Starting Over: The Rebuilding of Catholic Social Teaching on Economics

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In defending
the free market against those who believe that the Church condemns
such a thing, I have noticed that usually my opponents use what
is called in some Protestant Biblical defenses a "proof-text"
methodology. That is, my interlocutors take a sentence from an encyclical,
remove it from all of its contexts — textual, historical and theological
— recite it, and give it a "literal" interpretation; one
which suits their side of the discussion.

Two examples
come readily to mind. In defense of the idea that the Church "teaches"
that for a state to be legitimate, the Catholic religion must be
the official religion, they cite the following section from Leo
XIII' encyclical, Immortale Dei (1885), no. 6:

Since, then,
no one is allowed to be remiss in the service due to God, and
since the chief duty of all men is to cling to religion in both
its teaching and practice — not such religion as they may have
a preference for, but the religion which God enjoins, and which
certain and most clear marks show to be the only one true religion
— it is a public crime to act as though there were no God. So,
too, it is a sin for the State not to have care for religion,
as something beyond its scope, or as of no practical benefit;
or out of many forms of religion to adopt that one which chimes
in with the fancy; for we are bound absolutely to worship God
in that way which He has shown to be his will. All who rule, therefore,
should hold in honor the holy name of God, and one of their chief
duties must be to favor religion, to protect it, to shield it
under the credit and sanction of the laws, and neither to organize
nor enact any measure that may compromise its safety.

To the
merely casual reader, this certainly appears that Pope Leo is saying
that you must have the true Faith recognized and enforced by the
State. But a close reading and the political context reveal otherwise.

For over
a hundred years prior to the writing of this encyclical, the Church
was under formal attack from governments of both Catholic and non-Catholic
countries. Pope Pius IX thought that by issuing condemnations of
these government actions and of the thought that inspired their
actions the tide could be stemmed. So, Leo was dealing with an attempt
to remove Catholicism from the current states. Catholicism was under
attack in the French Third Republic (1870–1940) following the Dreyfus
affair, and Bismarck had been attacking the Church through harsh
anti-Catholic laws in Prussia starting in 1873. Leo's teaching was
very gentle, but clearly was an attack on anti-clericalism and the
radical separation of church and state, especially as practiced
in France and Germany at the time. There is no authoritative statement
here about the legitimacy of government; merely a moral exhortation.
All of what he says is correct, if it is interpreted properly: religion
is healthy for the state; the state is supposed to protect it; Catholicism
is the religion founded by Christ, and everybody has a moral obligation
to follow the true religion. (This is perfectly consistent with
Vatican II's teaching on religious freedom.) There is no idea here
that the state needs to force everybody to be Catholic, or that
the Catholic faith must be the official religion of the realm. But
of all religions, Catholicism, since it is the true one, must be

The second
example is drawn from a section of Pius XI's encyclical, Quadragesimo
Anno, written in 1931. Pius writes in sections 105–108:

In the first
place, it is obvious that not only is wealth concentrated in our
times, but an immense power and despotic economic dictatorship
is consolidated in the hands of a few, who often are not owners
but only the trustees and managing directors of invested funds
which they administer according to their own arbitrary will and

dictatorship is being most forcibly exercised by those who, since
they hold the money and completely control it, control credit
also and rule the lending of money. Hence, they regulate the flow,
so to speak, of the life-blood whereby the entire economic system
lives, and have so firmly in their grasp the soul, as it were,
of economic life that no one can breathe against their will.

concentration of power and might, the characteristic mark, as
it were, of contemporary economic life, is the fruit that the
unlimited freedom of struggle among competitors has of its own
nature produced, and which lets only the strongest survive; and
this is often the same as saying those who fight the most violently,
those who give least heed to their conscience.

Is this
authoritative teaching, or really the pope's own view of current
events based on his own economic paradigm, about which he has no
necessarily unique knowledge? It is almost difficult to explain
here the economic confusion in this section of the encyclical. In
this case, managers of money cannot invest funds "according
to their own arbitrary will and pleasure." All wealth has alternative
uses, hence those with discretionary cash will invest it where they
expect the most return. Managers of money, which by the way is not
their own, must seek the highest return or be fired by the people
who do own it. The highest return will come from the most sound
investments — taking into account not only expected yield, but also
risk factors. It would be like flushing someone else's money down
the toilet if they invested it "according to their own arbitrary
will and pleasure." So, a man may be under pressure from his
wife to invest in his brother-in-law's hair-brained business scheme,
but he would be crazy to do so. Competent money managers will not
lend money to those who are not likely to pay it back. Of course,
there are unforeseen events. This is why business people read papers
like the Wall Street Journal, or the Investors Business
Daily and the like. These papers help them see trends over which
they have no control and of which they can take advantage, or avoid
if necessary. So the laws of economics dictate where the money will
be invested, not the arbitrary will of the managers.

