Capitalism and the Catholic Bishops

The intersection of religion and economics can be a curious place. Witness one of the U.S. Catholic Bishops’ latest missives in “Faithful Citizenship: Civic Responsibility for a New Millennium.”

(As an aside, query whether it makes sense to speak of Christian responsibility “for a new millennium,” as this arguably implies that Christianity, being two millennia old, somehow has something different to say about civic responsibility now than it did during the life of Christ or during the time of Saint Augustine. Away clear thinking! There are trendy slogans at hand!).

As well they should, the Bishops remind us that it is their “responsibility as religious teachers to speak out on the moral dimensions of public life.” The Bishops also remind us of the event from which Y2K was calculated — the birth of Christ.

Unfortunately, where economics is concerned, the Bishops pay too little heed to the history of economic thought and the history of the Church, including recent history such as the Catechism, which has a much more precise, focused, and informative discussion of economics. A close reading of “Faithful Citizenship” does not disclose any discussion of Saint Bernardino of Siena or the Spanish Scholastics — Catholic scholars of the Middle Ages who pioneered economic thinking.

Worse, in a document which is intended to guide Catholics in the new millennium, i.e., for the next thousand years, there is virtually no careful discussion of economics. There is no discussion, moreover, of the significant economic theories of the past 250 years. No discussion of Adam Smith, Ludwig von Mises, or Friedrich Hayek.

Very much to the disappointment of this Roman Catholic, “Faithful Citizenship” consists mostly of vague generalities suitable for bumper stickers or sloganeering. There is very little in the way of food for thought. The Catechism and The Imitation of Christ, in my humble opinion, are much better spiritual guides.

Make no mistake: is not the conservative Orthanc that will remain nameless, such that one might expect such missives as “Mater si, magister non” to issue forth. Far from it. The media frenzy over allegations of sexual abuse among the clergy has been damaging, and I see no reason to kick the bishops when they are down. Moreover, I see no reason to kick the bishops at all. The present critique is nothing more than, and should not be interpreted as anything other than, a reasoned appeal for correctness in economic thought. Consider the present piece a call for the Bishops, and for Catholic intellectuals, to deliver a substantive treatment of Christ-like citizenship worthy of the name. Do not consider the present piece an argument against the teaching authority of the Church. (Indeed, see The Catechism of the Catholic Church, 2420).

Turning to “Faithful Citizenship” itself, the document is distressing for a number of reasons. First, the document reads like a sales brochure. It is, however, not at all clear who are meant to be the buyers. For example, one section of the document is entitled “Challenges for Believers,” while another touts “Catholic Assets in the Public Square.” For the record, the touted assets are a consistent moral framework, everyday experience serving those in need, and a large community of citizens — all of which makes it seem that the bishops are seeking to sell themselves to politicians.

Who else is supposed to be swayed by the fact that there are lots of Catholics in the United States? Trial lawyers seeking to use sexual abuse lawsuits as if they were suits against tobacco companies?

Not a good course of action to sell oneself to politicians, if indeed it is the intention. Much better for politicians to conform themselves to the moral teaching of the Church than for the Church to curry favor with degenerate power-hungry maniacs like the Clintons.

Second, when you get down to the details of what the bishops propose, the call to “Faithful Citizenship” is not much of a reasoned guide to serious Christian citizenship. Consider the following vague generalities.

“Social justice.” As F.A. Hayek spends an entire book demonstrating, (Law, Legislation and Liberty, vol. 2, The Mirage of Social Justice), there is no such thing as social justice. It is an empty term which merely sounds attractive to those who do not bother to delve deeper. The reason for this is that only individuals and their actions may be just or unjust. Society does not act, and cannot be unjust. And so to sanction the use of the term “social justice” (much like the term “just wage,” discussed later) is to open the door to fuzzy thinking and hence to social disorder. The concept of “social justice” is wholly devoid of meaning. The Bishops would do well not to perpetuate the insidious term.

“Our prosperity does not reach far enough.” Did Bill Clinton write this thing? Whose is “ours?” And how is it supposed to reach farther?

