March 19th 2010, Blackfriars, Oxford University.
When I first started dipping my toe into writing and researching Catholic social teaching, I did not see a particular good picture. The economic thinking which seemed to inform Catholic comment on social issues seemed to be weak. Much Christian comment on economic matters has tended to ignore not just empirical evidence but also, more or less, incontrovertible economic laws as well as ignoring much in the tradition of Catholic social teaching itself.
But, before I move on, I would like to pay tribute to the recent English and Welsh Catholic Bishops’ letter. It demonstrates both a considerable effort in absorbing and articulating some of the best of the tradition of Catholic social teaching as well as considerable humility in terms of the authors recognising the limits to their competence on the technical detail of economic matters. And this humility is very important when talking about these issues. Unintended consequences, about which the French nineteenth-century Catholic economist Frederic Bastiat wrote so well, are so ubiquitous in economics that, if you google the three words together, you get 1,240,000 responses. It should be a sobering thought for clergy who comment on economic matters that this is actually more than the total worldwide google responses for the words Catholic social teaching!
Many Christians grudgingly accept a free economy because of the material benefits it brings. But, today, I want to go further than this. A free economy should be seen as something that is intrinsically good of itself. Similarly, we should be aware of the problems of government intervention not just because of the damage governments can cause to material welfare, but because it can undermine certain basic precepts of a great, virtuous society. It is notable, in fact, that there is growing acceptance of some of what I will say from those on the left. Last year, I gave one of the four public lectures at Westminster Cathedral and John Battle, the Labour MP, gave another. He may have disagreed with my lecture profoundly but, I agreed with much of his. What was interesting about his lecture is that when he talked about “socialism” he was referring to organisations such as cooperatives and so on which I would regard as part of and parcel of a free economy. There was almost nothing in his lecture I disagreed with except his use of terminology.
My thesis about the importance of a free economy, the primacy of voluntary action and the subservience of government to the individual and the family is firmly rooted in the great history of Catholic social teaching. It is of interest to note that both the free market Nobel Laureate F. A. Hayek and Pope John Paul II, in their last significant books on the subject, traced the evils of the world – though for different reasons – to Descartes. That should make us pause for thought. Indeed, it is also interesting that both Francis’ centre and those who argue from my perspective, get their inspiration from the late scholastics of Salamanca as do modern followers of F. A. Hayek.
The case I want to make is that Christians should be very content with a market economy. They should not be trying to undermine a market economy but trying to strengthen it and populate it with virtuous people. This is a position, in my view, which is certainly compatible with the late scholastics and which was most clearly revived in John Paul’s encyclical Centesimus annus. But let me begin with some quotations from encyclicals about socialism. We can often understand a concept such as the market economy better by discussing its opposite.
Socialism gets a rough ride in papal writings. It starts with Pius IX, (slide) the Tablet’s bete noire. Pius IX had a certain way with words. In the 1840s he argued that socialists misapply the terms ‘liberty’ and ‘equality’ and are preparing people for “plundering, stealing, and usurping first the Church’s and then everyone’s property.” He then described socialism as a pestilence. Having said that, though Pius IX was against socialism, he was against most things, so let’s move on.
A little later, in 1891, this is Leo XIII describing the effects of socialism, (slide) “The door would be thrown open to envy, to mutual invective, and to discord; the sources of wealth themselves would run dry, for no one would have any interest in exerting his talents or his industry; and that ideal equality about which they entertain pleasant dreams would be in reality the levelling down of all to a like condition of misery and degradation.” He then talks about how socialism offends the natural rights of mankind and that its main tenet, the community of goods, must be utterly rejected.
A century later, John Paul II’s critique of socialism strikes a similar chord. He examines socialism in the context of the God-given nature of man. And this is important because, it moves us away from the tired justification of the market economy that it simply provides the best basis for material prosperity. John Paul says, in Centesimus annus: (slide) “the fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism…Socialism likewise maintains that the good of the individual can be realized without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil.”
