Documentation: The Future of the World Economy

The economic inequality between the northern and southern hemispheres is increasingly threatening the survival of the family of mankind; in the long run this may be no less a menace to the progress of history than are the arsenals of weapons with which East and West are already confronting one another. And thus new efforts must be made to overcome this tension. All previous methods have proven ineffective; in fact, in the last thirty years world poverty has increased at a truly staggering rate. To find constructive solutions, we need new ideas in the field of economics; but these ideas will be unthinkable and certainly not practicable without a new set of moral impulses. Thus there arises the possibility and the need for dialogue between the church and the economy.

Let us try to define the problem more closely. For it is not obvious at first glance — and certainly not from the standpoint of classical economic theory — just what the church and the economy have to do with one another, ex­cept that the church is also involved in business transactions and is therefore a factor in the marketplace. But it is not in this capacity — as a mere component of the economy — that the church is contributing here to the dialogue, but in its own right, as church.

The objection will now be raised that especially since Vatican II the autonomy of all areas of specialization must be respected, and thus the economy must be allowed to pro­ceed according to its own rules, unrestricted by moral con­siderations imposed from outside. Thus, following the tradi­tion inaugurated by Adam Smith, market and ethics are ir­reconcilable, since voluntary “moral” transactions are con­trary to the laws of the market and the moralizing in­dustrialist will simply be driven out of business.. And thus, for the longest time, business ethics rang like hollow metal, since economics was a matter of efficiency, not of morality. The inner logic of the market would therefore free us from the need to build up the greater or smaller morality of the in­dividual entrepreneur. The undisturbed interplay of the market’s laws was the best way to ensure progress and also fair distribution.

The great achievements of this theory made it possible for quite some time to overlook its limitations. But now a changed situation has drawn attention to that theory’s philosophical presuppositions and thus to its problematics. Though this view emphasizes the freedom of the individual businessman, and can therefore be termed liberal, it is in fact fundamentally deterministic. It assumes that man and the world are so constituted that the free play of the market forces can lead in one direction only — namely toward the balance of supply and demand, toward economic efficiency and progress. This determinism, according to which man, for all his apparent freedom, is completely controlled by the binding laws of the market, implies yet another perhaps even more astounding presupposition, namely that the market’s natural law (if I may phrase it thus) is essentially good and must necessarily work toward the good, whatever the moral values of the individuals concerned.

These assumptions are not completely false, as is clear from the successes of free enterprise so far. But neither can they be extended indefinitely; they are not universally valid, as is obvious from the current problems of the world economy. Without going into the subject in detail — which is not my task — I would merely like to underline a statement by Peter Koslowski, clearly pointing out what it is all about: “Economics is not only ruled by economic laws, but controlled by people….” Even though free enterprise relies on individuals following a particular set of rules, it cannot dispense with the individual; it cannot banish his moral freedom from the world of economics. It is becoming increasingly clear that the development of the world economy also involves the development of the world com­munity, of the universal family of man, and that the develop­ment of the spiritual dimension of man is an essential com­ponent in the development of the world community. The spiritual dimension of man is also a factor in the economy: free enterprise can function only with the help of an underly­ing moral consensus.

So far I have emphasized the tensions between a strict­ly liberal economic model and ethical considerations, and I have thus attempted to circumscribe a first set of ques­tions which will play a role in the discussion. I must now point out the opposite set of tensions. The question of market and ethics has long ceased to be a merely theoretical problem. Because the inherent inequality of the various economic zones threatens the free play of the market, there have been attempts, since the 1950s, to restore the economic balance by means of development projects. It can no longer be ignored that these attempts have failed, and have even accentuated the inequalities. In consequence, large areas in the Third World which had originally welcom­ed such development assistance with high hopes, now blame their misery on the market economy; they view it as a system of exploitation, as institutionalized sin and injustice. In this perspective, a centralized economy appears to be the moral alternative, toward which one turns with almost religious fervor. For, while the market economy relies on the effective action of egoism and on its automatic limitation by the competing egoisms, the main idea here seems to be that of a just control, striving to secure the same rights for all and to ensure the equal distribution of goods.

To be sure, attempts so far have not been very en­couraging, but it does not follow that we should dismiss all hope that such a moral perception can ever achieve success. It is argued that if the whole system were set on a stronger moral foundation, it should be possible to reconcile morality and efficiency in a society which is not geared toward max­imum profit, but toward self-restraint and the service of others. And thus in this area, the argument between economics and ethics becomes more and more an argument against the market economy and its spiritual foundations, in favor of a centrally controlled economy.

But the full range of the question under consideration first becomes clear if we include the third set of economic and theoretical considerations characterizing the panorama of the present situation: the Marxist world. In its theoretical and practical structure as a centrally controlled economy, the Marxist system is the diametrical opposite of the market economy. Salvation is to come from the fact that there is no private control of the means of production, that supply and demand are not aligned by competition in the marketplace, that there is no possibility of the pursuit of private profit, and that all controls originate from a central economic man­agement.