“The new world we lead is still too dangerous, giving rise to ethnic cleansing and an inability to confront hunger and genocide.” What exactly is meant by “confronting” hunger or genocide? And where is the idea that sin might have something to do with our “new world” not being very different from the old. Although one might expect, if not a sense of historical perspective, then a sense of the human condition from the bishops, this sense of sinfulness appears to be lacking at times.

“The younger you are, the more likely you are to be poor.” No kidding. Try this: the younger you are, the more likely you are to be unemployed. Child labor laws and all that. Could there be a link between unemployment and poverty?

“A powerful economy pushes our nation forward, but it widens the gap between rich and poor in our nation and around the world.” Again, I tear out my hair. You would swear that it’s a Dubya speech. The economy does not widen the gap between rich and poor. First, those who are rich and poor are not constant; rather, the individual human members of such impersonal categories shift over time. Second, it is possible for those who are rich to become richer by the application of their God-given talents. Bill Gates is very good at making computer programs that people freely buy because the programs are useful. Unless Gates suddenly becomes a moron, he will continue to be successful, while the man who is unable to earn a living is unable to earn a living. The gap between Gates and this man will necessarily widen. This is not to say that poverty is a good thing; it is manifestly a terrible human evil, which it is the duty of all Christians to ameliorate. This is merely to observe an economic fact. The reminder which the Bishops must give to all men of good will is to charitably share their wealth with those in need, i.e., to give as they are best able, to those who are in need. Without entrepreneurs to generate wealth, there would be nothing to share with the poor.

“It is increasingly apparent that major public issues have clear moral dimensions and that religious values have significant public consequences.” Wait a minute: since when? Formerly, major public issues had nothing to do with morality? Again, this is not a good advertisement for Catholic schools.

Third, even where “Faithful Citizenship” does not consist of vague generalities, the document is profoundly deficient with respect to political science and economics. We will first consider political science.

As noted by Nobel laureate F.A. Hayek in Law, Legislation and Liberty, in the unlimited democracy common to the remnants of Western civilization today, i.e., in a spoils-based democracy (what Aristotle considered to be the worst kind of government, i.e., mob rule), the politicians (those in power) will pander to any and all groups in order to remain in power.

Without acknowledging this essential feature of contemporary democracy, the Bishops blithely call for “a new kind of politics” in the next 1000 years. Memo to Bishops: unless some sort of limits are imposed upon the Parliaments of the West, the politics of the next 1000 years may be new, but it will not be better in any objective sense.

Worse, the Bishops call for “less partisan posturing and attack ads.” As a matter of plain vanilla political science: when there are no actual differences between candidates, such candidates must and will resort to attack ads to differentiate themselves. The Republican will spend $1.25 on federally-funded abortions, and the Democrat will spend $1.35. It’s a contest between good and evil! My eye. The bishops err on fundamental matters of political science. That is not a good starting point when giving advice meant to last 1000 years.

Sadly, the Bishops’ errors are not confined to the fundamentals of political science. Where economics is concerned, “Faithful Citizenship” suffers from too much Karl Marx (i.e., any Marxist pabulum) and too little understanding of the free market, by which it is meant that the chief defect is the Bishops’ failure to recognize in human freedom and hence in the free market the source of the “policies and programs” which they advocate.

First, consider the “preferential love of the poor and vulnerable” which the Church calls us to embrace. If you love the poor, free the market. The poor in the fifty states are manifestly better off than the poor in such socialist, which is to say anti-capitalist, nations as North Korea and Cuba. Pop quiz: which economies are more fruitful, those economies which are free, or those which are controlled by the modern, secular, omnipotent state? Where is a man better able to provide for others (both family and society): North Korea or Switzerland?

