Is Capitalism Catholic?

People who study economics are often told that modern capitalism is an outgrowth of a certain English Protestant or agnostic tradition represented by writers such as John Locke, David Hume, Adam Smith, and John Stuart Mill. The notion of a link between capitalism and Protestantism owes a lot to Max Weber’s famous thesis The Protestant Ethic and the Spirit of Capitalism, published in 1906. He argued that the distinctively Protestant values of thrift, discipline, hard work, and individualism helped create a new “spirit of capitalism” — the obvious implication being that Catholicism was an authoritarian form of religion inimical to freedom and self-discipline.
While this view has been conventional wisdom for almost 100 years, it is utterly wrong. For one thing, Protestants never had a monopoly over work and simple living, both of which were practiced by medieval monks many centuries before Luther and Calvin. In the words of historian Randall Collins, quoted in Rodney Stark’s The Victory of Reason: How Christianity Led to Freedom, Capitalism, and Western Success, medieval monasteries “had the Protestant ethic without Protestantism.”
Moreover, capitalism existed in Italian city-states during the late Middle Ages, a period not of obscurantism and darkness but of progress and intellectual vibrancy that established the foundations of what eventually became modernity. Shortly after the publication of Weber’s theory, economic historian Henri Pirenne produced a vast documentation showing that “all of the essential features of capitalism — individual enterprise, advances in credit, commercial profits, speculation, etc. — are to be found from the twelfth century on, in the city republics of Italy — Venice, Genoa, or Florence” (Stark, p. xii).
The same point is made by the highly reputed Fernand Braudel, who argued that “this tenuous theory [linking capitalism to the Protestant ethic] . . . is clearly false.” Long before the emergence of Protestantism, the Hanseatic cities of Northern Germany and the Baltic took over the place that had earlier been held by “the old capitalist center of the Mediterranean” (Afterthoughts on Material Civilization).
What is even more striking, however, is that medieval theologians were the first to reflect systematically on the principles of a market economy. According to the famous Austrian economist Joseph Schumpeter, we owe it to the scholastic doctors of the late Middle Ages who established the foundations of economic science. Referring to these doctors, Schumpeter notes in History of Economic Analysis:
It is within their systems of moral theology and law that economics gained definite if not separate existence, and it is they who come nearer than does any other group to having been the “founders” of scientific economics. And not only that: it will appear, even, that the bases they laid for a serviceable and well-integrated body of analytic tools and propositions were sounder than was much subsequent work, in the sense that a considerable part of the economics of the later nineteenth century might have been developed from those bases more quickly and with less trouble than it actually cost to develop it . . . .
Other historians have emphasized the role of medieval universities in the development of economic thought, particularly as regards value and price, two fundamental economic concepts that contributed mightily to the shaping of different economic schools of thought. For example, whether one adopts the labor theory of value (which asserts that the value of a good is determined by the labor required to produce it) or the subjective theory of value (where the value of an object is a function of both its scarcity and perceived utility) has a major impact on one’s economic worldview. As Schumpeter and others have noted, nearly all the ingredients of modern value and price theory can be found in the writings of medieval thinkers. They developed price and value theories remarkably similar to neoclassical models and rejected the labor theory of value on which Marxist and socialist theories are based. Moreover, they acknowledged the legitimacy of profits and interest charges as early as the 13th century.
According to historian H. M. Robertson, the Jesuits also played a major role in the development of capitalism in the 16th and 17th centuries by promoting enterprise, freedom of speculation, and the expansion of trade. “It would not be difficult,” he wrote, “to claim that the religion that favored the spirit of capitalism was Jesuitry, not Calvinism.”
While testifying to the intellectual contribution of Catholic scholars, these facts tell us little of the understanding of economic life by ordinary medieval laborers. But there is some evidence to suggest that what was being debated in universities was also being preached to the faithful. The best illustration of this is St. Bernardino of Siena, a Franciscan missionary and reformer active in the first half of the 15th century who systematized scholastic economics and was one of the first theologians to write an entire work dealing solely with economics.
Titled On Contracts and Usury, it provides a justification of private property, the ethics of trade, the determination of value and price, and the usury question. Bernardino described the entrepreneur as being endowed by God with a special combination of four entrepreneurial gifts — efficiency, responsibility, hard work, and risk-taking — and argued that the latter two legitimized the notion of profit. In short, profit was understood as the valid remuneration of the entrepreneur.
Largely as a result of the religious wars of the 16th century and the deep rivalries between Protestant and Catholic Europe that followed, the body of economic thought developed in the Middle Ages seems to have gone largely forgotten or ignored throughout the 17th and 18th centuries. And, sadly enough, when the Catholic Church sought to make pronouncements on some of the social and economic issues resulting from industrialization and the rise of modern capitalism in the 19th century, it made little reference to the economic ideas of medieval scholars.
Over the past 140 years, the Church has issued a series of statements on social and economic matters that have come to be known as Catholic social doctrine. Most of its views on specifically economic issues are set out in five encyclicals: Rerum Novarum, issued by Pope Leo XIII in 1891; Quadragesimo Anno, issued by Pope Pius XI in 1931; and Laborem Exercens, Sollicitudo Rei Socialis and Centesimus Annus, all issued in that order during the pontificate of Pope John Paul II.
In terms of economic thinking, the most far-reaching of these encyclicals is Centesimus Annus. What John Paul II argued in this document is:
a) that a regime that does not make room for economic freedom is contrary to human nature and brings about social decline, as attested by the collapse of the former USSR;
b) that unregulated “laissez-faire” capitalism results in an unjust society; and
c) that a just social order is one that negates neither the legitimate self-interest of individuals, nor the risk of abusive economic exploitation of the weak by the strong.
It is in the light of these considerations that Centesimus Annus calls for a regulated form of capitalism, not entirely unlike that which exists in the United States and Canada. To the question of whether capitalism is the model that countries seeking true economic and civil progress should follow, the encyclical offers this answer:
If by capitalism is meant the positive role of business, the market, private property and responsibility for the means of production as well as free creativity in the economic sector, the answer is in the affirmative . . . . But if by capitalism is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom nor is seen as a particular aspect of freedom, the core of which is ethical and religious, then the reply is certainly negative.
What we learn from the latest research in economic history is that the Middle Ages was a period not of economic stagnation but rather of economic fermentation, and that the Church, far from standing in the way of medieval economic development, took an active part in it both materially, through the economic activity of the monasteries, and intellectually, through its universities. Today, Catholic social doctrine, especially since John Paul II’s publication of Centesimus Annus, continues in that same tradition to support regulated free-market economies and to condemn socialism, even in its milder forms.