But despite these radical differences in the concrete economic mechanisms, similarities can be observed in the deeper philosophical assumptions. The first one is that Marxism is also a deterministic system, and conversely that it too promises full liberation as the product of this deter­minism. It is therefore a fundamental error to hold that a centralized economic system is a moral system in contrast to the mechanistic system of the market economy. This becomes very clear, for instance, when Lenin agrees with Sombart’s thesis that there is not a grain of ethics in Marxism, only inherent economic laws. Indeed, determinism is here far more radical and fundamental than it is in liberalism: for the latter at least recognizes the area of the subjective and views it as the realm of ethics; but here “becoming” and “history” are completely reduced to economy, and the delimitation of the individual subjective domain is viewed as opposition to the only valid law — that of history — and thus as a reaction hostile to progress, which therefore cannot be tolerated. Ethics is thus reduced to a philosophy of history and the philosophy of history lapses into party strategy.

But let us return to the similarities in the philosophical foundations of Marxism and strict capitalism. The second similarity — as will already have been clear in passing — is that their determinism involves the rejection of ethics as an independent entity of relevance to the economy. In Marxism this is especially dramatic, in that religion is reduced to economy; it is seen as the reflection of a particular economic system and thus also an obstacle to true knowledge and cor­rect behavior — an obstacle to the goal of the natural laws of history, namely progress. It is also assumed that history, which unfolds in the dialectic of positive and negative, must, by its very deepest, most unfathomable essence, ultimately end in total positivity. It is obvious that in such a perspective the church can contribute nothing to world economy; its on­ly significance for economics is that it must be overcome. That it might also be used for the time being as the means of its own destruction — and thus as an instrument of “the positive forces of history” — this is a view which has sur­faced but recently; it obviously does not alter the basic thesis.

Moreover, the whole system owes itself to the apotheosis of the central administration, in which the world spirit itself must be at work if the thesis is correct. That this is a myth in the worst possible sense of the term, and is simply an empirical observation which is constantly being verified. And thus the radical rejection of a concrete dialogue between church and economy which is at the root of this way of thinking actually confirms its very necessity.

In my attempt to describe the facets of a conversation between church and economy, I came across yet a fourth aspect. It is evident in the famous utterance by Theodore Roosevelt in 1912: “I believe that the assimilation of the Latin-American countries to the United States will remain very difficult as long as these countries remain Catholic.” Along these same lines, in a 1969 address, Rockefeller recommended that the Catholics there should be replaced by other Christians, an undertaking which we now know to be in progress. In both statements, religion (in this case a Christian denomination) is presented as a socio-political, and thus as a economic-political, factor which determines the nature of the unfolding of political structures and economic possibilities. We are reminded of the thesis of Max Weber, on the inner relationship between capitalism and Calvinism, between the structure of the economic system and the determinant religious idea. It is as though Marx’s idea were turned upside down: it is not economy which generates religious views, but rather the basic religious orientation determines which economic system will evolve.

That only Protestantism could produce free enterprise, whereas Catholicism — encompassing no corresponding education toward the freedom and the self-discipline that free enterprise requires — favors instead authoritarian systems, is a notion which is without doubt still widespread, and recent history seems to bear it out in many ways. On the other hand, despite all the adjustments the market system has undergone, we can no longer view the liberal capitalistic system as the salvation of the world without reservations, as was still possible in the Kennedy era with its Peace-Corps optimism. The reproaches by the Third World may be one- sided, but they are not unfounded. And thus, first of all, the Christian denominations must examine very critically their own attitudes towards political and economic ethics.

But this cannot only be an internal debate, for such self-examination can be fruitful only if it is carried out as a dialogue with those who are Christians and are responsible for the economy. A long tradition has often led such people to consider their Christianity as their private-concern, while as members of the business community they abide by the laws of economics; these areas have come to appear mutual­ly exclusive in the modern context of the separation of the objective and subjective realms. But the whole point is precisely that they should meet, preserving their own in­tegrity and yet inseparable.

It is becoming an increasingly obvious fact of economic history that the development of economic systems that con­centrate on the common good depends on a determined ethical discipline, which can in turn be generated and sus­tained only by strong religious convictions. Conversely, it has also become obvious that the decline of such discipline can actually cause the laws of the market to collapse. An economic policy which strives not only for the good of the group — that is, toward the good of a particular state — but for the common good of the family of man requires extraor­dinary ethical discipline and extraordinary religious strength. A political structure which concentrates the in­herent laws of economics on this very purpose seems almost impossible today, despite all great humanitarian protesta­tions. It can only be realized if completely new ethical forces are released. A morality which would presume to dismiss the technical knowledge of the laws of economics would merely be moralism, quite the opposite from moral. A scien­tific approach which would claim to manage without ethics would be a misunderstanding of the reality of man, and therefore not scientific. A maximum of technical expertise is sorely needed today, but also a maximum of ethics, so that the science of economics can be applied to the right goals and so that its findings can be politically and socially realized.

For all that, I neither could nor would attempt to give answers to the problems which concern us: I lack the necessary technical competence in economics. But I have tried to outline the question which brings us here together. This is an extremely urgent matter. It is already a great suc­cess that we are talking about it. Let us hope that in this much needed encounter of ethics and economics, we will succeed in taking a step forward Which will lead to greater knowledge and more effective action, and thus ultimately to the greater peace, the greater freedom, and the greater unity of the family of mankind.

Pope Emeritus Benedict XVI

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Benedict XVI was elected pope in 2005. Before his elevation, Joseph Cardinal Ratzinger (b. 1927) served as the Prefect of the Congregation for the Doctrine of the Faith during the pontificate of Pope John Paul II. Before his move to Rome, Ratzinger was archbishop of Munich and Freising. He was a professor of theology at several German universities and the author of many books including Introduction to Christianity, Principles of Catholic Theology and God and the World.

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