7/31/2019 Economic Law and Catholic Social Doctrine Part II

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Economic Law and Catholic Social Doctrine Part II2011-01-24 04:01:21 Thomas Storck

In the first part of this article I spoke of economic behavior as understood by mainstream neoclassicaleconomics and provided a critique of that, pointing out in particular its failure to recognize the crucial role

played by power and by human institutions in determining economic outcomes. Now how does this relateto Catholic social teaching? Does it recognize these factors? In fact, the popes have always recognizedthe place of human power and institutions in the workings of the economy. For example, in RerumNovarum itself, Pope Leo wrote that "Working Men have been given over, isolated and defenseless, to thecallousness of employers and the greed of unrestrained competition" (no. 2). And later in this encyclical,when discussing just wages, he states that a worker who accepts less than a living wage "because anemployer or contractor will give him no better," is "the victim of force and injustice" (no. 34). In otherwords, he does not see an impersonal and quasi-mechanical law of supply and demand at work in therelations between employer and employee, but acknowledges that greed and force can have a major rolein these relations. Similarly, Pope Pius XI, in his encyclical Quadragesimo Anno (1931), wrote:

Capital, however, was long able to appropriate to itself excessive advantages. It claimed all

the products and profits and left to the laborer the barest minimum necessary to repair hisstrength and to ensure the continuation of his class. For by an inexorable economic law, itwas held, all accumulation of riches must fall to the share of the wealthy, while theworkingman must remain perpetually in indigence or reduced to the minimum needed forexistence. (no. 54)

And later in the encyclical, he speaks of the "immense power and despotic economicdomination...concentrated in the hands of a few" (no. 105), and of the "accumulation of power [which] is anatural result of unrestrained free competition which permits the survival of those only who are thestrongest" (no. 107). And John Paul II, in Centesimus Annus (1991), implicitly censures the neoclassicalapproach when he criticizes "a radical capitalist ideology ...which blindly entrusts [the solution of poverty

and economic exploitation] to the free development of market forces" (no. 42). With regard to institutions,this quotation from Pius XI's Quadragesimo Anno shows that popes have been aware of the mutability ofhuman institutions and their effects upon economic behavior. Discussing the ownership of property, PopePius noted,

History proves that the right of ownership, like other elements of social life, is not absolutelyrigid, and this doctrine We Ourselves have given utterance to on a previous occasion in thefollowing terms: "How varied are the forms which the right of property has assumed! First, aprimitive form in use among untutored and backward peoples, which still exists in certainlocalities even in our own day; then, that of the patriarchal age; later came various tyrannicaltypes (We use the word in its classical meaning); finally, the feudal and monarchic systemsdown to the varieties of more recent times." (no. 49)

Following on this, Pope Pius stated that "the public authority, in view of the common good, may specifyaccurately what is licit and what is illicit for property owners in the use of their possessions" (ibid.). In otherwords, property ownership as a social institution is subject to different legal and social norms at differenttimes. It is not a fixed concept and it is no injustice to make legal changes with respect to property rightsas long as the natural law is not violated. Although the papal comments on economic power that I havegiven have been critical of the use of that power, the popes recognize that since economic power isomnipresent, it can be used for good also. It becomes wrong when what is sought is unjust, whether thisis done by capital or by labor. Leo XIII in Rerum Novarum spoke of the positive role which power couldhave in protecting the victims of injustice.

The richer population have many ways of protecting themselves, and stand less in need ofhelp from the State; those who are badly off have no resources of their own to fall back upon,and must chiefly rely upon the assistance of the State. And it is for this reason that wage-earners, who are, undoubtedly, among the weak and necessitous, should be specially caredfor and protected by the commonwealth. (no. 29)

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7/31/2019 Economic Law and Catholic Social Doctrine Part II

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None of this, however, means that the popes have ever set forth an economic theory as such. They havepronounced on certain moral aspects of economic activity, and have insisted on their right to do so. Thefullest statement on this point is found in Pius XI's Quadragesimo Anno, 41 and 42.

We lay down the principle long since clearly established by Leo XIII that it is Our right and Ourduty to deal authoritatively with social and economic problems. It is not of course for theChurch to lead men to transient and perishable happiness only, but to that which is eternal.Indeed "the Church believes that it would be wrong for her to interfere without just cause insuch earthly concerns"; but she never can relinquish her God-given task of interposing her

authority, not indeed in technical matters, for which she has neither the equipment nor themission, but in all those that have a bearing on moral conduct. For the deposit of truthentrusted to Us by God, and Our weighty office of propagating, interpreting and urging inseason and out of season the entire moral law, demand that both social and economicquestions be brought within Our supreme jurisdiction, in so far as they refer to moral issues.For, though economic activity and moral discipline are guided each by its own principles in itsown sphere, it is false that the two orders are so distinct and alien that the former in no waydepends on the latter.

But while restricting themselves to the moral aspects or implications of economic activity, they couldhardly perform this task without some attention to the manner in which economies actually work. For it

would be vain to exhort people to do what they could not do or to encourage behavior which violated lawsof nature. The popes are realists in their social thinking. They cannot rely upon the idealized picture ofeconomic behavior presented by mainstream economists, nor by the equally or more absurd portrayal bythe so-called Austrian economists. Although intending to teach morals, the popes must necessarilyassume some economic facts. This in itself should be sufficient to make Catholics who take an interest ineconomics suspicious of neoclassical or Austrian teachings, and cause us to look elsewhere. And in fact,there are other approaches, alternatives to the mainstream, alternatives which offer promising lines ofthought for the creation of an economics which is consistent with observed human behavior and with theChurch's social doctrine. One of the most interesting of these alternative schools is the originalInstitutionalism, an economic school that flourished especially in the United States from the late nineteenthcentury until the middle of the last century. Economist Clarence Ayres explains its basic approach in thisway:

...the object of dissent is the conception of the market as the guiding mechanism of theeconomy or, more broadly, the conception of the economy as organized and guided by themarket. It simply is not true that scarce resources are allocated among alternative uses bythe market. The real determinant of whatever allocation occurs in any society is theorganizational structure of that society - in short, its institutions. At most, the market onlygives effect to prevailing institutions. By focusing attention on the market mechanism,economists have ignored the real allocational mechanism.[i]

Market forces always function within the "the important roles of history and culture" which determine"economic actors' operative goals, values, and views...."[ii] Such ideas about how economies actuallyfunction seem very close to the kind of economic ideas and analysis implicit in papal social teaching. Inany case, a Catholic who takes seriously the social doctrine of the Church can hardly embrace uncriticallythe conclusions of neoclassical or Austrian economics. And if such a Catholic desires to help constructan economics that is fundamentally in harmony with the Church's teaching, he ought at least to look ateconomic schools such as Institutionalism to see what useful concepts and methods he might borrow ormake use of. Any other approach, any attempt to proclaim the absolute autonomy of economics fromethics or from the Church's magisterium will constitute a fatal separation of faith from reason. But aCatholic approach will understand that reason and faith work together and that the genuine conclusions ofreason will never contradict the teachings of the Church. In this way man's reason and the teaching of theChurch of God will be in harmony, allowing us to see more clearly the truth about economics, as about allother matters. [i]. Clarence Ayres, Discussion of Kenneth Boulding, "A New Look at Institutionalism"American Economic Review, vol. 47, May 1957, p. 26. [ii]. Saeed Parto, "Economic Activity and

Institutions: Taking Stock," Journal of Economics Issues, vol. 39, no. 1, March 2005, p. 24.