This critique is not just relevant to extreme forms of socialism but to all forms where families are subjected to illegitimate control by the state. Indeed, John Paul goes on to deal with the specific issue of the welfare state about which he said: (slide) “In recent years the range of such intervention has vastly expanded, to the point of creating a new type of State, the so-called “Welfare State”…[E]xcesses and abuses, especially in recent years, have provoked very harsh criticisms of the Welfare State, dubbed the “Social Assistance State”. Malfunctions and defects in the Social Assistance State are the result of an inadequate understanding of the tasks proper to the State.”
So there is little in formal Catholic teaching to give much comfort to those who believe in principle that the state should play the primary role in economic life and in the provision of welfare. If the Church rejects socialism does that mean she embraces the opposite? Of course, the answer is: “not necessarily”. The opposite economic system may be flawed too. As the old Polish joke goes, “socialism is the exploitation of man by man; capitalism is the opposite.”
Catholic social teaching has criticised capitalism at various times – sometimes in very strong language. Often, though not always, those criticisms relate to the culture of consumerism – consumption for its own sake – which the Popes have perceived is rooted in western societies. The production and consumption of addictive drugs (other than alcohol and cigarettes of which many Catholics approve wholeheartedly), pornography, and so on are undoubtedly disordered uses of economic resources. And the accumulation of material goods for their own sake, must be condemned. But the enemy here should be the sin of materialism and not the market economy.
State intervention in the economic sphere does not save us from materialism as socialism is intrinsically materialistic. It seeks to raise the human condition through increased production and the redistribution of material wealth, though, as Pope Leo noted, it does not succeed. So a debate about materialism does not really get us very far in a debate about socialism versus capitalism. Whether you live in a socialist economy or a market economy or something that combines the two, the love of money will still be the root of much evil – it just manifests itself in different ways in a socialist society.
Before moving on, there is an interesting issue of semantics it is worth bringing out. The term capitalism is often used to describe what I like to call a free economy. This was a term coined by its enemies. The phrase capitalism promotes a focus on structures (labour and capital) and outputs (goods and services) rather than promoting a focus on the human person and human flourishing – or the common good.
John Paul II makes this point. He asks whether capitalism should be the model sought by failed socialist countries and what he says is this: (slide) “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’.”
Personally, I prefer the term “free economy” because, as we shall see later, a free economy should be about much more than the production and consumption of goods and services that are bought and sold in the market, but let us look at the market sector of a free economy for a moment.
When we limit ourselves to praising the market economy for its role promoting the common good by providing for material needs we tend to find a grudging acceptance of the market economy by Christians – at best. Even this limited virtue is not unimportant but it is not the whole story. In the Pope’s 2009 Peace Day message, he noted that the eradication of the scandal of serious material poverty needs a thriving economy. Recognition of this should, in turn, lead us to change the way we approach policy in certain areas in which Christians are especially interested. For example, when asking how to approach the problem of poverty in the under-developed world, we should ask first – though development campaigners rarely do – “What causes prosperity?” The answer to that question is “business and enterprise”. We should then ask “what is the institutional framework that nurtures business and enterprise?” If we ask these two questions, we might put less emphasis on government-to-government aid to deal with the problem of under-development and more emphasis on the institutional structures that are necessary to nurture enterprise and that are generally missing in under-developed countries.
But, a free economy should not just be valued for the prosperity it brings. A free economy, being the opposite of the socialist economy that was criticised for anthropological, economic and political reasons by the popes, actually has inherent virtues that a government-directed economy lacks.
Firstly, in a free economy, economic resources are allocated by agreement, peacefully. I buy a pound of sausages from the butcher, he sells them to me. We both benefit from the transaction but we are not in competition and conflict. This is not to say that conflict and competition of a destructive kind do not occur, due to fallen human nature, in a market economy, but the process of mutual contracting substantially limits the damage caused by the pursuit of unrestrained selfishness. It is an extraordinary thing that a business can only prosper by co-operation with others and by serving others. It really should be a cause of some reflection.