In addition,
one must ask oneself whether, unless one has an M.B.A., would one
trust oneself to invest one's money, or would one let it be invested
by professionals? Does the Vatican invest its money? Yes. The Prefecture
of the Economic Affairs of the Holy See controls and invests most
of the money belonging to the Holy See.

Be that as
it may, the ghost author of the encyclical, Father Oswell Nell-Breuning,
S. J., a German Historical School economist, was really railing
about financial cartels in Germany. It is difficult to tell, however,
if there were any money-lending cartels in Germany at the time of
the Encyclical. In an extensive study, Professor Wilfried Feldenkirchen
shows that there were many cartels in Germany since the late 1800's,
but does not mention any were in the financial or lending areas.
The following graph certainly shows that the number of cartels in
Germany expanded at an astounding rate from 1911 to 1926, when a
decline began, but these were all industrial.

The industrial
cartels were the natural outcome of corporatist theory which was
pushed in Germany by the German Historical School economists, including
Father Heinrich Pesch, S.J., in the mid-1800s. In this case, what
Pius XI is complaining about is that his own chickens have come
home to roost, because later in the Encyclical, he would recommend
such a corporative system. Mussolini, who took total power in 1925,
installed such a system. Father Oswald Nell-Breuning, S.J., by his
own admission the author of the Encyclical, actually expresses regret
at using the term "corporatist" in the Encyclical because
people (naturally) equated it with Mussolini's system. Well, duh!
In any event, Michael Novak discussed Pius' and Nell-Breuning's
perspectives in Catholic
Social Thought and Liberal Institutions: Freedom with Justice
saying that, in their mind, the collapse of two big German banks
and the stock market crash bears out Pius' analysis of the brutishness
of the market.

What lessons
can be drawn from this for the believer? These practical aspects
of these encyclicals cannot be taken at face value merely because
a pope writes them.

since the popes rarely if ever refer to specifics as to what exact
historical situations they refer and the countries in which they
are occurring, verification is very difficult, if not downright

Secondly, the
theory behind many of these assertions is frequently ideological,
not real economics nor even theological. As such, as I have shown
elsewhere, facts are manipulated to fit the ideological point.

Thirdly, without
going through every encyclical, it can be said that they have minimal
value for guidance of Catholics, as opposed to other methods. At
times it appears that every pope feels that he must issue one or
more social encyclicals, or he is not doing his job. The presumption
seems to be that problems at the social level require general
discussion, guidance and condemnation. Various branches of a school
of thought are lumped together and the least defensible branch is
taken as typical and properly condemned with the rest of the school.
Or, at times, mere human failings due to original sin are seen as
part of a false philosophy, which needs to be attacked.

The confusion
in the method of writing social encyclicals is shown in the recent
attempts to collect quotations from the encyclicals and arrange
them according to topic. It becomes clear after a while that papal
writings on social and especially economic questions began with
an attempt to give guidance on particular situations as the Church
authorities saw it at the time, given current resources, and ends
up trying to establish, perhaps unwittingly, or at least some people
trying to establish, a consistent "corpus" of social teaching.

In this author's
opinion, this attempt has been at least a partial failure. One major
reason is that in Social Teachings one is not generally dealing
with revelation, but with applying eternal principles to concrete
political, social and economic questions, in which the Church authorities
have no special expertise outside of moral teaching itself, which
is derived from natural law and Divine positive law. A case in point
would be that it would be immoral for a company to fail to pay a
worker the wage he was promised, but moral to pay him his actual
discounted marginal revenue product. One tries in vain to recall
a section like this in an encyclical. In addition, the Church looks
at specific social, political and economic questions through the
lens of the current state of the social sciences, or in the case
of economics, up to the time prior to Centesimus Annus, through
the eyes of the German Historical School. So, Pius XI's Quadragesimo
Anno recommends a corporate state as a just economic order,
but it was dropped like a hot potato from there on.

When dealing
with revealed truths, truths which can be known only through God's
revealing them, it is admitted that there can be some development.
John Henry Cardinal Newman, in his famous Essay on the Development
of Christian Doctrine, responded to Protestant accusations that
the Catholic Church actually invents doctrines. He showed that the
Church can have new insights into revealed doctrines while the doctrines
remain unchanged. He gave a number of rules which should be used
to tell if a development of a doctrine is authentic. Newman's theology
of development was accepted by Vatican II. While Catholic Social
Teaching surely has some of the elements of consistency that are
similar to that in the doctrinal statements, the fact of the changing
circumstances and the changing insights of the social sciences,
not to mention the very real possibility of seeing social, political
and economic problems through ideological glasses, make the development
of a "corpus' of Catholic Social Thought problematic.

