces a vast amount of goods, whose distribution conforms to the norms of justice and equity.”

The Holy Father, of course, is not implicitly endorsing some collectivist statist form of economic life such as an excessively centralized and state-managed socialist economy, which has also won papal criticism. There is such a thing as legitimate inequality, which springs forth from a diversity of functions called for by the organization of society. Every nation must have men to fill public office and others to carry out different professions, both necessary and useful or the common good, and these callings require different aptitudes and qualities. There is inequality of condition, in the position of intellectual advantages, fortune, and social position which arises, in certain circumstances, both from different gifts and temperaments.

There is also inequality that is the result of the sin of individuals, arising from the disorder of persons, of society, and the unjust distribution of wealth and resources in the world.  This sort of inequality is unacceptable. Pope John XXIII makes it manifestly clear in Mater et Magistra that “all forms of economic enterprise must be governed by the principles of social justice and charity.”

The ultimate aim of economic activity is, and must be, the common good. The common good is the end of the laws of the State. The problem today is that the common good is radically and deeply misunderstood, even by practicing Catholics. To properly understand the common good, the fundamental principles concerning human sociability ought to be borne in mind in order that the common good be distinguished from its counterfeits and false substitutes, such as what one would find in the language of the utilitarians:  the greatest good for the greatest number.

Since the Enlightenment the common good has been undermined by various schools of individualism whose principal difficulty—in coming to an authentic understanding of the common good—involve confusion regarding orders of means and ends and, in some case, the problem of universals. The quintessential Thomist of the twentieth century, Catholic philosopher Jacques Maritain in his phenomenal work Man and the State puts it this way:

The aim of society is not the mere aggregate of the individual goods of each of the persons who constitute the nation-state. Such a formula would dissolve society as such for the benefit of its parts, and would lead to an “anarchy of atoms.” It would amount either to a frankly anarchic conception or to the old disguised anarchic conception of bourgeois materialism, according to which the entire duty of society consists in seeing that the freedom of each one be respected, thereby enabling the strong freely to oppress the weak.

There is a common work to be accomplished by the social whole as such, by that whole of which human persons are parts, and which is not “neutral,” which is itself engaged, held by a temporal calling. And thus the persons are subordinated to this common work…concerning what is deepest in the person, his eternal calling…to which society itself and its common work is subordinated.

The end of society is the common good, the good of the body politic. But if one fails to grasp the good of the body politic is a common good of human persons—as the social body itself is a whole made up of human persons—which entails by the natural law responsibilities and obligations on each person as well as natural rights rooted in the dignity of each person—this formula may, and has, lead to other errors of the collectivist or totalitarian type. The common good of society is neither a simple collection of private goods, nor a good belonging to a whole which draws the parts to itself, as if they were pure means to serve itself alone.

The common good, then, is the lasting realization of exterior conditions and it includes material things. But “good” has moral significance and implies such—it is that which perfects the human person as a rational and free creature in having provided satisfaction not only of his material and physical needs but also of his noble aspirations as a man—the satisfaction of his intellectual, artistic, cultural, and spiritual needs and thus provides peace, security, confidence, and happiness. Pope John XXIII declares, in perfect harmony with this, that “the economic prosperity of any people is to be assessed not so much from the sum total of goods and wealth possessed as from the distribution of goods according to the norms of justice, so that everyone in the community can develop and perfect himself.”

It goes without saying that the Catholic understanding of the common good and economic life is intricately tied to the question of the legitimate role of the government. Pope Leo XIII in Rerum Novarum establishes the ultimate objective of civil government:

“The foremost duty of the rulers of the state should be to make foremost duty of the rulers of the state should be to make sure that the laws and institutions, the general character and administration of the commonwealth, shall be such as of themselves to realize public well-being and private property… considered in its nature…the civil power is set up to attend to the common good which is the supreme end that gives human society its origin.”

Venerable Pope Pius XII makes a comparable claim in Summi Pontificatus:

“It is the noble prerogative and function of the State to influence, aid and direct the private and individual activities of national life that they converge harmoniously towards the common good. That good can neither be defined according to arbitrary ideas nor can it accept for its standard primarily the material prosperity of society, but rather it should be defined according to the harmonious development and the natural perfection of man.” 

