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.
Pope John Paul II waves at his flock …
Photo via nowitaly.com
… 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.”
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.”
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 hasthan 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.
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.”
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.
Vade 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.
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
3 Responses to “A Tale of Two Popes”
Most read in the last 20 days:
- Gold Sector Update – What Stance is Appropriate?
The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
- Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
- Trump and the Draining of the Swamp
Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
- Gold and Silver Divergence – Precious Metals Supply and Demand
Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
- When Trumponomics Meets Abenomics
Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway] Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
- The Great Wailing
Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations. Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any... You’d think Washington had been invaded by Goths, now...
- Receive a One Percent Gift When Buying or Selling a Home
How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell. The people who took this photograph probably want to...
- Unleashing Wall Street
To Unleash or Not to Unleash, That is the Question... LOVINGSTON, VIRGINIA – Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive? Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat... Image credit: Urs Hagen Oh,...
- Silver Futures Market Assistance – Precious Metals Supply and Demand
Silver Is Pushed Up Again This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday. Taking off for real or not? Photo credit: NASA Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again? This will again be a brief Report this week, as we are busy...
- Boondoggles for the Swamp Critters
Monster or Mozart? BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it... but it feels as though it wouldn’t take much to send them all running. Actually, they're not going anywhere yet... but there is a lot of overconfidence by those who were very worried when prices were a lot better - click to enlarge. Meanwhile... we’re coming to a deep...
- The Art and Pseudoscience of Monetary Policy
Definitely Maybe Everyone’s got a plan for sale these days. In fact, there are so many plans out there we cannot keep up with them all. Eat celery sticks and lose weight. Think and grow rich. Stocks for the long run. Naturally, plans like these run a dime a dozen. All social engineers who get to impose their harebrained schemes on the rest of the world through the coercive powers of the State, as well as all armchair planners regaling us with their allegedly...
- California, Nestle and Decentralization
Goodbye, Socialist Paradise Nestle USA has announced that it will move its headquarters from Glendale, California, to Rosslyn, Virginia, taking with it about 1200 jobs. The once Golden State has lost some 1690 businesses since 2008 and a net outflow of a million of mostly middle-class people from the state from 2004 to 2013 due to its onerous tax rates, the oppressive regulatory burden, and the genuine kookiness which pervades among its ruling elites.* There has been a...