Richard Bastien

By

Richard Bastien is vice-president of Justin Press located in Ottawa, Canada, and a supernumerary member of Opus Dei.

  • Aaron

    The difficulties posited with Weber are the result of the fluidity of “capitalism,” a fluidity evidenced by CA’s qualifiers of “if by capitalism is meant.” Weber acknowledged that capitalist mechanisms and practices existed before the Reformation, but his point was that the real rise of capitalism had to do not simply with the business mechanics but with the “rationalization” of economic life such that it became oriented toward and bounded by efficiency and profit alone, without anymore, as Fanfani would later argue, being ordered towards man’s ultimate end (God). It was on those grounds that Fanfani declared Catholicism and capitalism incompatible.

    Thus, while it is interesting to note the medieval theological engagement with economics, merely noting the theological justification of various components of capitalist life fails to do justice to the greater attitudinal conflict with which modern Catholics must grapple. It may be true that St. Bernardino “provides a justification of private property, the ethics of trade, the determination of value and price, and the usury question,” but he also would have condemned the way the quintessential 15th century Italian merchant lived and worked. As Odd Langholm has shown, the business philosophy of the Italian merchants of that day also showed up in the penitential manuals of the time – under the heading of avarice.

    Rather than rest content with the fact that capitalist mechanisms, with sufficient societal checks and balances, can and ought legitimately be used (and, I admit, it is good to remind people of these facts), we should also challenge Catholics to reflect upon whether our own use is legitimate, lest we too find that what we like to call thrift, hard work, and dedication are, in reality, our own form of avarice.

