Capitalism and Catholic Social Doctrine

There has been a lot in the news recently about the Catholic Church's position on Capitalism, triggered by the reaction by some professors to Speaker Boehner's upcoming speech at CUA. Here is my own survey of "capitalism" in the Catholic social tradition.

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The critique of socialism and communism is fairly well-known one who is at least partially familiar with Catholic social doctrine, especially given its attacks on socialism within the earliest documents in the tradition. Leo XIII’s Rerum Novarum was written in large part as a response to the socialist movement in Europe in the late nineteenth century, and his work was developed by Pius XI in Quadragesimo Anno, where Pius concluded, “No one can at the same time be a sincere Catholic and a true socialist.” (120) John Paul II‘s magisterium is significant for its critique of communism and other collectivist expressions of socialism. One might argue that there is not within the tradition of Catholic social doctrine, however, a parallel and consistent critique of capitalism. Thus, some have argued that the Church supports capitalism, or at least that there is an unresolved tension within the tradition. Tom Woods, an otherwise very traditional Catholic, argues that because the magisterium does not understand the functioning of economic laws, especially when it comes to the just wage, it is not infallible when it comes to such secular disciples.i The moral injunctions that comprise Catholic social teaching are based, at root, on economic misconceptions and factual error. Polemical assertion is not proof, and it should be obvious that no binding moral obligation can derive from unproven and indeed manifestly faulty premises. ii Leaving aside the question of the binding nature of Catholic social doctrine, it will be the task of this paper to suggest that perhaps some of the tension in discussions about the Church‘s position vis-à-vis capitalism stems from different notions of “capitalism” in the documents themselves. iii How is capitalism defined by Catholic social doctrine? How does it function? What is accepted, and what is rejected? After tracing a chronological trajectory of the theme, I will summarize with several evident trends related to the magisterium‘s discussion of capitalism.

The Early Tradition

The term ―capitalism does not appear in Leo XIII‘s Rerum Novarum, the main focus of which is to denounce the rising tide of socialist revolutions throughout Europe, which seek the abolition of private property as one of their basic goals. For this reason, Leo XIII defends the ―right to private property (2) as a right based on natural law, and which is necessary for the preservation of the inviolability of the family, (12) and other intermediary institutions within a society. The right to property, while strongly defended, is recognized as limited and relative to the universal destination of all goods. (19) Contrary to the evils which socialists propose, such as the elimination of private property which leads to the eventual subordination of the family and the individual to the state, Leo sees the Church as a “teacher of morality” and “right living” (23), which not only safeguards the individual, but also places at the forefront of her mission the care of the poor. In fact, Christians are called to ―give out of their excess‖ to assist those who are in need (19), and the poor are to be given special consideration in all decisions (24, 29). The poor tend to generally be identified as workers, and they are to be paid a just wage, which is not established through laissez-faire market forces or contract negotiations, but which is that amount truly needed to live and support a family, as well as be able to enable the possession of private property. (34) To achieve this goal, the Church supports the establishment of worker‘s associations (38), and recognizes that while the state has a role to play in the regulation of economic life, such decisions should properly be left to intermediary bodies at a local level (thus following the principle of subsidiarity, 41).

While Leo does not employ the word “capitalism,” it becomes clear that in his struggle against socialism, he is also struggling against a particular form of capitalism. Socialism is repudiated, but so are its causes: the destruction of worker‘s guilds in the eighteenth century, the separation of religion from public life, the callousness of employers and the greed of unconstrained consumption, widespread usury, and a spirit of avarice. (2) Implicit in the critique of socialism is therefore a critique of those factors brought about by nineteenth century liberal capitalism. Presumably, “capitalism” as such is not rejected, as is socialism, but what is needed is the proper “capitalism” that would allow spheres of influence other than blind market forces, rather than seeing workers as cogs in a machine that reduces them to the “mass of the poor” in the hands of the “small number of the rich.(2)