As Ludwig von Mises details in his brief masterpiece The Anti-Capitalist Mentality, the masses in a capitalist society decide what is made and in what quantities. In a capitalist system, savings and investment by the capitalists create employment and wealth for the otherwise impoverished masses. But don’t take von Mises word for the truth of that proposition. As the Catechism states, “Profits are necessary…They make possible the investments that ensure the future of a business and they guarantee employment.” ( 2432). Moreover, the Catechism reminds us that:

“The ownership of any property makes its holder a steward of Providence, with the task of making it fruitful and communicating its benefits to others, first of all his family.” ( 2404)

A capitalist economy, i.e., an economy which is “run” by free men and women, but in reality “run” by no one individual human mind, human persons are best able to fulfill their Divine obligation to employ their skills and property “in ways that will benefit the greatest number.” ( 2405)

In a capitalist, i.e., free, economy, devices which originate as luxury goods become available to the masses over time (think not only of cars and color televisions, but forks, knives and spoons). In East Germany, one of the allegedly “better-off” socialist states ever to have sullied the face of the planet, telephones were a luxury in 1989. In short, in a capitalist society, the little guy is better off than in any other system known to man (we will return to this point).

Similarly, the Bishops call for “programs and policies that promote peace and sustainable development for the world’s poor” is not supported by any substantive recommendations. In that regard, here is a substantive policy proposal: free men and women to act in the market as they see fit. By allowing men and women to freely utilize their God-given talents, knowledge and initiative as they see fit and know best (being best informed about the totality of their own circumstances and alternatives, and having the greatest incentive to provide for themselves), capitalism allows men and women to satisfy the demonstrated needs of their fellow human beings.

Moreover, peace and development are not, and can never be, created, let alone sustained, by violent government interference with the free actions of men and women, i.e., by Bill Clinton, George Bush, and Alan Greenspan. When government (of any level: local, state or national) interferes in the voluntary economic activities of the citizens, whether by way of protectionist tariffs, taxation, or subsidies, government distorts the effects of human actions. Worse, such nefarious meddling as fiat currency and deficit spending may seriously impair the ability of the poor to maintain or improve their standard of living. Triple-taxation of income, plus regulations which strangle productivity and job creation, similarly harm the poor.

One must not neglect to discuss the harmful, empty idea of a “just wage,” “minimum wage,” or “living wage” when discussing well-intentioned policies which affirmatively harm the poor they are allegedly designed to benefit. Although it may sound nice to talk of government forcing employers to pay higher wages, the notion of a “just wage” is dangerous in its imprecision. Precisely because it is not precise, the idea of a “just wage” allows the casual thinker on economics to ignore both economics and reality, or, rather, to think that they are thinking about an issue without really reaching the essence of the problem. First, the idea of a just wage is premised on the Marxist labor theory of value, which holds that things are objectively worth the labor that went into making them. Here, as in his atheistic materialism, Marx is in error. Value is subjective, and determined by human action, i.e., by men and women demonstrating their preferences by voluntary exchanges. Bishop Smith demonstrates his preference for a newspaper to a $1 bill by exchanging the $1 for the newspaper. Similarly, he demonstrates his preference for the newspaper over other things by spending the $1 on the newspaper rather than on a soda.

It is not an inalterable truth of the universe that a newspaper or a soda costs $1. Instead, these items are priced because of human actions, i.e., the market for newspapers or soda, which consists of men and women buying and selling, forecasting and producing, supplying and demanding, ends up with newspapers or soda being sold for $1. It may be that the government artificially forces the prices of soda to higher levels, for example, by paying subsidies to millionaire sugar farmers. It may be that government forces the prices of newspapers to higher levels by restricting timber production, and thus forcing up the price of paper. In summary, however, value is subjective. No matter what price supports are instituted by the government, and no matter what a newspaper publisher may wish to charge for his papers, prices are ultimately determined by the actions of men and women in a market. If no one buys the news for $1, the price must come down, or the publisher must find something else to do. Value is determined by what people actually pay for things, not by abstract ideas.

The idea of a “just wage” is just as empty as the idea of a “just price” for a newspaper. A man sells an hour or a year of his labor in the same way that he sells a newspaper. A man’s wages, then, are subjectively valued depending upon what he produces for those who consume his labor. The same man may wash cars, or he may assemble parts for automobiles. He may spend one hour at each task, yet has very likely not produced an identical hour of value in car washing and in auto parts assembly. His labor assembling car parts, one suspects, would be worth more on the market for labor.

To put the matter differently, why are 100 hours of Stephen King writing novels worth more than 100 hours of Stephen King washing dishes? Because those who consume his novels pay more for the 100 hours of writing than do those who pay for the 100 hours of dish washing. How do we know this? There are market prices for horror novels and for dish washing. Men and women demonstrate their preferences, based upon their subjective values. Would it be a “just wage” to mandate, by law, that Stephen King make the same hourly rate writing novels and washing dishes?

