Does the Church Condemn Capitalism?

The headline of a report on a recent survey summed up its findings: “Capitalism Against Christianity, Americans Believe.”

Is that good news or bad news? What should Catholics think? Does Catholic social teaching imply opposition to capitalism?

The answers you get to those questions would no doubt differ dramatically depending on whom you ask. Although it’s true that faithful Catholics have divergent opinions about matters involving the interpretation of Catholic social teaching and the assessment of economic facts, much of the heat such differences generate is due less to fundamental differences of principle and more to failure to take into account the wisdom of Voltaire. “If you wish to converse with me,” he said, “define your terms.”

Capitalism, like a handful of other words common in contemporary social and political discourse — rights, liberalism, and religion come to mind — has come to mean a lot of different things to a lot of different people. This fact alone should be enough to warn anyone seriously concerned with furthering dialogue with a view to discovering the truth (as opposed to preaching to the choir or rallying the troops or — pick your metaphor — otherwise engaging in polemics) that the term should be handled with care.

And yet, by and large, it isn’t. Acrimonious debates about whether the Church “approves” or “condemns” capitalism have raged for decades, in venues ranging from populist blogs to academic conferences. Years of participation in and observation of such debates has convinced me that much of the discussion is entirely fruitless. The reason is the chameleonic character of the term capitalism.

Make no mistake: There are serious debates to be had about what the Church teaches about economic systems; about what the relationship is between that branch of moral theology known as Catholic social teaching and that branch of social science know as economics; about how the norms laid down in the social encyclicals can or ought to be applied to whatever economic policy happens to be under discussion. These discussions are necessary and potentially fruitful.

But on the specific question of whether the Church condemns capitalism, debates tend to degenerate quickly into an unproductive back-and-forth. Among the more sophisticated, it’s an exchange of encyclical quotations; among the less refined, it becomes name calling (“Socialist!” “Randian!”).

This goes on despite the exemplary model right before our eyes: Centesimus Annus, published by Blessed John Paul the Great twenty years ago this month. Asking himself the question whether, upon the demise of Marxist economies in the late 1980s, capitalism should be the model and goal of every nation on earth, he answered thus:

The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy,” “market economy” or simply “free economy.” 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 in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.

Hundreds of thousands of words have been written on the issue since John Paul wrote these, but I have yet to see anyone put it better. His formulation captures exactly the problem at the heart of many debates. When they hear capitalism, many people think “entrepreneurship, commerce, innovation and technological progress, private property.” Of course the Church approves these things!

Others, however, hear “greed, materialism, cut-throat competition, exploitation of workers.” Of course the Church condemns capitalism!

My modest proposal, then, is to avoid altogether the kind of debate I’ve characterized here. When someone asks, “Does the Church condemn capitalism?,” try to uncover what they really want to know. Are they concerned about the health care system, or unemployment, or public sector unions? Possibly you can have a productive discussion about well-defined and feasibly narrow questions, such as: In Catholic social teaching, are the concepts of the just wage and the market wage synonymous? Is health care a basic human right and if so, does the Church’s teaching oblige the government to guarantee universal coverage? What is do the encyclicals say about organized labor?

If you must answer the initial question, then consider taking a cue from John Paul. Begin your answer this way: “Well, if by capitalism you mean…” You may not end up agreeing with your interlocutor, but at least you have a better chance of identifying where the real disagreements lie.

Kevin Schmiesing

By

Kevin Schmiesing is a research fellow at the Acton Institute. He is the author of American Catholic Intellectuals, 1895-1955 (Edwin Mellen Press, 2002) and, most recently, of Within the Market Strife: American Catholic Economic Thought from Rerum Novarum to Vatican II (Lexington Books, 2004). He is the book review editor for The Journal of Markets & Morality and is also executive director of CatholicHistory.net. Schmiesing earned his Ph.D. in American history from the University of Pennsylvania.

  • Jim

    I live in Dayton OH which is, as many know the home of the Wright Brothers. In fact I live less than a mile from their famed bicycle shop where the theories of flight were developed and tested.

    Wright Brothers 1901 Wind Tunnel Testing

    http://www.youtube.com/watch?v=61f0UGdPtek

    In addition to the most famous invention of the Wright Brothers, Dayton has a long history of innovation and invention. Also invented in Dayton was the cash register.

