Clear vs. Muddled Economic Thinking

Back in 1991, Pope John Paul II released the encyclical ‘Centesimus Annus‘. It condemned socialism, warned of the potential pitfalls of democracy and the welfare state and condemned the warfare state no uncertain terms. It represents quite a remarkable statement on social relations. Rarely has a leader of the Catholic Church embraced the ideas of classical liberalism so unreservedly.

 

PopeJohnPaulIIPope John Paul II waves at his flock …

Photo via nowitaly.com

 

Pope Francis waves to crowds as he arrives to his inauguration mass on 19 March 2013. … and so does Pope Francis.

Photo via catholicvirtue.org

 

Here are a few pertinent quotes from it:

 

“Continuing our reflections, and referring also to what has been said in the Encyclicals Laborem exercens and Sollicitudo rei socialis, we have to add that the fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. Socialism likewise maintains that the good of the individual can be realized without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil. Man is thus reduced to a series of social relationships, and the concept of the person as the autonomous subject of moral decision disappears, the very subject whose decisions build the social order. From this mistaken conception of the person there arise both a distortion of law, which defines the sphere of the exercise of freedom, and an opposition to private property. A person who is deprived of something he can call “his own”, and of the possibility of earning a living through his own initiative, comes to depend on the social machine and on those who control it. This makes it much more difficult for him to recognize his dignity as a person, and hinders progress towards the building up of an authentic human community.”

[…]

I myself, on the occasion of the recent tragic war in the Persian Gulf, repeated the cry: “Never again war!”. No, never again war, which destroys the lives of innocent people, teaches how to kill, throws into upheaval even the lives of those who do the killing and leaves behind a trail of resentment and hatred, thus making it all the more difficult to find a just solution of the very problems which provoked the war.”

[…]

Not only is it wrong from the ethical point of view to disregard human nature, which is made for freedom, but in practice it is impossible to do so. Where society is so organized as to reduce arbitrarily or even suppress the sphere in which freedom is legitimately exercised, the result is that the life of society becomes progressively disorganized and goes into decline.”

 

(emphasis added)

There is nothing in the above we would quibble with. In fact, the entire encyclical is well worth reading. Naturally, John Paul’s views were strongly influenced by his past as a church leader in formerly communist Poland. He had seen and experienced the evils of full-scale socialism first hand. Even so, it is remarkable how clear-headed his views about the market economy were. Such views about economics and freedom have not always been expressed with similar clarity by the Catholic Church. In fact, as Mises has pointed out in his sociological analysis of socialism, the stance of church leaders on economic issues was often anything but defensible.

Contrast the quotes from John Paul’s encyclical with the most widely quoted passage from the first apostolic exhortation, Evangelii Gaudium, released by Pope Francis:

 

“[…] some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase.

 

(emphasis added)

It is actually an exaggeration to call the new pope a ‘socialist’ (we confess to having occasionally stooped to doing so as well). He is by all accounts someone who is genuinely moved by the plight of the poor.

Also, he is certainly not wrong in principle to criticize the current financial and economic system, as he does in the exhortation. However, his economic thinking is nevertheless muddled; for instance, what he calls the ‘free market’ is not really an unhampered free market system, far from it actually. As Gary North has pointed out, his trust in politicians to right the alleged wrongs of the market is just as misguided:

 

“Unfortunately, Pope Francis’s evident compassion for the poor is overwhelmed by his confusion about freedom expressed in markets. Economic liberty has done more to elevate the living standards of the general population than any other form of social organization in history. At the same time, it improves justice and expands inclusiveness. In addition, it is the only system which does not trust in the goodness of those with power. Conclusions drawn from such mistaken premises demonstrate why good intentions are not enough, if we are to judge from results.

The fact that the Pope picked “trickle-down” economic theories to attack was revealing, because no economist ever promoted such a thing. It was a term, like “tax cuts for the rich,” invented by big government opponents of market freedom to deliberately misrepresent it.

Trickle-down is a defamatory characterization of “supply side” economics which misdirects attention away from the primary means by which all gain from market freedom. Its core confusion is in assuming that reducing the disincentives faced by heavily-taxed high earners, leaving them more take-home pay, only benefits them, except for what trickles down to others when they spend it.

The reality is that when people, however rich or poor, advance their interests through voluntary arrangements, they benefit those they deal with. This is done by providing opportunities others find better than their alternatives, and those improved opportunities increase others’ real wealth. As George Reisman succinctly put it:

“Under capitalism, not only is one man’s gain not another man’s loss, insofar as it comes out of an increase in overall, total production … one man’s gain is positively other men’s gain … Indeed, under capitalism, competition proceeds to raise the standard of living of the average wage earner above that of even the very wealthiest people in the world a few generations earlier.”

Or, as Arthur Seldon put it, “capitalism is the instrument which people in all societies … use to escape from want and enrich one another by exchange.”

