Capitalism and Catholicism

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LRC readers with good memories will recall a minor controversy that erupted last summer over my articles on economics and Catholic social teaching. (By and large, the controversy stemmed from this article.) The debate centered around arguments that were to be elaborated at greater length in a yet-unreleased book of mine. I’m happy to report that that book, The Church and the Market: A Catholic Defense of the Free Economy, is now available.

The book offers a ringing — one might even say relentless — defense of the Austrian School of economics, from its methodology through its practical applications. Its subject matter includes prices, wages, labor unions, foreign aid, antitrust law, socialism, the Industrial Revolution, money, banking, interest, inflation, business cycles, subsidiarity, the welfare state, and many other topics. The book also features a chapter-length reply to those who recommend, as the only legitimate Catholic position, the system of "distributism" advocated by G.K. Chesterton and Hilaire Belloc.

If you read many expositions of Catholic social teaching, you find statements like: "It is good for families to prosper. Therefore, the following principle [antitrust legislation, attacks on big business, taxation on wealth, etc.] is morally obligatory." In other words, we want X, so therefore we should have Y. (The connection between X and Y is often implicit, but it is there.) But what if either 1) Y moves you further away from X; 2) there are better ways than Y of getting X; or both? The corpus of Catholic social teaching is filled with such statements, so much so that it’s no easy thing to separate the basic principles from the recommendations. The problem, naturally, is that these are all debatable issues, though a great many expositors of the social teaching give the very unfortunate impression that they’ve all been decided, except for a few holdouts who for some reason obstinately refuse their assent.

For example, one of my longtime critics operates a website that condemns my economic positions but that calls for a "universal living wage" to help the poor. He advances this position not only because he thinks it really will help the poor but also because it will "help the economy" by stimulating consumer spending — as if simply using things up could make society prosperous, or as if more consumption spending is just what the state ought to be encouraging in our savings-starved economy.

Yet he is right about one thing: plenty of sources within the corpus of Catholic social teaching, as well as the overwhelming majority of its lay expositors, can be cited on behalf of just the policy he recommends. It is safe to assume, however, that they recommend that policy not for the purpose of impoverishing people but of making them better off. But if their suggested policy will in fact tend to make people considerably worse off by (among other things) increasing unemployment, is it somehow illicit from the point of view of Catholic obedience to say so? And if the normal functioning of a free, private-property economy already possesses a natural tendency to raise wage rates (as I demonstrate in the book), then surely this is yet another argument in favor of rejecting the "universal living wage" idea in favor of the private-property order (which is really just shorthand for a system in which no one is allowed to steal or to initiate violence).

The point I have tried to make was summed up well last year by Archbishop John J. Myers:

For example, our preferential option for the poor is a fundamental aspect of this teaching. But, there are legitimate disagreements about the best way or ways truly to help the poor in our society. No Catholic can legitimately say, "I do not care about the poor." If he or she did so this person would not be objectively in communion with Christ and His Church. But, both those who propose welfare increases and those who propose tax cuts to stimulate the economy may in all sincerity believe that their way is the best method really to help the poor. This is a matter of prudential judgment made by those entrusted with the care of the common good. It is a matter of conscience in the proper sense.

There are a great many other areas in which sound economic knowledge can inform our moral deliberations. Suppose a moral theologian, in the course of a discourse on economics, wished to highlight the alleged virtues of a system of fiat money as opposed to a commodity money like a gold standard. If it could be shown that the introduction of fiat money necessarily involves the massive confiscation of the people’s stock of a previously existing commodity money — in other words, a massive act of theft, as when Franklin Roosevelt seized people’s gold holdings in 1933 — wouldn’t that influence our moral evaluation, and might it not even trump whatever advantages this theologian attributed to a fiat money, since the system he recommends could be established only through immoral means?

Similarly, it may seem not especially problematic for a moral theologian to argue — as indeed some do — that one of the roles of the state is to provide a stable currency. Yet what if economic theory should reveal the very idea of a "stable currency" to be chimerical, and state intervention into money — as with intervention into any other segment of the economy — as certain to introduce confusion, discoordination, and injustice, and in general to make society worse off? No answers are given to these questions, since the questions themselves are never raised in the first place. My book finally raises them.

