September 25, 2015
Pope Francis vs. the American Dream
On capitalism, free markets, and income inequality, Pope Francis has taken a tough stance to understand. Some American critics, including conservative talk radio host Rush Limbaugh, have accused the pontiff of being a Marxist. “The ideology of Marxism is wrong. But I have met many Marxists in my life who are good people, so I don’t feel offended,” Francis has been quoted as saying in response to such criticisms.
Pope Francis went on to say:
There was the promise that once the glass had become full it would overflow and the poor would benefit. But what happens is that when it’s full to the brim, the glass magically grows, and thus nothing ever comes out for the poor … I repeat: I did not talk as a specialist but according to the social doctrine of the church. And this does not mean being a Marxist.
What does a Catholic Capitalist make, though, of the pope’s frequent criticism of “unfettered capitalism?” For example, Pope Francis has said, in his 2013 encyclical:
Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘Thou shalt not’ to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?
He has also said:
The thirst for power and possessions knows no limits. In this system, which tends to devour everything that stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.
It is important to understand Pope Francis, by his own admission, is not a specialist; that is, he is not an economist, and he does not speak as such. Rather, the pope presents a perspective of a man standing in persona Christi. As such, it is hardly any wonder that his heart breaks, as should all of ours, for those who are most in need of our charity.
What are we to make, then, of the pope’s comments criticisms of capitalism? Cardinal Timothy Dolan has written the “principal focus of Pope Francis’ economic teaching” is “that economic and social activity must be based on the virtues of compassion and generosity.” What many people, possibly including Pope Francis, fail to realize is that free market capitalism is the economic system which most lends itself to true compassion and generosity, and which is, therefore, essential to a Christian way of life.
Before he became the 266th pope of the Catholic Church, Pope Francis was once Jorge Mario Bergoglio, born in Buenos Aires, Argentina in 1936. Argentina’s economy in the 20th century was characterized by a blend of socialism, corporatism, and crony capitalism. It wasn’t until, following the collapse of public enterprises in the late 1980s, privatization became popular in Argentina. By then, Bergoglio would have been in his 50s, having spent most of his life in a country where his only experience of capitalism was crony capitalism.
At the turn of the millennium, Argentina was in the midst of what was, perhaps, its worst economic crisis since it gained its independence from Spain. “Critics of Argentine economic liberalization the Menem Presidency’s administration pursued argued Argentina’s economic problems were largely caused by neoliberalism, and they laid much of the blame at the feet of the U.S. government, which had promoted neoliberal reforms in Argentina, as well as the IMF under the Washington Consensus.1 Other Argentine voices have argued neoliberal policies were not pursued aggressively enough, thus causing the economic instabilities which plauged the nation at the beginning of the 21st century.
The Pope Formerly Known As Cardinal Jorge Mario Bergoglio appears to have been persuaded that many of the economic ills his country has faced are the result of unrestrained capitalism, the economic liberalization of the Argentine economy pursued under the influence of the U.S. and the IMF. It is no wonder, then, that Pope Francis is a vocal critic of what he likely perceives as the economic system and the culture which is at least partially responsible for much suffering in his native Argentina. But what Cardinal Bergoglio never experienced, what Pope Francis clearly does not understand, and what even we in the U.S. have yet to experience is true free market capitalism and the prosperity and upward mobility offered by truly unbridled capitalism.
Greed Is Good
What the Holy Father does not understand is how greed can be good; but greed can only be good in a capitalist system. No variant of Marxism, Progressivism, or collectivism ever does away with greed, for it is part of the human condition. Marxism “simply ensures that the only way a person can satisfy it is by using his political connections to steal what he wants, to pillage hapless value-creators while condemning the poor to a life of politicized dependency.” 2 As Adam Smith put it:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
In their indispensable book, Common Sense Economics, Dr. James Gwartney, et al., articulate twelve key elements of economics, one of which is: “People earn income by helping others.” This is the point Adam Smith concisely made, quoted above; but here is the way it is phrased in Common Sense Economics:
People differ in many ways–their productive abilities, their preferences, their opportunities, their specialized skills, their willingness to take risks, and their luck. These differences influence people’s incomes because they affect the value of the goods and services that individuals are willing and able to provide to others.
In a market economy, people who earn high incomes do so because they provide others with lots of things that they value. If these individuals did not provide valuable goods and services, consumers would not pay them so generously. There is a moral here: if you want to earn a high income, you had better figure out how to help others a great deal. To put that another way, if you are unable or unwilling to help others, your income will be low.
This is what Pope Francis doesn’t understand, because he has never experienced a true free market economy. Shockingly, to most Americans, neither have we! In the U.S. economy, there is a mix of capitalist and socialist elements. We intermix free market principles with protectionism, barriers to trade, and other elements of Progressive government in a baffling fashion.