Pius XI in Quadragesimo Anno makes explicit Leo‘s implicit critique of capitalism. He notices that since the time of Leo the “capitalist economic regime…has penetrated everywhere” (103) as a result of the growth of industry, and that its prevalence brings new challenges. First, he explicitly rejects the “Manchester school” of economics that gives free reign to “market forces” based on the principle of laissez faire (54), which is an exaltation of the individual, deprived of any relation to a moral law. Free competition is nonetheless encouraged, and is “justified and quite useful within certain limits,” which must always be derived from, and subordinate to, the “effective guiding principles” of social justice and social charity (88). These principles, however, ought not to be imposed in a heavy-handed manner from above, for this would risk the danger of the state substituting itself in the place of private initiative (95). In a response a corporate model (such as Mussolini‘s), he recognizes that while this state of affairs might seem to allow room for worker‘s rights, peaceful collaboration between classes, and the repression of socialism, such state-sponsored economic policies develop an excessive bureaucratic character that serves particular political aims, and not the common good (95).

Pius XI therefore critiques not only a form of state-sponsored capitalism such as Mussolini‘s, but also notices that capitalism can go seriously awry at an international level. “Unbridled ambition for economic domination has succeeded the desire for gain; the whole economic life has become hard, cruel, and relentless in a ghastly measure.” (109) Leo‘s critique of avarice and greed is therefore applied here directly to a capitalist system; an individualistic spirit, a supposed necessity of free competition, has “committed suicide; economic dictatorship has replaced a free market.” (109) The critique of such capitalism, expressed in the consolidation of a large amount of wealth in few capital-owning entrepreneurs, at the expense of laborers, however, does not lead Pius to dismiss the system altogether. The “system as such is not to be condemned,” but must rather take into account the social character of economic life, social justice, and the common good in order to function properly. (101) The unbridled free market capitalism needs to be ordered, curbed, and directed towards these three factors through a legitimate public authority (110). Furthermore, capitalism cannot be based on the “rationalism that had taken hold of large numbers” at the time when the new social order was beginning (133). In order to function correctly, therefore, capitalism needs to be based on an entirely different metaphysics, “inspired by Christian principles.” (136) Economic goods would be seen only as instruments to the supreme end (God), and would only be used insofar as they help to the attainment of that end. (136)

Shifting Emphases

During the pontificate of Pius XII, we see both an inherited critique of capitalism from Leo XIII and Pius XI, as well as new themes in relation to the Church‘s understanding of the system. First, we see in very explicit terms a re-statement of the rejection of economics as a value-neutral science, governed by supposed “natural laws” that exist independently of moral norms.

…if the physiocrats and the representatives of classic economics believed they had built a solid framework by treating economic facts as if they were physical or chemical phenomena amenable to the determination of natural laws, the falsity of such a conception was revealed in the crying contradiction between the theoretic harmony of their conclusions and the terrible social misery which they allowed to exist in reality.iv

While such a critique of economics might apply as equally to socialism as it does to capitalism, which both claim to follow laws inscribed into the order of things, Pius suggests that he is critiquing capitalism:

…they ignored the essential human element, the relations which unite the individual to society and impose upon him not only natural but also moral criteria for using material goods. Diverted from their communal purposes, these elements become means of exploitation of the weak by the strong, under the law of sheer merciless competition.

Modern, industrialized capitalism can bring with it much misery and plight for the worker. Thus, while it has always “condemned the various forms of Marxist socialism… the Church cannot ignore or overlook the fact that the worker in his efforts to better his lot, is opposed by a machinery which is not in accordance with nature, but is at variance with God‘s plan and with the purpose he had for creating the goods of the earth.”v

In answer to the social misery, Pius proceeds to argue that the recent contemporary situation (World War II) demonstrates that “almost nobody is incapable” of making selfless, altruistic feelings predominate, at least in critical times. The flourishing of each person and a just society is not therefore something that can only be known to the Christian, but seems to be accessible to all, whose increasing interdependence in light of the horrible preceding era reveals that problems, including economic ones, must be solved through “understanding and sincere mutual love.” In no way can social order “be sought from the theory of the “laws of the market’ “a purely positivistic by-product of neo-Kantian criticism—nor in the mere formula, every bit as artificial, of ‘full employment,’”vi but must rather be sought in “the conservation, development, and perfection of the human person, helping him to realize accurately the demands and values of religion and culture.”vii One notices therefore an increasing link between capitalism and the authentic flourishing of the human person.