Probably more crank theories exist on money than on any other economic topic. Thankfully, Catholic thinkers like Hilaire Belloc recognized the dangers of inflation and fiat currency. But other twentieth-century Catholic notables actually condemned the gold standard. Their criticisms of the Federal Reserve System were frivolous rather than substantial — that it was "privately owned," for example (as if a "publicly owned" inflation machine would have been desirable). The Church and the Market answers the claims of well-known Catholic inflationists who, unfortunately, continue to influence some of their co-religionists to this day.

Without fail, whenever the subject of Catholic social teaching and the Austrian School comes up some people can always be counted on to point out, as if we didn’t know already, that material prosperity isn’t everything. But when the American bishops issue one of their predictably dreadful statements on the economy, they make perfectly clear that they advocate the economic policies they do for this express reason. They believe that state intervention will make people materially better off. If we are "materialistic," therefore, then so are they. The debate centers around whether the bishops’ approach to economics will or will not deliver the promised prosperity.

Msgr. John A. Ryan, for example, the American priest who perhaps more than any other attempted to reckon with the question of labor and wages, argued that men are "more susceptible to religious influence [and] can know and serve God better when they are contented and comfortable than when they are impoverished and miserable." As he said again and again, his belief that the material well-being of workers would be increased by living-wage legislation was what motivated his doubtless well-intentioned but extremely ill-advised campaign on its behalf.

As I have discussed elsewhere, Pope Paul VI (r. 1963—1978) recommended an approach to foreign aid for the developing world that has proven ineffective and in some cases even calamitous in practice. It was logically possible at the time to predict that the outcome of such a policy would not be a happy one, and indeed a number of development economists, such as Peter Bauer, were issuing such warnings. Now while the Pope doubtless has the right to instruct the faithful on matters of morality and to remind them of their obligations toward the less fortunate, surely nothing in the doctrine of papal infallibility guarantees that the Pope’s suggestions for economic policy must always bear good fruit. If that were true, no one would need to study economics at all.

For the zillionth time, I don’t deny the popes’ moral authority and I’m not destroying Christian civilization. If the Pope wants to say that an employer should not show reckless disregard for human life, he has every right to do so. At the same time, it has to be borne in mind that everything has a cost, and that bringing about safer workplaces through state fiat, which the social teaching appears to recommend, will typically come at the expense of the workers’ wage rates. In the paper I cite above, I discuss the role of market forces in balancing legitimate concerns about safety on the one hand against workers’ desire for high wages on the other. Any other way of balancing the two is inherently arbitrary. No one will ever be able to persuade me that this is not a sensible and licit consideration that has an important role to play in sound moral analysis.

Few would question the good and humane intentions that have motivated the economic counsel of those with whom I disagree in the book. For a long time, however, a great many Catholics have been concerned that the means recommended may not have the results intended for them, and are likely to make the condition of workers and the poor still worse. Meanwhile, though, the impression has been given that to voice these misgivings is to involve oneself in some kind of disobedience to Church teaching. It is this unresolved difficulty that this book aims to address in the course of its defense of the market.

William Luckey, chairman of the department of political science and economics at Christendom College (and who, I am happy to say, has strongly endorsed my book), shares this concern. "The fact that Catholic economic teaching, put forth as unchanging and required of belief, did not square with what Austrian economists know to be true, has created an agonizing crisis of conscience for such economists." It was to address that crisis of conscience, and to vindicate the Austrian School of economics — so often misunderstood and caricatured — that I wrote this book.

Professor Thomas E. Woods, Jr. [send him mail] holds a bachelor’s degree in history from Harvard and his Ph.D. from Columbia. His books include the New York Times (and LRC) bestseller The Politically Incorrect Guide to American History, and the just-released book The Church and the Market: A Catholic Defense of the Free Economy.

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