Consider professional licensing, for example; how many professions require a license to practice their trade? Doctors, lawyers, architects, engineers, funeral directors, nurses, dentists, teachers, accountants, veterinarians, pharmacists, psychologists–most of the most sought-after and well-paid jobs require some kind of licensure. Why? Do we require licensure because we are protecting the public from people who could harm them, or because lobbyists for these industries want to protect professionals in these industries from competition in order to keep their incomes artificially high?
I believe many Americans earn high incomes, at least in part, because they are protected from competition. For example, consider how many more lawyers there would be if the bar exam and were optional, if those who passed it received a certification of completion, but no license to practice law was required, if lawyers were only required to disclose to prospective clients whether or not they had taken and passed the bar exam. Then, well-informed prospective clients could decide for themselves whether or not to hire a lawyer based on their credentials and how much they valued the lawyer’s certification (or lack thereof) for having passed the bar exam (or not).
Imagine the effect on the supply of legal services, relative to demand, if the bar exam were optional. Imagine what that would do to the cost of legal services. Is it any wonder, then, that the American Bar Association supports a mandatory bar examination and professional licensing for lawyers? Of course it should not be surprising to anyone that highly paid professionals support professional licensing. Licensing keeps competition to a minimum.
Professional licensure is just one of the many ways the government interferes in free markets. Government intereference in markets nearly always creates economic inefficiencies by inflating or deflating either supply or demand. Such inefficiencies would not exist in a free market capitalist economy, and people would be able, in such a market economy, to be rewarded most by providing goods and services people most highly value. If he wants to increase prosperity around the globe, Pope Francis should be championing privatization, deregulation, limited government, and free markets–all the things that permit people to work hard and improve their economic condition and raise their quality of life.
Gwartney, et al., also identified “seven major sources of economic progress,” all of which are essential elements of a free-markets capitalist economy. To do the most good, from an economic perspective, here are the things Pope Francis should be supporting:
- Legal system: The foundation for economic progress is a legal system that protects privately owned property and enforces contracts in an evenhanded manner.
- Competitive markets: Competition promotes the efficient use of resources and provides a continuous stimulus for innovative improvements.
- Limits on government regulation: Regulatory policies that reduce trade also retard economic progress.
- An efficient capital market: To realize its potential, a nation must have a mechanism that channels capital into wealth-creating projects.
- Monetary stability: A stable monetary policy is essential for the control of inflation, efficient allocation of investment, and achievement of economic stability.
- Low tax rates: People will produce more when they are permitted to keep more of what they earn.
- Free trade: A nation progresses by selling goods and services that it can produce at a relatively low cost and buying those that would be costly to produce domestically.
When it comes to creating the conditions necessary for human beings to flourish and be prosperous, Pope Francis is simply clueless. He is absolutely right about how we should treat each other, of course; he’s just wrong about governments’ proper roles in securing prosperity for the nations of the world.
Austrian economist Murray Rothbard once said:
It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.
This is why, as a Catholic and a capitalist, I cringe when I hear Pope Francis condemning “unfettered capitalism.” Doing so throws his ignorance of economics into stark relief. The pope, like many Progressivists and Marxists, means well; he has a heart that is sensitive to the plight of the poor, and that is to be commended. Unfortunately, the Holy Father makes no distinction between crony capitalism and free market capitalism, and that is why he is wrong about “unfettered capitalism.” What the world needs is truly unfettered capitalism!
Poverty is a moral tragedy, but inequality is unimportant.3 I think, in spirit, as Tim Kane puts it, “The Pope is not calling for us to renounce capitalism, but to renounce a ‘deified market’ and ‘profit at any price, with no concern for social exclusion or the destruction of nature.’ This is a worthy call, one we should answer with happy hearts.” 3
Economics may well be a dismal science, but it is a science which should be well-understood those of us who work hard to create value for other people, who take entrepreneurial risks, who pursue profits for our good and the good of all those who depend on us, who treat charitably those who we can bless according to our means. It is our duty and the means of our liberation from the bonds of poverty to understand the economics of entrepreneurship, and use the principles of that “dismal science” to elevate our condition and that of all those in our sphere of influence. That is true charity, true compassion, and it can only happen when people and markets are free.
- Veigel, Klaus Friedrich (2005). “The Great Unraveling: Argentina 1973–1991”.Governed by Emergency: Economic Policy-making in Argentina, 1973-1991. Princeton University. Archived from the original (PDF) on 2011-12-14.
- Reed, L. (2014, September 24). The Speech Pope Francis Should Have Given. Retrieved September 25, 2015, from http://fee.org/anythingpeaceful/the-speech-pope-francis-should-have-given/
- Kane, T. (2015, September 24). Why Capitalism Is Worth Defending To The Pope. Retrieved September 25, 2015, from http://fortune.com/2015/09/24/pope-francis-inequality-washington/
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