To my knowledge, “capitalism” does not appear again until the social doctrine of Paul VI, but it is important to notice that John XXIII’s thought continues the general trajectory. In Mater et Magistra, he summarizes Rerum Novarum as a critique of economics which divests itself from the moral law (11), the recognition of which would entail a desire for social justice, charity, and a juridical order (38-41). He upholds individual initiative, and argues that where it is lacking, “tyranny prevails.” (87) One notices therefore the discussion of economic matters in keeping with Pius XI (emphasis on social justice and charity), a strong juridical order (Pius XII), and the role of private initiative (Leo XIII and Pius XI). We will see these themes continued and developed within Paul VI and John Paul II.

Increasing Critique

Continuing Pius XII’S “personalist turn,” Paul VI frames his economic discussion in Populorum Progressio within the framework of a “new humanism that will enable modern man to find himself anew by embracing higher values of love and friendship…which will permit the fullness of authentic development.” (20) Within this framework, he condemns a kind of capitalism (which he identifies as a fruit of liberalism) that considers profit as the key motive, competition as the supreme law, and private ownership of the means of production as an absolute right, which has led to excessive suffering, injustices, and fratricidal conflicts. (26) Nevertheless, work within a capitalistic system can still be done in common, bring joy, and unite hearts, minds and wills. (27) In Octagesima Adveniens, however, he is concerned with a “renewal of a liberal ideology” that brings with it economic efficiency, to which even Christians can succumb, but which has at its basis an erroneous affirmation of individual autonomy, personal motivation, and liberty. (35) This ideology is exposed in the system of “technocratic capitalism” which is egotistical, (37) and ultimately grounded on a false anthropological notion. Technocratic capitalism is set alongside “bureaucratic socialism and authoritarian democracy” as equal systemic threats that derive from false ideologies.

We therefore see in Paul VI‘s writings a shift from the prior discussion, in which “capitalism” was strongly associated with liberalism, and juxtaposed against socialism/collectivism. Paul suggests that both a certain kind of capitalism and a certain kind of socialism (previously antitheses) both ultimately deny the transcendence of the human person, whose freedom calls her to ―go beyond‖ every ideology and bring to every historical process truly human values. Any capitalistic system that does not take into account nor make possible the integral development of the human person (spiritual, corporeal, moral, material, psychological, etc.) is not acceptable. John Paul continues this “Pauline” trajectory, while specifying what the magisterium means by “capitalism.”

In Laborem Exercens, he provides an account of the subjective meaning of work, through which and by which the person determines and fulfills himself in relation to others, and whose labor, as an expression of and constitutive part of his humanity, must always take precedence over capital. (6) It was early capitalism that denied the priority of the person and her labor over capital, and this reversal, expressed both in collectivism and capitalism, presupposed a way of looking at economics marked by the “premises of materialistic economism,” (7) which can be a “theoretical” ground for either capitalism or collectivism. John Paul recognizes that “capitalism” has a definite “historical meaning as a system” that is opposed to communism or socialism, but he argues that the error of early capitalism can be repeated anytime that “man is treated on the same level as the whole complex of the material means of production.” (7) Thus, any system that adopts the reversal of order between man as the effective subject of work and its creator and man as a mere instrument of production can be called capitalism. (7) John Paul II therefore argues that the problem of Pope Leo‘s time was that the whole liberal socio-political system was based on “economistic premises,” which reversed this order. History interprets the “class struggle” as one of an ideological conflict of liberalism as expressed in capitalism, and Marxism as expressed in socialism, but both ideologies share the failure to recognize the priority of labor over capital.