It is a serious error to simply assume that there is a metaphysical scale of objective economic values. As F.A. Hayek points out in Individualism and Economic Order, many economists assume as “given” the very things which economics seeks to explain. If it were so very simple to discern the value of a given project, in the abstract and merely by reference to vague ideas of justice, no business would ever fail. Yet that is not our human experience. As Hayek observes, a chief problem for economics is how to best deal with human ignorance, i.e., with limited knowledge known to limited people.

The idea of a “just wage,” if it is to have any meaning, must not ignore the fact that the price of labor is determined by the market. It is not an intelligible use of the term “justice” to describe wages as just or unjust. The same goes for the Bishops’ assertion that “Farmers deserve a decent return for their labor.” Although this statement might deserve our affirmation, it can have no practical meaning other than that those who buy farm products should not cheat or steal. In that regard, recall that the discussion of a “just wage” in the Catechism (“A just wage is the legitimate fruit of work;” 2434) is presented within the discussion of the Seventh Commandment: Thou shalt not steal.

The notion of a “just wage” cannot mean that any particular price must be guaranteed, as that would require that the desires of men and women for corn, for example, remain constant forever and for all time as compared to the amount of money they have to spend and as compared to all other alternative food items competing for their grocery dollars. Clearly, this state of affairs will never come to pass. Instead, the just wage means that one should pay what is owed, i.e., pay what the labor is worth. Which returns us to subjective value theory, as opposed to Karl Marx and his labor theory of value. Pop quiz: if it takes me two years and costs $1,000,000 to hand-draw a set of baseball cards, would it be unjust for someone to buy my set of hand-drawn baseball cards for less?

The minimum wage and the just wage are essentially the same idea, i.e., the idea that a government can magically declare prosperity by command. Surely the Bishops should know better than to believe in such a notion. The net effect of minimum wage laws are to decrease the number of available jobs, because a minimum wage necessarily and artificially raises the price of labor beyond the productivity of that labor (the higher the minimum wage, the more jobs are destroyed). Two queries for the Bishops: (1) why not require by law that everyone in America make $1,000,000 an hour; and (2) is a poor man better off unemployed, watching another man earn $10 an hour, or might he be better off, in the absence of a minimum wage, earning $5 an hour like his neighbor? If you want just wages, free the market.

These real-world questions are simply not answered by the Bishops. Their failure to do so is a serious flaw in “Faithful Citizenship.” The Bishops’ suggestions for government program upon government program, if implemented, would necessitate a large, intrusive and expensive (i.e., high tax) government. Their programs would necessarily deprive human persons of the ability to control their own lives, and transfer such control to bureaucrats and career politicians. Additionally, the Bishops make no suggestions for how to prevent their pet programs from becoming boondoggles, mere tools for the advancement of bureaucrats and cronies (Enron anyone?). The Bishops’ proposals, therefore, are bad ab initio, even if they do rather unimaginatively amount to a mere tweaking of the status quo which is the modern welfare state.

There are, thankfully, bright spots. The Bishops insist upon the role of the Church in public affairs, and they hint at a recognition of the fact that taxation can be so ruinously high as to destroy families by destroying the ability of a father and husband to earn a wage. The Bishops also appear to understand that giant tax bills for tax-schools (“public” schools) can make it economically impossible for the less-well-off Catholics to go to Catholic schools (as if the public school monopoly will shed any tears over this chance to eliminate the last remnant of serious competition!). And they condemn “direct and intentional attacks on civilians in war,” unlike so many phony conservatives since September 11, as “never morally acceptable.” The same goes for “the use of weapons of mass destruction or other weapons that cannot distinguish between civilians and soldiers.” It was nauseating to see the news media so gleeful over the “daisy cutter” bomb employed in Afghanistan.

By the way, the failure to adequately consider economic thought is not in any way limited to the American bishops (alas, if only it were so; we will pass over politicians in silence). Consider the following definition of capitalism from The Essential Catholic Handbook (Ligouri, 1997):

capitalism — An economic system marked by private ownership of the means of production and a for-profit free market for goods and services. The Church does not see the capitalist system as unlawful, but it condemns its abuses, such as unbridled materialism and the absolute control of the marketplace over human labor.