A socialist system, on the other hand, involves allocating a fixed set of resources in a system that is necessarily beset by conflict. Whether it is the fight for the fixed number of places at state schools or the inter-generational conflicts that are being acted out on the streets of Greece, bargaining and political positioning are the very mechanisms by which governments come to resource allocation decisions.
Allocation of resources by government planning may be tolerably peaceful in a society with a very high degree of consensus. But we no longer live, if we ever did, in a society which has Christian values that are sufficiently widely shared for the democratic system to be effective in allocating economic resources without conflict.
Markets generally harness self interest – a motive that is completely different from that of selfishness with which the term is often conflated – in a way which genuinely promotes the common good. In diligently pursuing my own objectives, I can only generally succeed if I help others achieve theirs. The brewer earns nothing from producing beer unless people want to consume it. We should therefore welcome the free economy and empathise with it because, with business at its heart, it allows human beings to meet their own needs whilst, at the same time, serving the needs of others. As Pope John Paul II put it, (slide) “The social order will be all the more stable, the more it takes this fact into account and does not place in opposition personal interest and the interests of society as a whole, but rather seeks ways to bring them into fruitful harmony.” In other words the common good – the conditions for human flourishing for all – are quite compatible with the pursuit of benign self interest within a market economy. This is another insight from the late scholastics of Salamanca.
Now, it is, of course, possible for self interest to become disordered – or bent – and turned into selfishness. In the business economy the pursuit of self can do much damage. But the damage is more limited than if the selfish take their place in government and use powers of coercion to achieve their objectives in a centrally planned economy. I would rather a selfish, greedy person worked in a manufacturing or service business than as Finance Minister of an under-developed country or as chief of the secret police. Ultimately, a business must be mindful of the “other” it seeks to serve or it will go out of business.
Now, there is a temptation to think that the market economy needs to be tamed, regulated and controlled for the sake of the common good. It is dangerous, though, to assume that a modern state should through discretionary powers of taxation and regulation – and we should remember that, for example, the state will spend more than the citizen in most EU states next year – direct the market economy towards politicians’ own interpretation of the common good. The market has many self-regulating institutions mechanisms which government intervention has frequently undermined. Once a general regulatory role is given to government, restraining it becomes very difficult – governments like to regulate the market, but who regulates the government? A government is disciplined only by a quinquennial election. My baker is disciplined three times a week by my visits – or otherwise – to his shop.
Government intervention is simply the wrong tool to deal with a problem of a lack of virtue: remoralisation and evangelisation is the correct tool. I have always been genuinely puzzled why so many clergy put so much trust in government and so little trust in evangelisation to make society a better place. If we see a lack of virtue in markets, we cannot assume that this will be tamed by government and that those in government and regulatory bureaus will exhibit the virtues the rest of society lacks.
There is a branch of economics here that is very important called public choice economics. Those – including Christians – like to criticise the concept of self interest at work in markets. But, public choice economics suggests that we cannot assume that people switch off the self-interest switch when they are bureaucrats or political representatives. For this reason, regulatory bureaus tend to expand and acquire more powers. Those who enjoy exercising such powers are attracted to work in such institutions. The middle way is, then, inherently unstable. This is not a pessimistic view of human nature. It is just pointing out that we criticise the concept of self interest in markets then we cannot assume the concept away when government is responsible for the allocation of economic resources. Just look at the budget situation of the US, Japan and almost every EU country. They are all, through the democratic process, piling burdens on future generations in order to finance today’s consumption encouraged by the self interest of voters and politicians.