    Last year, at the whim of the CEO (who lives in New York), NCR (formerly National Cash Register) which was founded here in Dayton in 1879, packed up and moved the entire company after being bribed with subsidies by state & local governments using FEDERAL money, putting thousands out of work here. It sent shock waves through the city already reeling from massive manufacturing losses thanks to NAFTA.

    If NCR had been structured like this company – pulling up stakes and leaving thousands behind would not (and could not) have happened.

    Mondragon: a for-profit organization that embodies Catholic social thought.

    http://www.entrepreneur.com/tradejournals/article/116926710_1.html

    In Laborem Exercens Pope John Paul II also said:

    “We can speak of socializing only when the subject character of society is ensured, that is to say, when on the basis of his work each person is fully entitled to consider himself a part-owner of the great workbench at which he is working with every one else. (no.14)”

    I think that the “Wall Street Bull” is the offspring of the “Golden Calf”. It’s time to start putting people over stock prices.

    • http://outsidetheautisticasylum.blogspot.com/ Ted Seeber

      Jim- I have a tendency to agree. Much of what is wrong with crony capitalism, can be easily solved merely by reorganizing hierarchal corporations into flat co-ops.

  • Cord Hamrick

    Jim:

    I’m going to make an argument, for the sake of argument, which I actually don’t believe applies in the NCR case you describe.

    The purpose of this rather hypothetical argument is to defend free market principles and the notion of (fair, free) competition between the states.

    However, I don’t believe this argument applies to the realities of the NCR relocation. That, according to your description, was actually caused by Federal-level interference of the pork-ulent variety: The type of thing which “movement” conservatives abhor but which they’ve found it difficult to exterminate in the Republican party because they’re often faced with a choice between a corporate-welfare supporting “RINO” or losing the seat to a corporate-welfare supporting Democrat. Given that choice, they opt, wincingly, for the RINO (who will at least caucus with the few actual conservatives in Congress), but they remain disgusted by the pork.

    Anyhow, for a moment, I’m going to argue in the hypothetical mode: Let us imagine, for a moment, that there was no Federal money used as incentive for NCR, and that the benefits NCR saw in moving came entirely from tax incentives and whatnot which affected the town or county or state budget.

    In that case, then: Had NCR been structured in the Mondragon style, it would not have “left thousands behind.” But it might still have “left with thousands.” That is to say: Worker-owners might have opted for a better life elsewhere.

    It depends, I suppose, on the priorities of those individuals; they might prefer to remain where they were rather than move for the sake of an improved business climate, if the margin of improvement was small.

    But what if it were quite large?

    If a company can relocate its business to a more business-friendly state, and thus sell significantly more units or significantly increase the profit margins per unit, then the owners may be morally obligated to make the move. That way dollars which could provide better college educations for their children or better medical coverage for their pregnant wives or better vacations for the whole family are not uselessly lost to the inefficiencies of incompetent or corrupt state government.

    These are not small considerations, and most folk will change jobs twenty or so times over the course of their working lives, often for precisely such reasons (the pay is better, the benefits are better, the schools are better, the commute is better, et cetera). If they like the company with which they’re working, and have controlling interest in it, how much the better if, when they move, they can bring the company with them?

    Moreover, it is a good thing for a certain kind of competition between states to exist, because it forces state governments to weed out inefficiencies and unfairness in the legal environment which they impose on businesses. It is part of the reason that, despite its ports and its strong entertainment and tech industry associations, businesses are fleeing California in droves for the safer environs of Texas, Georgia, and the like. It is a good thing that California, or states making similar errors, should receive such feedback; their falling revenues serve as incentive for them to clean up their act.

    That argument applies, of course, to a company which moves its operations to a state which is truly “business-friendly”; that is, one which is better than the previous location by virtue of better embracing lawful free market principles.

    It is contrary to free-market principles, however, for a state to gain an advantage over another because their Congressman managed to get the chairmanship of a powerful committee and was thus able to wheedle special grants and loopholes for businesses in his state. For of course the purpose of competition between states, like that between businesses, is to encourage efficiency and service.

    If this competition is fair, the “winners” become an aristocracy of achievement (not a bad thing, especially since the “aristocracy” has rapid turnover as soon as the other states/businesses catch on and learn how to match the efficient techniques of last years’ “winners”).

