Calling people – not markets – to account

The Catholic Church has a social teaching because social and economic relationships are human relationships. There is much room for disagreement on specific policy issues but, when it comes to the over-arching principles, it is important that we choose our words carefully.

Pope Francis’ recent criticism of the market economy in a talk to ambassadors on 16th May seemed not to do so. In particular, his talk misunderstood the nature of a free economy and – more importantly – the relationship between free human persons and the outcome of a market economy.

In his talk, there were some of the usual odd statements that pervade Justice and Peace Commission documents that are so damaging to constructive debate in these areas: “While the income of a minority is increasing exponentially, that of the majority is crumbling”. It is normal for Justice and Peace Commission documents to begin by citing widening inequalities and the problem of the poor getting poorer when the opposite is clearly happening. Incomes amongst the better off in the world are stagnating whilst the income of the poor in many countries in the world is increasing more rapidly than at any previous time in history – most notably in Africa.

Markets were blamed by the pope for the poor falling behind but, of course, the poorest people live in the countries that have no proper developed market economy. Given that the pope was addressing the ambassadors of Kyrgyzstan, Antigua and Barbuda, Luxembourg and Botswana he did, in fact, have rather a good random sample of countries for a statistical study. Kyrgyzstan is not poor because it has embraced markets. Rather – in the words of the 2012 Index of Economic Freedom study – it suffers from: weak foundations of economic freedom, insecure property rights and pervasive corruption.

This is standard Justice and Peace Commission stuff: disappointing, but predictable. More worrying, however, was the pope’s comment that: “This imbalance results from ideologies which uphold the absolute autonomy of markets and financial speculation, and thus deny the right of control to States…”. Putting aside the fact that financial markets have been very much controlled by the state in recent decades (indeed, such regulation was part of the problem and encouraged reckless lending and complex securitisation), the phrase “the absolute autonomy of markets” is meaningless. The results of a free economy arise from the free decisions of its participants. The market is not autonomous unless human persons are automatons. The Church teaches, however, that people are rational free, reasoning and acting persons who can take good moral decisions or bad moral decisions. This is as true in the economic arena as anywhere else. That is why John Paul II said in Centesimus annus: “we have to add that the fundamental error of socialism is anthropological in nature…Socialism likewise maintains that the good of the individual can be realised without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil.”

It is also why, when John Paul asked whether capitalism should be the model that ought to be proposed to poor countries, he answered: “If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”.” Of course, the economy should be, argued John Paul, circumscribed by the rule of law.

It is because of the Christian understanding of man as a moral and reasoning person that Pope Benedict argued in Caritas in veritate: “Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man’s darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.” In other words, we are not animals; the economy is not autonomous: it is guided by the decisions of moral human persons. Indeed, the snappy youth version of the Catholic Catechism is very strong on the importance of not circumscribing freedom, even when it is not used appropriately.

This same problem was clear in a further address to the Sisters of the Missionary of Charity whose main work is in India. He said that a wild capitalism has taught the logic of profit at all costs. It has to be said that capitalism – whether wild or not – is not India’s problem. It suffers from the catastrophic failure of socialism, although the limited market reforms of the early 1990s have begun to pull people out of poverty. But, wild capitalism does not “teach” us anything – any more than “wild promiscuity” or “binge drinking” teaches anything about sex or drinking. “Wild” capitalism results from a disordered moral approach to business and it is the Church – according to Catholic teaching – who teaches us how to best re-order our behaviour. We re-order capitalism by re-ordering behaviour, not by re-ordering political structures.

As the pope went on to say, we need “disinterested solidarity and…a return to person-centred ethics in the world of finance and economics”. What a pity that the headlines obscured this message and the address as a whole lost coherence as he seemed simultaneously to call for a state-centered and a person-centered approach. You can have one or the other – not both. At the same time, a Christian understanding of the moral, reasoning and acting human person cannot lead to the view that markets are autonomous. People are not merely animals acting upon instinct. The Church’s message about the importance of ethical behaviour should not be obscured by calls for political solutions to moral problems. Pope Francis should not repeat the monumental mistakes of Rowan Williams in this area.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.