Has Pope Francis misunderstood the market economy?

Pope Francis had some dismissive things to say about the market economy and globalisation in his apostolic exhortation. Disappointingly, however, there was much use of the rhetorical tactic of knocking down straw men.

In one such example, the Pope criticised those who believe in the “absolute autonomy of markets”. Nobody believes in the “absolute autonomy of markets”. Markets are forums in which economic co-operation between human persons takes place in the context of institutions. Markets can be restrained by the moral and ethical behaviour of those involved; by institutions that develop within markets themselves; by civil society; by culture; and by governments. Markets cannot be autonomous – they are the creation of human persons, and human persons are reasoning acting beings rather than automatons. To talk about the complete autonomy of a market is like talking about the complete autonomy of a brothel without reference to any of the people operating within it. It is meaningless in the context of Christian anthropology. The apostolic exhortation takes the sophisticated discussion of Caritas in veritatebackwards.

Insofar as the Holy Father was referring to the independence of the market from the state, which was an issue he raised, this is a strange era in which to make such a point. Western governments spend close to record proportions of national income and the regulation of businesses in many places is rising from already high levels. Indeed, the Holy Father is rightly scandalised by the level of youth unemployment in countries such as Spain, France and Italy. He should reflect on the fact that those countries come 125th, 130th and 146th out of 148 ranked countries for their regulatory burdens on business. There is a direct link between regulation and the number of people trapped outside the labour market. Pope Francis should consider too that the much-criticised financial system is not a creation of the market but a highly regulated system underpinned by the state: a welfare state for bankers if you like.

The tone of the economic analysis was unduly pessimistic. The Pope talked about increasing poverty, inequality and exclusion. However, world poverty has fallen more rapidly since 1980 than at any time in the history of our planet: the fall is staggering, and the main cause is globalisation. The globalisation of technology was criticised. But just consider how the mobile phone – which is a technology produced by multinationals but harnessed by smallholders, fisherman and stallholders in Africa – has changed the lives of millions of previously poor people. The Pope also argued that we see the “globalisation of indifference”. Perhaps we should consider the other side of the coin – the US$139.2 billion of charitable assistance that is given to the developing world each year by US citizens alone (this excludes government aid and private investment).

Indeed, the parts of the exhortation on the economy in no way reflected the tone of the rest of the document. The document was upbeat about the healing power of God’s love, inclusive in its scope and charitable in its spirit whilst prompting the consciences of the reader. There is an optimistic story to tell on the economy too: the spirit of generosity among so many and economic development lifting people out of poverty at record rates. We are all impatient and things are not perfect – but market economies and globalisation have achieved much. Ironically, those countries which are most reluctant to embrace a market economy and globalisation are often those which the Holy Father cites when highlighting some of the economic tragedies of modern world.

Of course, we should all be reminded of the crucial need for economic activity to be cloaked in virtue and urged to ensure that markets serve the poor and not vested interests – there is room for conscience-prompting there too. How important these issues are! However, unlike most other aspects of the exhortation and, for example,Caritas in veritate, it is likely that the sections on the economy will generate more heat than light and conflict rather than synthesis.

This article originally featured in The Tablet.

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.