In the modern world today, he warns of the dangers of “neo-capitalism or collectivism” which can, based on the experience of the past, effectively safeguard workers‘ conditions, provide proper social legislation, and allow associations, but which can easily fall prey to “ideological or power systems” which allow “flagrant injustices” to persist. (8) The same error of early capitalism can be expected if economic thinking starts from the improper theoretical (materialistic philosophy) or practical (economistic way of thinking) starting points. (13) It is evident that John Paul II, following Paul VI, does not simply speak of capitalism as a set of conditions or characteristics, but argues with it from a more explicitly philosophical point of view.

He continues this philosophical trajectory in Solicitudo Rei Socialis, where he provides more specific insights about the kind of system that might be acceptable. The right to economic initiative is upheld (15), since its denial ultimately disregards human subjectivity and creates dependence, and its suppression is likened to the “dependence” of the worker-proletariat in “capitalism.” (15) It is interesting to note the use of the word “proletariat” with regard to capitalism, and the accompanying discussion of the “liberal capitalist West” and the “Marxist collectivist East,” both towards which the Church “adopts a critical attitude.” (21) Both systems need updates and change, in order to promote the integral development of peoples and society. Once again, “economism” is rejected, since development cannot occur simply through the new accumulation of goods (28), and there is a sharp critique of “superabundance” in the capitalistic west, which manifests itself in a culture of consumerism, gratification, consumption, and waste. (28) Having critiqued both liberal capitalism and communism, John Paul II points out that Catholic social doctrine does not offer a “third way” between the two, but that it offers tools with which one can transcend both systems in a truly international outlook. (41)

The increasingly strong critique of modern liberal capitalism is repeated in Centesimus Annus, which begins by drawing parallels between the “unbridled capitalism” of Leo XIII‘s time and the modern condition, both characterized by abuses of women, children, working conditions, hygiene in the workplace, and fair pay. (8) He points out that especially in the Third World, which is often at the mercy of the developed nations, there exist the “human inadequacies of capitalism,” (33) which also manifest themselves in the developed countries. The struggle against such inadequacies [notice that the struggle is now one against inadequacies of capitalism!] does not propose a socialist alternative [which turns out to be state capitalism (35)], but what John Paul II calls a “market economy,” or a society of “free enterprise,” marked by participation, free work, business, a role for the market, and private property. (42) In this “new capitalism” the state and all of society has the goal of pursuing and defending “those collective goods, which among others, constitute the essential framework for the legitimate pursuit of personal goals on the part of each individual.” (40) Capitalism is to be rejected if by this is understood an “economic sector which is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality.” (42) There is a danger of a “radical capitalistic ideology.” (43)

From this brief survey, at least three trends associated with the discussion of “capitalism” by the Catholic social tradition become evident. First, capitalism, as an economic system, is not a value-neutral system, which operates on the basis of self-evident and self-sufficient economic laws. Rather, if there are “laws” that govern capitalism, these can never be separated from morality, and in fact, are always already based on a prior philosophical or moral conception—such as rationalism, economism, individualism, materialism, practical atheism, liberalism, etc. These philosophical and moral systems in turn regulate and govern the practical decisions about the regulation of and structure of capitalism. Second, the tradition strongly emphasizes the need to order capitalism (and any economic system) in a manner that respects and is grounded in a higher order. This relation of the economy to a higher order is expressed in different ways by the popes. The creation account of Genesis functions centrally for John Paul II in LE; natural law functions in a central manner in RN and QA; the “divine law of harmony” grounds social order for Pius XII; the paschal mystery grounds Christian humanism in PP and OA; and the later works of John Paul II (SRS and CA) focus on the nature of the human person. Common to all these ways of referring economic teachings to a higher order is an optimism that, in spite of the misery of a particular situation, it is truly possible to bring about a just system.