The Holy Fathers, in harmony with the developing body of Catholic social thought, establish that it is the government’s foremost responsibility, adhering to certain principles and within the legitimate constitutional framework of a nation’s system of governance, to be a steward of the common good and to regulate the exercise of ownership to facilitate the universal destination of goods. The reason is rather straightforward: if man is to attain his destiny through upright living in the temporal order, it is most important to realize that this temporal order (political, economic, social) does not itself constitute by its organization, institutions, structures, and spirit, an obstacle to the supreme destiny of the human person and of mankind. For this reason, the service of the common good is primarily the proper mission of the State. Pope Pius XII virtually verbatim makes this precise argument, stating “all economic and political activity of the state is ordered towards the lasting realization of the common good.”

This perspective, which takes a positive disposition, strikes a chord with the Aristotelian idea that the fundamental role of the State is to create, within the constraints of legitimate political and ethical principles, a society of virtuous citizens. All activities of the State are pre-ordained, as it were, toward this end. It is self-evident that this perspective contradicts the Enlightenment disposition toward negative role of the government, which reduces the role of the State to police and defense functions and to providing categorically necessary social goods, and guaranteeing maximum autonomous freedom via minimal regulation.  The limitations of government is certainly recognized in Catholic social teaching, but the Church’s understanding of the proper role of government in society arises from her discerning its place in the grander scheme of things—in the economy of salvation—in which everything has its place and function.

Given such an understanding of the role of government and the common good, in comparison to its actual contemporary reality, Pope Pius XII’s reflection is spot on:

“The main reason for the decadence of society is that today the common good is ignored, disowned, ridiculed, and betrayed. There is a race for selfish pleasure and a coalition of private and corporate interests against the common good.”

Too often the unquestionably consistent and unanimous papal criticism of laissez-faire liberal capitalism and its almost inherent opposition to the common good is ignored by modern society, Catholics included. Pope Leo XII in Rerum Novarum criticized liberal capitalism noting the “enormous fortunes of some few individuals, and the utter poverty of the masses.” This statement remains exactly right, particularly given the varying, but similar figures, stating that an incredibly small minority of people own beyond-staggering percentages of global wealth. Forty years after Rerum Novarum, Pope Pius XI declared that “a veritable economic dictatorship” was forming. The Holy Father argued that these disorders, by and large, resulted from the divorce of economic science from natural law morality and social ethics:

“The ultimate consequences of the individualist spirit in economic life are those which you yourselves…see and deplore: Free competition has destroyed itself; economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain; all economic life has become tragically hard, inexorable, and cruel. To these are to be added the grave evils that have resulted from an intermingling and shameful confusion of the functions and duties of public authority with those of the economic sphere—such as, one of the worst, the virtual degradation of the majesty of the State, which although it ought to sit on high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is a slave, surrendered and delivered to the passions and greed of men. And as to international relations, two different streams have issued from the one fountain-head: On the one hand, economic nationalism or even economic imperialism; on the other, a no less deadly and accursed internationalism of finance or international imperialism whose country is where profit is.”

Pope Pius XII, following his predecessors, could not be more stridently critical.

“It too often happens that it is no longer human needs which, according to their natural and objective importance, order the economic life and use of capital, but, on the contrary, it is capital and its ambitions for gain which determine which needs will be satisfied and to what extent. In such circumstances it is not human work in the service of the common good which attracts and uses capital but, on the contrary, capital which disposes as its pleasures of both man and his work, like bowls in the hand of the player.”

“The narrow calculations of egoists, tending to corner economic resources and the materials of common use so that nations less favored by nature remains outside.”

“Wherever capitalism is based on false ideas and assumes a limitless right over its own property, without admitting any subordination to the common good, the Church has always condemned it as contrary to the natural law.”

Pope John XXIII, not surprisingly, continues the trend of his predecessors.  

“One may not take as the ultimate criteria in economic life the interests of individuals or organized groups, nor unregulated competition, nor excessive power on the part of the wealthy, nor the vain honor of the nation or its desire for domination, nor anything of this sort. Rather, it is necessary that economic undertakings be governed by justice and charity as the principal laws of social life.”

“Our heart is filled with profound sadness when we observe…a wretched spectacle…whole continents, receive too small a return from their labor…they and their families must live in conditions completely out of accord with human dignity.

Pope Paul VI in Populorum Progressio strongly condemns the negative consequences of liberal capitalism, citing the common good as the foundation of all economic activity.