    But if the competition is rigged by Federal money or regulatory loopholes achieved by legislators in exchange for campaign funds, then the “winners” aren’t those who had the most efficient operations or who best served their customers. Instead, the “winners” are those who were best at gaming the system, who “knew the right people,” who called in favors. Instead of an ever turning-over aristocracy of achievement, you get the “aristocracy of pull.” Whoever has the most “pull” with the government, wins. And then they use the same legislators to game the system to prevent anyone else from winning next year: The “aristocracy of pull” consequently has very little turn-over.

    Anyway, it sounds to me like the NCR move resulted from politicians and businessmen with “pull” rather than with entrepreneurial genius. Very sad. And what a shame that the extent of government action can be so profound as to cost so many folks jobs without even the compensation of encouraging better governance either in Dayton or in NCR’s new home?

    For the lesson to Dayton is not “We need to be more business-friendly” but rather “We need more pull, in order that we might afford to be unusually business-friendly at taxpayer expense.” And the lesson at NCR’s new home is not, “We achieved a boon to our area by making our laws and infrastructure and workforce fair and efficient and skilled,” but, “We achieved a boon to our area by wheedling the right politicians.”

    Sad, that.

  • Carl

    I like the CCC 2425 explanation better, “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.”

    Legislate simple laws and then enforce them. No planned economy! Compassionate capitalism (conservatism).

  • Gian

    The problem is Free Market has become inextricably linked with the Worship of the Invisible Hand. That repels a lot of people
    as it should. The problem is Protestant in origion, by virtue of 18C Enlightenment.
    Rand is merely the inevitable logical consequence of Adam Smith.
    This recent article by Edward Skidelsky in First Things May 2011 is very relevant. Some excerpts:
    —————————————————————————-

    A bridle-maker, to use Aristotle’s example, aims at ease and agility in the cavalryman, the cavalryman at victory in war, and victory in war at the freedom and glory of the polis.

    the ancient vision of the polity as a teleologically ordered whole, in which the public good is not just the product but the ultimate end of private actions

    In a society so conceived, the avaricious man is an outsider, for his actions, even if they happen to further the common good, do not in any sense aim at that good, but only at his own enrichment. He is a permanent potential subversive, if not an actual criminal. To the extent that the spirit of avarice and luxury prevails in a nation, patriotism and virtue will wither away

    ___________________________________
    And later:

    The public good was no longer an end but an effect, no longer something to be aimed at but merely engineered.

    Self-love,” originally an Augustinian term of opprobrium, was transformed by Rousseau, and Smith following him, into a neutral term designating a natural regard for one’s own welfare.

    Adam Smith uses the word Avarice only six times in the whole of The Wealth of Nations, and then only in connection with specific misdeeds such as theft or debasing the coinage, or with foolish, self-defeating conduct. When referring to the motive underlying ordinary economic activity, he uses the colorless term “interest.”

    The phasing-out of “avarice” and related terms—a process substantially completed by the time The Wealth of Nations appeared in 1776—had the effect of stripping economic activity of its ethical character, of rendering it morally indifferent. Legal infractions such as theft and fraud were still censored, of course, but not as expressions of the acquisitive drive so much as breaches of general principles of justice

    What were the deeper ethical implications of this revolution in economic attitudes? Aquinas, recall, had condemned acts of avarice as bad in themselves, regardless of their “ultimate intention” or their expected but unintended consequences. Sacking a loyal worker to increase profits is wrong, even if done with the aim of amassing funds for charity and in expectation of future benefits to society.

    From the new perspective, however, all expected consequences of the sacking—whether intended proximately, ultimately, or not at all—contribute equally to its ethical value. What matters is the aggregate. So long as our employer can expect any suffering caused by his action to be outweighed by its indirect social benefits, he has nothing to reproach himself with. Responsibility for promoting the good has been shifted onto an impersonal causal mechanism. He is free to pursue his own interest—legally, of course, and within the framework of a properly functioning market economy.