Interestingly, also, economists increasingly understand the implications of the limitations of human knowledge for political and economic policymaking, and for institutional design. The argument is really quite straightforward. Humans lack the knowledge to centrally plan the economy and achieve outcomes that ensure that goods and services are produced that meet needs and demands. The collapse of the communist economies was, of course, the great manifestation of that but it applies on a smaller scale too. This particular critique should resonate with Christians who should surely be aware of the limitations of the human mind and human planning to try to improve and perfect society. And this is where the problem of unintended consequences that I mentioned at the beginning comes in. Frank Field could address you for hours about the unintended consequences of the welfare system in the UK in terms of destroying families and work incentives. In short, an imperfect human institution – the state – cannot bring to perfection another imperfect human institution – the market.
But, a free economy goes beyond a free market. Indeed, some research suggests that our societies look materialistic not because we have transferred economic power from the government to the market – something which has not, in fact, happened – but because we have transferred economic activity from within the family and civil society (where we provide a service out of love and reciprocity) and into government, and to some extent, the market, where everything has to be paid for.
Furthermore, the free economy has been made to look more like a crude process of materialistic getting and spending as the state has taken primary responsibility for less conspicuous and more wholesome goods and services such as health, education, arts and culture, social insurance, pensions and the regulation of financial markets – all of which were mainly provided, a couple of generations ago, by a mixture of profit-seeking companies, mutual associations, foundations, charities, professions and community associations. The free economy can be a richer and deeper institution than it is currently, and the opportunities for mutuality and solidarity could be much more profound, enriching and effective.
Exploring this further, there are several potential areas where I believe that a renewal of understanding of Catholic social teaching, and its intrinsic compatibility with an economic and social order in which families are at the centre of decision making can make a valuable contribution to political debate. This contribution is based, unsurprisingly on the application of the principles of solidarity and subsidiarity. That renewal, I should add, has begun.
The Church, and certainly many commentators, often talk as if these two concepts are held in tension. Solidarity, it is argued, demands government action to help the poor, the homeless, the sick and so on, whereas the idea of subsidiarity provides a warning to politicians to use the lowest possible layer of government to implement policy and to leave decisions with the family if possible. This is an extreme over-simplification.
When the popes have talked about solidarity and the “preferential option for the poor” they have generally been referring to it in the context of charity – love and service in providing for one’s neighbour without expecting anything in return. This is true from the early uses of the phrase by Pope Paul VI to Pope Benedict’s 2009 World Peace Day Message in which he said (slide) “it is timely to recall in particular the ‘preferential love for the poor’ in the light of the primacy of charity, which is attested throughout Christian tradition, beginning with that of the early Church”.
Indeed, it is a fundamental error to conflate the role of the political system in seeking to help the poor through coercive redistribution with that of people acting spontaneously out of charity. The state should create a just order which promotes the common good. The state may intervene, as a last resort, to try to assist the poor. But, the virtue of solidarity, represented by love and works of charity, arises in the first place from the individual, the family and spontaneously from the community. The political order should not be the main vehicle for the practice of solidarity as it has become in the West. The state, is the last resort because it can only achieve its objectives using coercion and because it is so remote from the needs it is trying to meet – one of the messages of Deus Caritas Est.
As Christians, we need to put the state back in its place. We should make clear the need to give families, voluntary institutions and civil society room to breathe and fulfil their legitimate functions. After all, the first and biggest provider of welfare is the family. The working wife provides for the unemployed husband. Husband and wife provide for the needs of their children. Children will look after their parents and so on. Yet, over a 20 year period at least, the state has acted decisively to undermine the family as a provider of welfare.
Why does the state need putting back in its place? The reason is because of our understanding of the term subsidiarity. The state exists to help individuals, families, the community and civil associations achieve their legitimate objectives. If it does more than this our dignity and freedom in the economic sphere, which natural law demands we are allowed to exercise, is undermined. Indeed, on occasions (perhaps on increasing occasions in the UK) the government can compel us to do things that we, as Catholics, believe to be against God’s will: especially in the fields of healthcare and education.