  • Austin

    There is nothing wrong with Capitalism, provided the people practicing it are honest: unfortunately, in the past few years, we have seen people at high levels of Capitalism who are not honest. They cheat their employees, their customers, their shareholders and even themselves. There is nothing wrong with profiting from hard work, reasonable risk taking, etc., however, the Ponzi schemes and pure greed we have witnessed have given Capitalism a bad name. I think what we have seen for the most part in the past few years, is not true “Capitalism” as we had known it, but rather speculation and greed.

    If CEO’s generate true wealth for the shareholders, and make a lot of money, this is one thing. But for CEO’s to be paid enormous amounts of money to run their companies into the ground and cost the shareholders most of their investment, often while skirting the law, is quite another thing.

    There is also the issue of economic justice. To try to cheat the employees at every turn, might make some sort of economic sense, but it is not economic justice. We need to keep this in mind too.

    Capitalism will come back, but I hope it is tempered with honesty and justice.

  • Joe H

    The only thing I would say is, the Popes have also promoted Distributist ideas that call for wider ownership of property in general and the means of production in particular. This would eliminate many of the sources of class conflict in capitalism that give rise to socialist demands in the first place.

    If by “capitalism” people mean “the free market + private property” then Distributism too is a form of capitalism. Others are convinced that it is some form of socialism. It is all in how one chooses to define a word.

  • Ann

    John Paul II had it right.

    We’ve just seen what can happen when much needed regulations break down.

    I would also argue we need more regulation, more checks and balances, on the politicians who let this all happen. And also, those who participate in corruption. Who rob taxpayers with the aim of their own blind, self-interest. That might even be a tougher one than reining in private companies.

  • David Reed

    The problem here is that one Social Encyclical has been quoted and not in its entirety. The whole of Catholic Social Teaching rejects American Capitalism as much as it rejects European Socialism and Communism. The only Catholic in the 20th Century that seemed to understand this most fully was Peter Maurin of the Catholic Workers. What worries me about this post is that many American Catholics will read it and say, “Ah… so the Vatican and God support my American way of life!!!” The problem is, once you read Economic Justice for All or Faithful Citizenship you discover quite quickly that the form of “capitalism” talked about in Centessimus Annus is not American Capitalism, nor is it the capitalism of CNN, MSNBC, Fox News, the Republican Party, nor the Democratic Party. It’s beyond all ideologies and should be called what it is–CATHOLICISM!!!

    Making Catholicism a champion of Western Capitalism is just as bad as saying Catholicism champions Marxism, or liberation theology, or this -ism or that -ism.

    Why can’t Catholicism just be Catholicism? Why does everyone want to attach it to something else?

    The Kingdom of God isn’t any -ism! It’s beyond all -isms…

    Peace of Christ in this Easter Season,

    David

  • Dan Deeny

    I read Rodney Stark’s book “The Victory of Reason”. Excellent book. As is his book “The Rise of Christianity”.
    What is perhaps not so Catholic is our modern tendancy to substitute articles, conferences, position papers, radio interviews, TV appearances, and speeches for real trade and manufacturing.
    Let’s encourage Catholics to start manufacturing facilities, and then trading companies to sell the products made in the manufacturing facilities!

  • Tim Shipe

    I have kicked around the idea for some time now- that since we have approximately 25% of the American population that is Catholic, that is a potentially huge niche market. If we can pull together the brains and brawn in many different specialty consumer goods- food products, toys etc.., and bring investors together who want their money to be part of something helpful to the common good in general, and to the Catholic Church, specifically. Why not put together all of these folks and commit to following all the Catholic moral principles of economy and human rights, as well environmental stewardship? This would kind of be like the various Fair Trade programs, but more ambitious, and centered here in the U.S.

    For example we could build safe, American-made toys, offering 10% of profits as a tithe directly to the Church, and make sure we pay all workers a just wage, and cut out big advertising budgets, maybe being more like the Amway word-of-mouth technigues, and web site access. Profit would not be the driving agent, but even with offering food and consumer goods at above-market prices, if it isn’t outlandishly expensive, I believe more Catholics would be willing to pay more and have less if they have more confidence that they are choosing an entity that is really dedicated to doing the right thing on every level. This market would appeal to social justice and pro-life specific type of Catholics because of the products themselves being put through the wringer of the entire Church social doctrine- and if you start with a few things that everyone wants- like toys and certain foods- then replacing their mass market brand with Catholic Brand would be a very easy sell- look Amway took off with similar replacement product models- so why not Catholic Brand or some such thing- without having to drag in the Institutional Church, but being of service to the common good and to the Institutional Church in the process of being capitalists in the most positive sense of the word?