 

As North remarks further, Pope Francis evidently confuses the free market with the state-capitalistic caricature that has been erected in its place. What the pope deems a ‘market failure’ is in reality a government failure:

 

“When the rich get richer by rigging the political process, that is objectionable, but it is not a market failure. It is a government failure, imposed by undermining the benefits competitive markets provide for all participants.

And the solution is to get the government out of the theft business (as capitalism would require), not to first enable favorites to garner ill-gotten gains from restricting competition, then use government’s abuses as an excuse to more heavily tax (and thus discourage) those who actually benefit others.

It is true that the crony capitalism we see all around us, which is far closer to fascism than capitalism, is unjust. Pope Francis is right to criticize such injustice. But private property, the basis of capitalism, prevents rather than enables the “dog eat dog” “survival of the fittest” competition that capitalism’s attackers accuse it of.

In contrast, private property prevents the physical invasion of a person’s life, their liberty, or their property without their consent. By preventing such invasions, private property is an irreplaceable defense against aggression by the strong against the weak. No one is allowed to be a predator by violating others’ rights. Property rights negate the rule of “might makes right,” which prevails in the absence of such rights.

 

(emphasis added)

As noted above, it is actually too simplistic to call Pope Francis a ‘socialist’ as a number of observers have done. We have little doubt that he is moved by a genuine concern for the poor and a desire to fight injustice. He surely means well and the critique he voices in the exhortation is in many ways justified, but it misses its target by attacking a straw man. Capitalism – even in its less than perfect current form – has once again lifted hundreds of millions out of abject poverty over the past few decades. Instead of condemning the free market, one should demand more of it if one’s goal is to lift up the poor.

 

Addendum: A Smattering of Woo?

It has turned out that Pope Francis is extremely conservative in one area though: he firmly believes in the literal devil, and the Church’s small department of exorcism is apparently making a strong comeback of late.

 

“Largely under the radar, theologians and Vatican insiders say, Francis has not only dwelled far more on Satan in sermons and speeches than his recent predecessors have, but also sought to rekindle the Devil’s image as a supernatural entity with the forces­ of evil at his beck and call.”

[…]

“Pope Francis never stops talking about the Devil; it’s constant,” said one senior bishop in Vatican City who spoke on the condition of anonymity in order to speak freely. “Had Pope Benedict done this, the media would have clobbered him.”

Yet, as with so many of his actions, Francis may simply be correctly reading the winds of the Catholic Church.

Although it is difficult to measure, Vatican officials talk about a resurgence of mystical rites in the church, including exorcism — or the alleged act of evicting demons from a living host. Cardinals in Milan; Turin, Italy; and Madrid, for instance, recently moved to expand the number of exorcists in their dioceses to cope with what they have categorized as surging demand.

[…]

By most accounts, the ranks of official exorcists number between 500 and 600 in a global church of more than 1 billion Catholics, with the vast majority operating in Latin America and Eastern Europe. This week, at the ninth and largest Vatican-sanctioned convention on exorcism, attendees gushed about the fresh recognition being afforded the field.”

 

(emphasis added)

The church has been very reluctant to allow exorcisms to take place in recent decades, as it has slowly but surely accepted that those once deemed ‘possessed’ are simply mentally ill. It has however not foresworn the practice altogether. We would submit that it is likely to do far more harm than good (since even a placebo effect seems unlikely to register in the case of severe mental illness). As far as we are concerned, ‘demonic possession’ is basically woo-woo. The recent rise in the demand for exorcists can probably be explained by the deteriorating social mood.

 

levitationVade retro Satanas! Possession-induced levitation, made in Hollywood. Please note: this happens only in movies.

(Photo via condenast.com / Author unknown)

 

Should you ever encounter what looks like levitation induced by demonic possession, here is a possible non-woo explanation for it.

 
 

 
 

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3 Responses to “A Tale of Two Popes”

  • woodsbp:

    Hi there Pater. Could you possibly do me a big favour: I would like you to explain what exactly you mean by a Free Market, as I have this, possibly naive belief, that such an entity whilst possible in theory, is impossible in practice. That is: if you observed a particular market in action you would say, “That’s a Free Market!”. Thanks.

    Economists may theorize that a FM ‘should’ exist – and provide plausible political, social and economic arguments for this opinion, view, belief or whatever. And then propose appropriate policies to further that belief.

    Unfortunately, long experience has shown that humans cannot (maybe will not) establish a Free Market. So are you (and others) chasing an economic chimera? If this be so, then what would you accept as your alternative? For example: ensure folk are not being deliberately harmed – either directly or indirectly.

    And for what its worth, no economic process is either ‘good’ or ‘bad’ – except within the value frames of the mindsets of the beholders. All contemporary economic ___ isms are embedded (carried along) in the Permagrowth paradigm. And its within that paradigm that our current economic problems lie. You cannot theorize with Nature. Some dopey economic theorists appear to believe that they can. Nasty surprise awaits.

    Brian.

  • No6:

    Now we have a bubble forming in exorcists!

  • zerobs:

    John Paul II was chosen to please Catholics.

    Pope Francis was chosen to please non-Catholics. Maybe the thought was it would drum up enrollment.

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