Subsidiarity means “to help” and from a proper understanding of subsidiarity many direct policy implications follow. I will mention just one – education – where finally the penny is dropping in the Catholic Church in England and Wales. We could have interesting discussions about the environment too, as another issue where similar considerations apply.
With regard to education, we need to clearly articulate the fact that the state exists to provide the framework within which parents, including Catholic parents, can obtain education for their children of the sort that parents desire. The state exists to help families obtain an education for their children. No more. That is what the principle of susidiarity demands. We are increasingly finding that this relationship is being reversed – though the rot set in with the immediate post-war settlement. Catholic schools are becoming agents of the government providing a service of educating children on behalf of the government – albeit in a more or less Catholic context. Indeed, it is interesting that the implicit – and sometimes explicit – message of papal Catholic social teaching in this field is that the state should provide the same support to parents to have their children educated in a private school as is provided in state schools. In others words, the parent and the family should be at the centre of decision making and the state merely provides financial assistance to those families who need it. Such a system – financing parents to obtain education and not controlling and financing schools – would set Catholic parents and schools free: again as is demanded by natural law. It would also, I suspect, lead to the creation of many more Catholic schools that would provide more alternatives for parents that better suited the varied needs, character and aptitude of their children.
In concluding, let me stress that, as the Catechism makes clear, quoting from Centesimus annus, the market economy must be circumscribed in a framework of law so that the market is the servant of human freedom. Where that framework should begin and end is not something determined directly by Catholic social teaching. But, it must protect property – something which is demanded by natural law and which is the basis of a free economy. Throughout the last 200 years, Catholic social teaching has responded positively to the claims for workers rights and condemned certain manifestations of the market economy. Precisely where the relative roles of the state, the market, moral restraint and civil society begin and end is certainly a matter for prudential judgement and is historically contingent. For some Christian economists, the current financial crisis is a failure of the market economy. For others, it is a failure of over-regulated financial institutions, government monetary policy and the inevitable result of governments – especially in the US – underwriting the building up of risks in the financial system. Each view will probably solicit a different policy response consistent with Catholic social teaching.
In summary, my message is this. We need, at least, to empathise with the free economy. All too often as Christians we see certain social objectives that we would like to see fulfilled: the elimination of poverty, education and housing for all, good health services and so on. As a result we call upon the one institution (government) that we know can pass laws that we believe can help us achieve these objectives directly. We should resist the temptation to think in this way because when the state acts it undermines the autonomy of individuals, families, businesses, charities, cooperatives, mutuals and professional and civil associations to act separately and in solidarity to meet the varied needs of families and the joint needs of the community in their own ways. We also frequently find that the result of government action is often precisely the opposite of that intended. If we do not like what we see in a market economy then our response should be to promote virtue, not big government.
We should empathise with the market economy not just because the alternative has proven so disappointing but, because its inherent virtues chime with God-given human nature. The fact that a market economy involves allocating economic resources peacefully, by agreement, is a tremendous thing; the fact that it allows people to use their creativity in the economic sphere for the own benefit but also requires them to serve others in the process is something to be celebrated. The institutional variety in terms of the different types of business and employment relationships – and the variety of goods and services – that we see in a market economy in a small way mirror the uniqueness of each individual whilst the charitable and reciprocal relationships we develop in the non-market part of the free economy reflect the social obligations that we have as a result of being unique members of the same human family.
It is with good reason that the Compendium of Catholic social doctrine states that government intervention in the economic sphere must be a last resort and only continue as long as the special circumstances that require it continue. That is a strong statement and we should take note.
Now it is time to argue. It has been said about Bartalome de Las Casas that in his writing “there was a clear excess of superlatives owing to the fact that [he] thinks in extremes, even in his grammar; he rarely uses one noun when two or three will serve the same task.” He would have pulled no punches so let us now engage in dispute.