    This new method of moral reckoning was to become famous as utilitarianism, but is more aptly called (in a term coined by G. E. M. Anscombe) consequentialism. For what was crucial was not the stress on utility or happiness—that, after all, had been central to many ancient ethical theories—but the insistence on pooling or aggregating all the expected consequences of an action. Utilitarianism was just one of many species of consequentialism, though always the dominant one. If consequentialism holds that the moral value of an act is determined by the sum of its expected consequences, utilitarianism adds that the only relevant consequences are pleasures and pains

    In suggesting that consequences might in some cases be aggregated, Smith and Hume had hit upon a principle of universal application, ready to burst the bounds within which their own good sense confined it. Utilitarianism swiftly evolved into a comprehensive system of normative ethics, applicable not just to economic but to all human acts.

    The discipline of economics has long since severed ties with utilitarianism in its classical, Benthamite form. The maximand is no longer conceived as a distinct mental state but as the satisfaction of preferences or the realization of certain “capacities.” Nonetheless, the consequentialism in utilitarianism—the insistence on pooling the various consequences of an act, regardless of their intentional status—remains integral to any form of economic analysis

    Edward Skidelsky in First Things May 2011.

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  • http://cf.telegram.com/submissions/blogs.cfm?category=Locally%20Grown Anthony Zamarro

    Let’s favor that kind of capitalism that actually increases the number of capitalists, namely, supporting small, independently owned businesses wherever possible.

    The idea that the public good is best supported by the decrease in the cost of goods is preposterous. We are paying for this erroneous view now via the amalgamation of commercial power in the hands of a very few, very large corporations. The price tag on a product does not communicate the diverse contributions and burdens on a community that went into its production and sale.

    Buy local. The big guys won’t starve (who cares if they do). But you will realize a shift in power towards people who care about you and your community more than the corporate board of Wal Mart.

    Peace out.

  • http://outsidetheautisticasylum.blogspot.com/ Ted Seeber

    Since 2008- I have become convinced that capitalism in general is more “greed, materialism, cut-throat competition, exploitation of workers.” than it is “entrepreneurship, commerce, innovation and technological progress, private property.”

    And I think that Pope John Paul the Great, as well as Pope Benedict XVI in _Caritas in Veritate_ hit the nail right on the head- the difference is ” circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious” vs “for the liberty and profit and freedom of the individual, the core of which is the mortal sin of greed”. Rights are only rights when they are circumscribed by duty; otherwise they’re just license to harm your fellow man.

  • Paul Schmidt

    I usually define the term myself:

    “I don’t like the term ‘capitalism’ but prefer the term ‘voluntary exchange system’. I support such a system, do you?”

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  • Carl

    Capitalism doesn’t cause greed, materialism, cut-throat competition, and the exploitation of workers—people do.

    This is a slogan borrowed from the NRA, “guns don’t kill people do.”

    Stop blaming inanimate objects and systems.

  • Gian

    Does your system includes voluntary exchanges of sexual services or porn services?

  • Wolfgang Grassl

    Very good points, Kevin! -isms are usually not helpful because they serve to preempt discussion and understanding rather than foster it. When asked about the compatibility of capitalism and Catholicism, I tend to return the question: “What do you mean? Whether the Church allows profits? Absolutely yes. Whether the Church endorses property? Absolutely yes. Whether the Church supports greed? No, but this is not a property of an economic “system” but might well be an individual sin.” By dissecting capitalism into its supposed constituent parts, the question is usually answered more convincingly than by the “faith statement” of “yes” or “no”. And this is an important point you make in your article.

  • Dave

    We have, really, only two options: Freedom and slavery. Which one is most capable of helping the poor and advancing the general health of society? Is it not obvious? It’s the Golden Rule vs Socialism.

    http://lifesupport.blogtownhall.com/2011/02/19/the_golden_rule_vs_socialism.thtml

    No contest.

  • James

    Capitalism does more good for the poor than any other system yet known to man. Under capitalism, businesses seek to identify and meet nearly every physical and psychological need of humankind. Moreover, they do this at a profit, leading to massive job and wealth creation.

    Under capitalism, businesses are economically sustainable entities that grow and provide jobs, salaries, and thus homes for huge populations. Businesses provide the creation and mass affordability of life saving products and services.

    The masses can live in abject poverty, or they can live in the human-need-meeting system known as capitalism.

    Governments don’t meet human needs. They can only create some rules of the road as needed. And if they create too many rules, they destroy the ability of a business to function and exist.

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