First, the definition is imprecise at best. It would be better to define a capitalist system as “a system of private property.” That’s all. Contained within the meaning of private property is the notion of liberty, i.e., the freedom to control one’s own property. If Saint Patrick’s Parish owns one square block of property, then the parish owns that property. It is a necessary characteristic of ownership that the parish may sell the property, build a church on the property, or turn it into a garden. To the extent that the parish is not free to use, change, or sell the property, the parish is not free. Liberty, then, is a natural corollary of private property.

Second, consider the double-negative, back-handed compliment paid to human freedom: “the Church does not see the capitalist system as unlawful.”

Er, okay. How about this hypothetical statement, identical in form to the Ligouri definition of capitalism: “the church does not see buying and selling as evil.” Such a statement, if it were passed off as a definition of buying and selling, would be manifestly inadequate, as well as silly.

Consider as well the following: “the church does not condemn buying and selling, but condemns their abuses.” Again, silly.

Turning specifically to the alleged “abuses of capitalism,” it is a question of fact whether the listed abuses are actually abuses unique to capitalism, or simply the same human sinfulness which might be acted out by men in any economic system.

First, “unbridled materialism.” We must begin by defining materialism, as is generally accepted, as meaning: (1) a belief that only physical matter, as opposed to spiritual existence; and (2) an inordinate attachment to material things to the exclusion of intellectual or spiritual things.

There is nothing unique to a private property system where materialism is concerned. Marxism, for example, was materialist in the strong sense, meaning that it denied the existence of God and the spiritual realm. For Marxism (and think of this the next time the New York Times portrays some cute, fuzzy professor in a nice sweater as a Marxists), human beings are chemistry sets, merely arranged differently than rocks, mud, and garbage. Moreover (and more to the point), it would be a denial of reality to claim that there are no materialistic persons in socialist or communist societies. The Kremlin, unless I am mistaken, was not noted for its dedication to Franciscan ideals.

If anything, it would seem that human beings can fall into the trap of materialism in any culture. It would seem that, at anywhere or anytime, men can sin by valuing material possessions more than the higher things. Or am I missing something?

Indeed, I am. As Lew Rockwell has pointed out, in the socialist and communist nations, where the material possessions necessary to the sustenance of life are more scarce, they are necessarily more dear, that is, more valued. When you need to stand in line for toilet paper or bread, in a Moscow winter — and I mean stand in line outside, in a line going around the block — you are likely to place more value on the acquisition of material possessions than your typical toilet paper buyer at an American warehouse store. This, however, must not obscure the point that the idea of a “sinful culture” is shorthand for “sinful men and women.” Labels are fine, so long as they help, rather than defeat, rational thought (recall our earlier discussion of “social justice;” unlike “social justice,” the idea of a “sinful culture” is something to avoid, and hence beneficial, unlike the vapid idea of “social justice” which one might be encouraged to achieve).

Second, “absolute control of the marketplace over human labor.” In the abstract, it sounds nice to complain that capitalism somehow imposes “absolute control” over labor that would otherwise be, one supposes, free. (Go look up “platitude” in your dictionary, then come back). Unfortunately, this alleged “abuse” of capitalism is merely a fact of life. It is a fact that human labor is a marketable commodity.

To put it another way, human labor is ultimately “controlled” by other human beings. The term “marketplace” is merely shorthand for the human beings of the world who express their preferences for goods and services by buying some and not buying others.

Of course, it must be recognized that this type of “control” is “control” in name only. It is clearly distinguishable from the control exercised by dictators, despots, regulators, and bureaucrats. Indeed, it is a benign form of control.

Consider: the reading public controls the type of novels which are published, the kind of beer which is brewed, and the kind of films which are made. If no men or women spend money on Stephen King novels, then Stephen King must either decide that his dedication to his craft is such that he will continue to write in a life of poverty, or that he will pursue a different craft which provides him with the means to earn a living.

Ultimately, however, Stephen King’s human labor is controlled — by the marketplace, i.e., by what men and women buy.