  • D.B.

    While I agree with what you propose in principle, I believe it is doomed to fail because:

    1.) Anti-Catholic forces are already entrenched to the point where it would require totalitarian methods to dislodge them
    2.) Original Sin makes the Altruism and Brotherhood required to sustain such a system for an extended length of time impossible in this world

    Simply put, while we are capable of great Virtue, we are also a fallen and wretched lot….Selfishness and Pride are default feelings which we must constantly battle against. Rot would inevitably corrupt such a system.

    Don’t misunderstand me, I’m all for laws for Just wages, reasonable taxes, worker’s protection, et al…but we are not going to build any semblence of paradise on this Earth. I view such reforms as ointments for a chronic ailment, one that will not be cured until Christ returns. Make things better, by all means…but let us take care not to fall into the trap of Utopian fantasy that somehow “We’re going to do it”….We’re not.

  • Tim Shipe

    D.B.- I’m not proposing that Catholics try to take over the whole U.S. economy- I’m just suggesting that we build up a nice little niche market for a few items- be they food and some consumer goods like toys- we incorporate and put into our charter our commitment to adherence to all Catholic social doctrine teaching principles, and add that 10% of all net profits be given directly to say the pope’s charity fund to allow him to decide what charities are worthy. All that would be required is that we find a group of committed Catholics who have expertise and funds to make a run at establishing something that gives serious Catholics a market option- much like Ave Maria investment funds serve a similar purpose for those looking for a Catholic-values friendly place for investment monies- why not establish something like this for consumer goods- I mentioned toys because as a parent I am sick of buying Chinese-made toys that I have no idea whether they were produced safely for my kids and for the laborers in china- slave labor or sweat shops have no place in an economy that respect natural law. The thing is that if we can produce quality items following natural law commands, more people than just Catholics may come calling- that’s the thing about the natural law- it is not just written in Catholic hearts. Look there have always been orders of monks and nuns who have followed this type of economic plan of action- the monks with their beer and coffee and the like- why not take this as our model- maybe even bring together a group of Catholic investors and those with technical expertise in some products we may be interested in, and approach some religious orders who are already active in economic initiatives to come on board if we need partners- I don’t see how this is utopian- it is just not something one person can do alone- but that seems a lot like the way the Church teaches we work out our salvation in the Mystical Body of Christ- we need one another, we need to put together all the talents God has spread among His people. This has economic aspects I’m sure of it.

  • R.C.

    Joe:

    If by “capitalism” people mean “the free market + private property” then Distributism too is a form of capitalism.

    Let me affirm for you: By “capitalism,” self-described capitalists do mean “the free market + private property.”

    And since they’re the ones who identify with the term, they ought to be allowed to define it!

    (Naturally, academic economists might prefer a more academic definition, which might go on for volumes. But for a six-word definition, it does nicely.)

    Now: Is Distributism a form of “the free market + private property?”

    It depends on implementation. Implemented wholly voluntarily, it easily qualifies. Implemented by outlawing all non-coop businesses, it obviously doesn’t!

    If implemented with a degree of government intervention in-between those two extremes? That would depend on the amount of intervention. And also on opinion: People asking “how free should a market be to deserve the ‘free market’ title?” come up with different answers, and the same is true for the question “how private should property be, to deserve the title ‘private property’?”

    Capitalists always say that capitalism should be “fettered” by two kinds of law:
    (1.) Civil and Criminal Law, which is backed up by the threat of fines or imprisonment; and,
    (2.) The Moral Law, which is backed up by the threat of guilty conscience or eternal damnation.

    But they also strictly demarcate the roles of these two laws:
    (1.) The role of Civil and Criminal Law is to protect the rights of individuals from the use of force or fraud by others, and to establish standards as needed for civil order (e.g. driving on the right side of the road);
    (2.) The role of the Moral Law is to inform and drive individuals toward (for atheist capitalists) doing/thinking what is Good, or (for theist capitalists) toward loving God and neighbor.