“However certain concepts have somehow arisen out of these new conditions and insinuated themselves into the fabric of human society. These concepts present profit as the chief spur to economic progress, free competition as the guiding norm of economics, and private ownership of the means of production as an absolute right, having neither limits nor concomitant social obligations. This unbridled liberalism paves the way for a particular type of tyranny, rightly condemned by Our predecessor Pius XI, for it results in the “international imperialism of money. Such improper manipulations of economic forces can never be condemned enough; let it be said once again that economics is supposed to be in the service of man.”

“We must repeat that the superfluous goods of wealthier nations ought to be placed at the disposal of poorer nations. The rule, by virtue of which in times past those nearest us were to be helped in time of need, applies today to all the needy throughout the world. And the prospering peoples will be the first to benefit from this. Continuing avarice on their part will arouse the judgment of God and the wrath of the poor, with consequences no one can foresee. If prosperous nations continue to be jealous of their own advantage alone, they will jeopardize their highest values, sacrificing the pursuit of excellence to the acquisition of possessions. We might well apply to them the parable of the rich man. His fields yielded an abundant harvest and he did not know where to store it: “But God said to him, ‘Fool, this very night your soul will be demanded from you…’”

“Extreme disparity between nations in economic, social and educational levels provokes jealousy and discord, often putting peace in jeopardy…For peace is not simply the absence of warfare, based on a precarious balance of power; it is fashioned by efforts directed day after day toward the establishment of the ordered universe willed by God, with a more perfect form of justice among men.”

“‘He who has the goods of this world and sees his brother in need and closes his heart to him, how does the love of God abide in him?’ Everyone knows that the Fathers of the Church laid down the duty of the rich toward the poor in no uncertain terms. As St. Ambrose put it: ‘You are not making a gift of what is yours to the poor man, but you are giving him back what is his.’ You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich. These words indicate that the right to private property is not absolute and unconditional.”

“No one may appropriate surplus goods solely for his own private use when others lack the bare necessities of life. In short, ‘as the Fathers of the Church and other eminent theologians tell us, the right of private property may never be exercised to the detriment of the common good.’ When ‘private gain and basic community needs conflict with one another,’ it is for the public authorities ‘to seek a solution to these questions, with the active involvement of individual citizens and social groups.’”

Pope John Paul II set forth moral parameters, in which, many capitalist ideals could be implemented in a social economy and he even suggests that it probably should not be coined as “capitalism.” The Holy Father, however, most certainly did not contradict his predecessors in opposing laissez-faire liberal capitalism.

 “…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.”

“More and more, in many countries of America, a system known as neoliberalism prevails; based on a purely economic conception of man, this system considers profit and the law of the market as its only parameters, to the detriment of the dignity of and the respect due to individuals and peoples. At times this system has become the ideological justification for certain attitudes and behavior in the social and political spheres leading to the neglect of the weaker members of society. Indeed, the poor are becoming ever more numerous, victims of specific policies and structures which are often unjust.”

“It is necessary to state once more the characteristic principle of Christian social doctrine: the goods of this world are originally meant for all. The right to private property is valid and necessary, but it does not nullify the value of this principle. Private property, in fact, is under a ‘social mortgage,’ which means that it has an intrinsically social function, based upon and justified precisely by the principle of the universal destination of goods .” 

Perhaps no recent pope has been more critical of liberal capitalism and its implications for socio-economic justice than Pope Benedict XVI, which should come as no surprise to anyone familiar with Joseph Ratzinger or his family’s history on the subject (cf. Georg Ratzinger).

“Today’s international economic scene, marked by grave deviations and failures, requires a profoundly new way of understanding business enterprise…The conviction that the economy must be autonomous, that it must be shielded from ‘influences’ of a moral character, has led man to abuse the economic process in a thoroughly destructive way…in the long term, these convictions have led to economic, social and political systems that trample upon personal and social freedom, and are therefore unable to deliver the justice that they promise.”

“The economic sphere is neither ethically neutral, nor inherently inhuman and opposed to society…it is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner.”

“True development does not consist primarily in ‘doing.’ The key to development is a mind capable of thinking in technological terms and grasping the fully human meaning of human activities… Even when we work through satellites or through remote electronic impulses, our actions always remain human, an expression of our responsible freedom. Technology is highly attractive because it draws us out of our physical limitations and broadens our horizon. But human freedom is authentic only when it responds to the fascination of technology with decisions that are the fruit of moral responsibility.”

Papal criticism of liberal capitalism, no matter how often dismissed or thoroughly ignored, remains markedly clear: it, in its totality, that is, laissez-faire capitalism is not reconcilable with the social doctrine of the Catholic Church.