What is needed
to resolve these dilemmas is an encyclical which bases its teaching
on the foundational principles of Catholic moral theology, the 10
commandments and the Beatitudes, while abstaining from the acceptance
of any (especially) economic theory per se.

The main elements
of such an encyclical can now be suggested:

  1. A brief
    theological and philosophical treatise of the nature of the
    human person. This treatise will take into account the developments
    over the last hundred years or so in Phenomenology and Personalism
    as developed by John Paul II and the Lublin School of Thomism.
    It would show man as a creature having reason and free will.
    He can discern the good with his reason and his will is truly
    free so that he can freely choose the good. It would recognize
    that his knowledge and choice of the good are tainted by Original
    Sin, which darkened his intellect and weakened his will, but
    also that many choices in life are not clear, and more often
    than is supposed, are not simplistic choices between good and
    evil, but between two competing goods of varying and possibly
    hidden values.

  2. Man is
    created with certain drives or impulses the satisfaction of
    which is supposed to produce human flourishing and are arranged
    in a hierarchy — the lower meant to serve the higher. If the
    hierarchy is violated, the human being is lead away from happiness
    and flourishing. So, the instincts of self-preservation, feeding,
    shelter, etc., are not valued for themselves but allow men to
    pursue higher-level ones, such as the desire for family, the
    respect of others, the need for a well-ordered relation with
    God, and happiness and admittance into the inner life of the

  3. But many
    of the choices we make are economic. These choices are the responsibility
    of the adult, who makes them ostensibly for his own flourishing.
    The Vatican II Decree on Religious Freedom, Dignitatis
    Humanae, is an appropriate guidepost for this and is based
    on the dignity of the human person. The core of Dignitatis
    Humanae has never been thoroughly unpacked by anyone, and
    can be extended theologically to defend a free economy. The
    document states:

    in dealing with this question of liberty the sacred Council
    intends to develop the teaching of recent popes on the inviolable
    rights of the human person and on the constitutional order
    of society. (Dig. Hum., # 1)

    While the
    document discussed this subject in relation to religious liberty,
    which obviously is man's greatest freedom, it never got around
    to the discussion of human rights in general and the constitutional
    order of society as it seemed to promise. The implication is
    that man must be allowed to discover religious truth without
    coercion; if man must be allowed to believe and practice the
    faith of their conscience without hindrance from anyone, whether
    public or private except as a matter of public order, he ought
    to be free to decide, again within the limits of public order,
    the other, lesser, things, which he believes lead to human flourishing,
    even if it is to his own detriment. This does not exclude the
    right of the church and others to guide, persuade and even morally
    condemn some choices, nor does it imply a moral approval of
    all choices. But just as in man's search for religious truth,
    it must not be coerced choice.

  4. Having
    said this, the Church has a duty and a right to give moral
    guidance to man's choices, where morality is in question. Here
    is where this new document must take into account the developments
    in moral theology of the last hundred years or so, and are seen
    in the encyclical of Pope John Paul II, Veritatis Splendor.
    In this latter document, the Pope states that "the
    morality of acts is defined by the relationship of man's
    freedom with the authentic good." This good is established
    in man by Divine wisdom. (Ver. Spl., # 72, italics in
    original) In other words, the moral law is meant to bring man
    to the fulfillment of the hierarchy of existential ends which
    God placed in him for his flourishing and ultimate happiness.
    There is no carping in this encyclical about how the world is
    going down the drain as we see in so many past encyclicals,
    which are so worded, not because of eternal truths, but because
    the events of the times were so harrowing.

  5. Lastly,
    this new encyclical should focus on specifically moral
    aspects of social, political and moral actions in the same style
    of Evangelium Vitae, and avoid painting with too broad
    strokes. Popes need to remember, that painting with broad strokes
    opens the door to the enemies of true liberty, friends of statism,
    and anti-capitalism that many of us Catholic Austrian economists
    have had to bear with all these years.

In writing
an encyclical in the style just outlined, the Church would be doing
a pastoral service to aid the human flourishing discussed above
and re-gain much of its credibility with, at least, economists.

31, 2008

Dr. William
R. Luckey [send him mail]
is Professor of Political Science and Economics at Christendom College
and has expertise in Political Philosophy, Business and Economics,
and Theology. He is an Adjunct Scholar of the Mises Institute and
of the Acton Institute for the Study of Religion and Liberty. Dr.
Luckey is also on the advisory board of the Center for Economic
Personalism, and is on the Board of Scholars of the Virginia Institute
for Public Policy Studies.

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