In 1891, Bishop John J Keane — then rector of the Catholic University of America — looked back on the 115 years since Adam Smith published “The Wealth of Nations” and Smith’s belief that ‘the law of nature’ would render all individual strivings in economics to the benefit of the common good and replied, “Time has applied to the theory the only moral test admitted by Hume and [Smith], and has proved it wrong.” J. Keane, “The Catholic Church and Economics,” 6 Quarterly Journal of Economics 25, 31 (1891). Keane did not dispute that Smith’s principles were capable of producing fabulous wealth; rather, he saw that the wealth it produced was hardly shared in common. The problem, Keane noted, was that “[t]he right solution of the great problem [of political economy] demands other moral factors, which [Hume and Smith] did not take into account, and which, in fact, their initial principles excluded.” Id.
Keane was introducing American scholars to Rerum Novarum, Pope Leo XIII’s foundational encyclical on the Catholic response to modern economics and social welfare. Keane found seven key principles in Rerum Novarum, which remain foundational elements of both sectarian and secular critiques of capitalism, and particularly American-style capitalism: (1) Certain rights of man are inalienable; (2) the universal brotherhood of men demands certain social obligations between men; (3) from such brotherhood, those with more are obligated to share with those with less; (4) special concern must be directed to protect and provide for the poor; (5) individual conscience must govern individual dealings with others, but also (6) the State has the power and the duty to protect against injustice in such dealings, in the service of the common good; and (7) as all comes from God, all must be used in the service of promoting the Kingdom of God. (This last one is particularly Catholic, but if one replaces “Kingdom of God” with “commonwealth,” one may get closer to a secular approximation.)
Keane’s principles particularly responded to David Hume and Adam Smith for their refusal to accept external ethical bounds on economic behavior. Hume, in Keane’s view, “unhesitatingly teaches that [morality’s] basis and motive is utility; that the right or wrong of actions must be decided by the useful or pernicious consequences resulting from them.” Id. at 30. Choices made in purely economic dealings were amoral, and could be judged only on their tendency (or not) to promote the common good; they were not subject to external ethical bounds. For Hume, defrauding another was deemed bad not because fraud was an abstract vice, but because that fraud pragmatically creates long-term loss both for the fraudulent actor (because others would no longer contract with him), the defrauded (who has lost individually), and society at large (which has lost the benefit that both the fraudulent and the defrauded could have brought to society). In his seven keys, Keane forcefully responded that Man is not merely “economic man,” homo oeconomicus, whose actions are deemed right or wrong solely by their good or ill effect on the common good. Instead, Keane insisted that external ethical considerations rightly govern the overall economic structure and individual transactions and inform principles of government that may regulate those affairs.
It is all the more striking, then, that 126 years after Keane’s full-throated critique of actual laissez-faire capitalism, one finds a Catholic priest writing a book titled, “Defending the Free Market: The Moral Case for a Free Economy.” Or finds another Catholic priest, the popular conservative blogger Father Zuhlsdorf, parsing the Spanish and Italian for “trickle-down economics” to determine what Pope Francis’ Evangelium Gaudium “really means” for American Catholics (in a way that won’t upset the economic apple cart). Or finds right-wing Catholic commentator and Fox News analyst Andrew Napolitano writing, “Thank God, so to speak, that [Francis’] teaching authority is limited to faith and morals, because in matters of economics, he is wide of the mark.” God forbid that morality have anything to say in economic life! At least Napolitano is in good company; his remark hearkens back to William F Buckley Jr’s pithy and memorable response to John XXIII’s “Mater et Magistra:” “Mater, si; magistra, no.”
