The Pope Takes On Capitalism

Pope Benedict greeted the G-8 summit with an interesting papal encyclical entitled "Charity in Truth" that proposes an entirely new economic order:

In "Charity in Truth," Benedict denounced the profit-at-all-cost mentality of the globalized economy and lamented that greed has brought about the worst economic downturn since the Great Depression.

"Profit is useful if it serves as a means toward an end," he wrote. "Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty."

"The economy needs ethics in order to function correctly — not any ethics, but an ethics which is people centered," he wrote.

While acknowledging that the globalized economy has "lifted billions of people out of misery," Benedict accused unbridled growth of recent years of causing unprecedented problems as well, citing mass migration flows, environmental degradation and a complete loss of trust in the world market.

He urged wealthier countries to increase development aid to poor countries to help eliminate world hunger, saying peace and security depended on it. He specified that aid should go to agricultural development to improve infrastructure, irrigation systems, transport and sharing of agricultural technology.

At the same time, he demanded that industrialized nations reduce their energy consumption, both to better care for the environment — "God's gift to everyone" — and to let the poorer have access to energy resources.

"One of the greatest challenges facing the economy is to achieve the most efficient use — not abuse — of natural resources, based on a realization that the notion of 'efficiency' is not value-free," he wrote.

He denounced that the drive to outsource work to the cheapest bidder had endangered the rights of workers, and demanded that they be allowed to organize in unions to protect their rights and guarantee steady, decent employment for all.

Benedict called for a whole new financial order — "a profoundly new way of understanding business enterprise" — that respects the dignity of workers and looks out for the common good by prioritizing ethics and social responsibility over dividend returns.

"Above all, the intention to do good must not be considered incompatible with the effective capacity to produce goods," he wrote. "Financiers must rediscover the genuinely ethical foundation of their activity so as to not abuse the sophisticated instruments which can serve to betray the interests of savers."

Pope Benedict has written similar things before during his career as a cleric and an academic, and as I understand it, this encyclical is very much in line with a large part of long standing Church doctrine.

In fact part of what led to the Schism and later the Protestant Reformation was a revolt against the Church's attempt to limit natural, economic man and his self-interest.

"The Imitation Of Christ" ( 1389 or so) by Thomas A Kempis, one of the most famous and influential books on Catholic theology spends a decent amount of ink on the topic of repressing economic man and self-interest.

Pope Benedict's chief misunderstanding here is similar to President Obama's in a way, and characteristic of people who have essentially spent their lives in institutions supported by the taxes or stipends taken from others rather than living directly by the fruits of their own labor.

A corporation or business by its very nature is an entity that takes an investment by shareholders or a proprietor and translates it into income and profit. That's why it exists. Businesses are there to make profit, not to 'do good'. Obviously, just as with individuals, there are some very necessary legal constraints that have to be put on that mission. No one wants someone selling shoddy or unsafe merchandise,infringing the rights of others by creating public nuisances or health hazards, taking money for goods and services that are never delivered, or using illegal means like blackmail or arson to coerce trade or eliminate the competition.

But aside from obvious criminal behaviour, when government, the Church or other institutions attempt to get in the way of self-interest and profit or hammer on business to channel or legislate profit towards what they deem to be 'social responsibility', several interesting things happen.

Since the primary motive of business is profit, diverted from that in the form of taxes, money spent to comply with onerous government regulations or money spent on public relations via social responsibility projects has to be made up in some way.

Businesses don't actually pay taxes or spend money to comply with regulations. They merely raise their prices to the consumer, cut the quality of the product or service they produce, cut future growth areas like expansion and research and development,move their facilities to where costs are cheaper or close production and lay off workers...or all of the above combined.

The end result? Smaller tax revenues, fewer jobs,smaller GDP, less charity and a lot more misery. And of course, ultimately, a lousier climate for investment, sometimes to the point where people mostly give up the idea of starting new businesses and employing others altogether.

That's simply how life works in the real world, and always has.And any time an attempt has been made to co-opt those rules 'to do good' in the eyes of the beholder, it's always failed miserably.

As an example, the US has been morphing in the direction of overtaxing, over regulating and otherwise interfering with economic man and the primary profit motive of business for quite some time now, and the results are quite evident. Foreign investment and the purchase of US government debt in the absence of safe and secure vehicles in places like East Asia along with the purchases by the American consumer have staved off some of the harsher realities for some time. But as America's consumer market dwindles and there's more and more demand for safe investment and savings vehicles that provide decent rates of return outside the American financial markets and the dollar, the day of reckoning gets closer. And we're in the process of making Obama's Great Leap Forward which should accelerate that day of reckoning considerably if we're unfortunate enough for it to be completely implemented.

As a sideline, this illustrates one of the philosophical differences between Judaism and Catholicism. I think that the Church attempts to suppress much of what John Locke would have called 'the natural man' and earthly self-interest to promote spiritual well-being in the next world, and the afterlife is paramount. I consider this a natural development since Christ was an Essene ( an ascetic Jewish sect) as well as a Rabbi.

Judaism's difference in this area as I see it is that while the afterlife is not unimportant, it is not emphasized in the same way. There is no vividly descriptive Hell or Purgatory, although there is the concept of Gehenna, which is not even mentioned in the Torah but is first referred to obliquely in the Book Of Daniel and the other prophets and defined as a place without G-d's presence. Instead, the emphasis is on channelling the natural man (which includes economic man, of course) with certain restrictions such as the the Ten Commandments, halacha and the mishna with the idea of building a better society here on earth.

This was a primary reason why the Church, even though it's doctrine was openly anti-Semitic at the time, allowed Jews a place in Europe, albeit a tenuous one. The Jews were the middle men needed to mitigate the problems of the Church attempting to repress economic man with things like 'the doctrine of the just price' and other restrictions on capitalism by providing a necessary outlet to secular Europe for activities like banking and credit while still allowing secular Catholic rulers and businessmen to fulfill church doctrines.

The Pope's latest encyclical is likely to be a scant interest except to th edevout and unlikely to be influential on countries like India and China interested in moving into the 21st century and growing their economies.

As intellectually brilliant as he is, I'm certain he must be aware of that, but feels too weak to avoid the necessity of bowing to political currents within the Church, just as he has in his positions on Islam and the relationships with Israel and the Jews.

Disappointing, to say the least.


(hat tip and a commendation to Joshua's Army member Louie Louie)