This is a very different form of control from the control imposed by governmental bureaucrats and regulators who censor or ban certain books. Consider one American president — John Adams — whose Alien and Sedition Acts outlawed political opposition to his regime. How’s that for control?

The “definition” of capitalism in The Essential Catholic Handbook is, in short, unhelpful. (By the way, it is a shame that this handbook uses the NRSV translation). Moreover, it fails to explain the essence of capitalism, namely, private property, in any way.

The Ligouri definition, by the way, references paragraph 2425 of the Catechism of the Catholic Church. and the Catechism is more favorable to the free market than The Essential Catholic Handbook. The Catechism of the Catholic Church, in Part 3 (Life In Christ), Section 2 (The Ten Commandments), Article 7, (The Seventh Commandment) declares that:

2423 The Church’s social teaching proposes principles for reflection; it provides criteria for judgment; it gives guidelines for action: Any system in which social relationships are determined entirely by economic factors is contrary to the nature of the human person and his acts.

2424 A theory that makes profit the exclusive norm and ultimate end of economic activity is morally unacceptable. The disordered desire for money cannot but produce perverse effects. It is one of the causes of the many conflicts which disturb the social order. A system that “subordinates the basic rights of individuals and of groups to the collective organization of production” is contrary to human dignity. Every practice that reduces persons to nothing more than a means of profit enslaves man, leads to idolizing money, and contributes to the spread of atheism. “You cannot serve God and mammon.”

2425 The Church has rejected the totalitarian and atheistic ideologies associated in modem times with “communism” or “socialism.” She has likewise refused to accept, in the practice of “capitalism,” individualism and the absolute primacy of the law of the marketplace over human labor. Regulating the economy solely by centralized planning perverts the basis of social bonds; regulating it solely by the law of the marketplace fails social justice, for “there are many human needs which cannot be satisfied by the market.”Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended.

The economics of the Austrian School, of Carl Menger and Ludwig von Mises, is wholly compatible with this call. The Austrian School does not propose that social relationships be determined only by economic factors. Indeed, it is not clear what that would mean. Instead, the Austrians point out that economics is a matter of human action, and that it is possible to learn truths about economics by studying human actions. Acting human persons are not required to surrender all notions of faith, family, or community.

Similarly, capitalism does not require that profit be the ultimate end of economic activity. Although men and women act for ends, profit is but one possible end of human action, and clearly not the ultimate end (salvation).

Finally, the Austrian view of economics is also compatible with the Church’s declaration that “there are many human needs which cannot be satisfied by the market.” This is manifestly true. Capitalism does not necessitate the idea that all human needs are fulfilled by the market. Instead, capitalism recognizes that the market is very good (indeed, the best system known to man) at fulfilling man’s material needs. As faithful Catholics must recognize, this is not the sum total of human existence.

Since the Catechism is so thoroughly sound on economic matters, what is wrong with the American bishops? Are the bishops desperately seeking approval from the wrong crowd? There are hints of this, as “Faithful Citizenship” includes calls for “gun safety measures” (don’t all guns come with safeties?), “reasonable restrictions on access to assault weapons and hand guns” (there is no such thing as an assault weapon, and hand guns are a wonderful device for personal protection), environmental initiatives, health care, and housing.

In short, the bishops appear to ratify much of the contemporary Leftist political agenda, without any substantive explanation for doing so.

On the other hand, “Faithful Citizenship” curiously omits any discussion of homosexuality. The word does not appear in the document. The closest the bishops come to addressing this significant moral issue of our times (and, indeed, of all human times) is the statement that “Marriage as God intended it provides the basic foundation for family life and needs to be protected in the face of the many pressures working to undermine it.” Considering the Left-wing push to make homosexuality morally acceptable, the silence of the bishops on this issue speaks volumes.

“Faithful Citizenship” falls sort of delivering a sound theoretical framework for Catholic consideration of economics and politics. Unsurprisingly, it also fails to deliver practically workable economic and political suggestions. The Bishops would do well to begin anew with a sound praxeological foundation. The works of Carl Menger, Ludwig von Mises, Murray Rothbard, and F.A. Hayek deserve serious attention.