    Finally, they add that, when Civil and Criminal Law exceeds its proper role, it becomes unjust. (Theist capitalists clarify why: It arrogates to Caesar’s Law a role intended for God’s Law, thus obligating Caesar to enforce what only God (a.) is authorized to enforce, and (b.) capable of justly-and-accurately enforcing.)

    If Civil and Criminal Law becomes unjust in matters related to property and transactions, it becomes anti-capitalist: Anti-free-market, and anti-private-property.

    So, there is nothing anti-capitalist about monasticism, because monks, sharing property, do so in obedience to the Moral Law (not the Civil and Criminal). They make the decision to give up their property freely and privately, which is utterly in accord with the ideas of “free market” and “private property.”

    Similarly, capitalism applauds the already-wealthy business owner who “pays himself” $1 per year as salary, and distributes all other year-end profits into employees’ bonuses. (Happens all the time.) For he who obeys the moral law for moral reasons is making a free and private decision, thereby exercising the freedom of the market and the private use of his property.

    But if Civil and Criminal law circumscribes the use of my property, not to protect the rights of innocents or to establish necessary standards, but for other reasons, my property is no longer “private”; it is “government’s.” For “ownership” means decision-making authority.

    And of course, if Civil and Criminal law forces me to the marketplace to enter into a transaction against my will (and especially against my moral code!), it is still a market, but no longer a free one.

    So, to answer whether Distributism is a “form of capitalism,” we must first distinguish between (a.) the state of having widely-distributed business ownership, and (b.) the Civil/Criminal Laws required to get us there.

    (a.) Is obviously perfectly compatible with capitalism.
    (b.) Is compatible with capitalism to the extent that those laws don’t impinge on the privacy of property and the freedom of the market, except where required to defend the innocent against force or fraud.

    Fair enough?

  • Joe H

    I should check back more often on these.

    “Implemented by outlawing all non-coop businesses, it obviously doesn’t!”

    No one has ever suggested this. No one has ever suggested anything remotely like it. So why would this even be an issue?

    I mean, the kind of capitalism you support would by a tyranny if its supporters pushed to outlaw all non-oligarchical or non-autocratic firms. Do I need to bring that up every time we debate the merits of different business types?

    In fact, in the history of capitalism, more than once have such ‘traditional firms’ banded together to deliberately undersell cooperatives out of pure ideological spite. It isn’t quite tyranny, but its petty and hateful all the same.

  • A.C.A.

    I counted the word “free” or “freedom” ten times in the very clever trestise on economics and morality by Joe H. In an explanation of socialism or its cousin “distributionism”, would it appear even one time?

    Catholics and most Christian denominations believe that man was created with “free will”. It was God’s willful intention that man be free and responsible for his actions.

    Therefore the essential component of an economic system must be freedom. The freedom to create goods and services(wealth) and then distribute it. The Rule of Law is essential in any system, even if it is the Rule of the Tyrant.

    Therefor Catholicism is compatible with Capitalisim.

  • wigal

    There is nothing wrong with Capitalism, provided the people practicing it are honest: unfortunately, in the past few years, we have seen people at high levels of Capitalism who are not honest. They cheat their employees, their customers, their shareholders and even themselves. There is nothing wrong with profiting from hard work, reasonable risk taking, etc., however, the Ponzi schemes and pure greed we have witnessed have given Capitalism a bad name. I think what we have seen for the most part in the past few years, is not true “Capitalism” as we had known it, but rather speculation and greed.

    If CEO’s generate true wealth for the shareholders, and make a lot of money, this is one thing. But for CEO’s to be paid enormous amounts of money to run their companies into the ground and cost the shareholders most of their investment, often while skirting the law, is quite another thing.

    There is also the issue of economic justice. To try to cheat the employees at every turn, might make some sort of economic sense, but it is not economic justice. We need to keep this in mind too.

    Capitalism will come back, but I hope it is tempered with honesty and justice.

    No one has cheated employees more lately than the federal government and the UAW as both consume control of auto companies and negotiate for auto-worker jobs to be sent to Canada and overseas.

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