The desire to embrace the Mater but ignore the Magistra* is a unique and universal Catholic failing. In modern democracies, the desire to tell the Pope to “butt out” of national affairs dates back to the 1880s. Then the German Catholic “Center Party” told Pope Pius IX to keep his nose in faith and morals and out of German national politics. (In that instance, there was good justification, as Pius was all too eager to compromise with the anti-Catholic Chancellor Bismarck in order to combat actual socialist tendencies in France and Italy). Today, some Catholics want to embrace Catholic sexual ethics while ignoring recent Papal condemnations of the death penalty. Others want to embrace social policies for the poor while also promoting women’s ordination. Father Z, Napolitano, and Buckley in many ways do that which they accuse liberal Catholics of doing; they uphold certain papal teachings as the Gospel truth, while rationalizing or downplaying those that conflict with their own worldview. It’s not that the Pope means to run down capitalism, they say; it’s that he doesn’t understand true economic theory, a science where faith and morals hold no sway.
The Pope is indeed no economist. For Francis to declare by fiat the “perfect” economic system would be as sensible as declaring that the Sun revolves around the Earth. But the prophetic voice of the Pope — of any moral leader — rests in the challenge to injustice in any form. This includes economic systems that defraud the poor and rely on the toil of third world workers. When conservative American Catholics promote an economic system that uncritically equates the individual good with the common good, their actions are wrong-headed. The Pope, and all Catholics, have the duty to ensure that economic transactions are just in the eyes of God.
One need only look to the response to the 2008 economic and financial crisis to see the failure of conservative American Catholics in economic theory. In modern legal and economic parlance, the business of government is about “incentives:” It is government’s job to provide incentives for individual actors to take acts that promote the common good. When bad incentives are in place, a person is more likely to take actions that hurt the common good. In one example, the Glass-Steagall Act of 1933 limited the cross-over between commercial banking and investment banking. In the aftermath of its repeal in 1999, banks were incentivized by higher profits to take risky investment actions with commercial funds, which in part precipitated the 2008 financial meltdown. Some have tried to reinstate Glass-Steagall, but conservative Catholic politicians have been in the vanguard resisting its re-enactment, believing this will endanger economic investment and inhibit growth. Yet, this is a fundamental misunderstanding of ethics and economics. There is no moral benefit to a booming economy if the result is that people take actions in their own self-interest that harm others.
As GK Chesterton once observed, the economy was made for man, not the other way around. And, even if supply-side economics actually does distribute wealth more equally (a debatable notion), universal wealth does not equal universal salvation. This is especially true when based on a radically individualistic capitalism that ignores the cumulative effect of selfishly individual economic transactions on the common good. Paul Ryan’s statement, “Ayn Rand, more than anyone else, did a fantastic job of explaining the morality of capitalism, the morality of individualism, and this, to me, is what matters most,” should make fellow Catholics cringe. Rand’s radical individualism is the very antithesis of the community of saints.
The conservative Catholic seeking to live by the social justice precepts of the Church is presented a dilemma: how to set the economic levers in order to maximize moral behavior. The Republican Party’s solution is largely a negative prescription — less regulation, more free markets. This may help the economy, but it does not solve the moral problem; rather, as Bishop Keane saw in 1891, it only exacerbates it. “No intelligent student of history will deny that the manipulation of economics by ‘paternal’ governments went to such an extreme under the [pre-capitalist] Mercantile System that the reaction of laissez-faire was inevitable and necessary. But neither can any impartial thinker deny that the assertion of individual independence in economic arrangements may also go to extremes, that the exemption of personal rights in such matters from governmental control may be pushed to lengths seriously detrimental to the social welfare and demanding the intervention of the social authority.” Keane, at 34–35. Catholics who promote a capitalism based on individual desires ignore that this system incentivizes people to use unethical means to obtain success; where there is no rule prohibiting unjust gain, enough people will act in that manner to spoil what good there may have been for the many.
In fact, this final irony is most fundamental of all. In promoting an economics of radical individualism, such Catholics ignore their obligations to the common good. That is, such Catholics cease being ‘c’atholic.
The rest of us are left with half-solutions from the left side of the aisle and and hare-brained demogoguery from the right. A theory, a theory! My kingdom for an ethical economic theory.