Since personal action always entails risk, fault, and possible failure, the universe of freedom must be open, indeterminate, contingent. Some new things appear in it; some old things disappear. Pope John Paul II regularly stressed the new things that happen, such as the new ideas that emerged in the years before Rerum Novarum and the many changes that occurred in the world between 1891 and 1991. For him, history was a realm of trial and error, of costly mistakes and lessons hard-earned. Moreover, the human person seldom experiences societies worthy of his or her capacities for freedom, for love, for truth, for justice—and these are the things that the human race seeks.
Here John Paul II is not focusing solely on the individual. He is pointing out that the fully developed person is social, collaborative, and sharply aware of what she owes to others—and of how, in some ways, all depend on all. He is at once the pope of the person and of solidarity. Would there have been a Solidarność with a lesser person than Lech Walesa to lead it? Would Walesa be the person he now is—the historical person—if he had not acted in and through Solidarnoć? Person and community are mutually defining. Neither is wholly developed apart from the other.
For human progress in history, moreover, new free associations need to be formed continually from the creative acts of some few individuals. Collaborating together, even just a few individuals can become an arrowhead of advance for their whole society, even the whole world. Could there have been contemporary Poland—free and prosperous and more virtuous (more responsible and cooperative than ever before)—without the small band that persevered in that new free association called Solidarity? Could there be a united Europe if Solidarity had not cut a path through the Iron Curtain, and in the aftermath brought down that barbarous Berlin Wall? Both individual persons—hugely brave and admirable persons—and the communions they formed were necessary to the task. John Paul II told both: “Do not be afraid!”
[CHAPTER 11]
Centesimus Annus: Capitalism, No and Yes
PAPAL SOCIAL THOUGHT WAS ONCE SAID TO LACK SOPHISTICATION in the social sciences and to be too focused on the individual. Centesimus Annus intends to expand its analytic apparatus broadly enough to contrast not just ideologies, but actual systems of political economy such as real, existing examples of socialism and real, existing examples of democracy and capitalism.
With some sophistication, the pope distinguished the sphere of the social from that of the state, and drew a line between civil society and government. He emphasized the importance of free labor unions, citizens’ initiatives, and free associations. In a passage reminiscent of Tocqueville’s worries about the “new soft despotism” of democracies, the pope launched a systemic critique of “the social assistance state,” contrasting local, “neighborly” work among the poor with the sterility of bureaucratic relationships.1 Whereas for centuries the Catholic tradition had maintained a positive view of the role of the state in social life, John Paul II was especially careful and detailed in setting limits to the overly ambitious states of the late twentieth century.
There had never been any question in John Paul II’s mind that democratic institutions, whatever their faults, are the best available protection for human rights. He now added that capitalist virtues and institutions, whatever their faults, are the best available protection for democracy. To be sure, it was the famous section 42 of Centesimus Annus that drew most of the attention in the world’s press. Until that point in the encyclical, the pope had been dealing with the events that had changed the world since 1891, and especially the events of 1989, as background for his practical advice for the present. Then in section 42 the pope was at last ready to return to the underlying question being pressed upon him from Poland, Czechoslovakia, Hungary, the Third World, and many other quarters: After the collapse of socialism, what do you propose? It is worth giving his answer in full, since the only sensible answer to the question requires some care with the highly disputed term “capitalism.”
Returning now [for the third time] to the initial question: Can it perhaps be said that after the failure of communism capitalism is the victorious social system and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World, which are searching for the path to true economic and civil progress?
The answer is obviously complex. 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.” But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.2
Point by point, this reply reflects the experience of those nations that since World War II have experienced both political liberty and economic prosperity. For example, recovering from the experience of Nazism, Germany after World War II had to undergo a major transformation which was not only economic, but also political and moral. In many of the formerly communist nations, the situation today is similar. In Anglo-American nations, a structure of law has evolved over centuries, from which slowly emerged the political, economic, and cultural institutions that together frame “the free society.” In fact, such neoliberal thinkers as Friedrich Hayek in The Constitution of Liberty and Bruno Leoni in Freedom and Law particularly stress these noneconomic factors. In The Spirit of Democratic Capitalism (1982), I called the resulting Gestalt a “tripartite system.” Democratic capitalism is not a “free enterprise system” alone. It cannot thrive apart from the moral culture that nourishes the virtues and values on which its existence depends. It cannot thrive apart from a democratic polity committed, on the one hand, to limited government and, on the other hand, to many legitimate activities without which a prosperous economy is impossible. The inarticulate practical wisdom embedded in the political system and in the moral-cultural system has profoundly affected the workings of the economic system. Both political decisions and the moral climate encouraged this economic development. At various times in American history, both the political system and the moral-cultural system have seriously intervened, positively and negatively, in the economic system. Each of the three systems has modified the others.
In the second part of section 42, cited above, Pope John Paul II carefully ordered the roles of all three systems—economic, juridical, and moral. As one part of the tripartite structure, capitalism rightly understood flows from the pope’s anthropology: “Man’s principal resource is man himself. His intelligence enables him to discover the earth’s productive potential and the many different ways in which human needs can be satisfied.”3 “Man,” he wrote again, “discovers his capacity to transform and in a certain sense create the world through his own work . . . carrying out his role as cooperator with God in the work of creation.”4 And yet again, “Man fulfills himself by using his intelligence and freedom. In so doing he utilizes the things of this world as objects and instruments and makes them his own. The foundation of the right of private initiative and ownership is to be found in this activity.”5
Moreover, the expression of personal creativity through work entails a social dimension: “By means of his work man commits himself not only for his own sake, but also for others and with others. Each person collaborates in the work of others and for their own good. Man works in order to provide for the needs of his family, his community, his nation, and ultimately all humanity.”6
In these texts we see the elemental form of the pope’s logic, from the image of the Creator in each person, to the work that flo
ws from that source. Likewise, from the fecund mind of the creative God, to the exercise of human intelligence and choice in invention, initiative, and enterprise. Already in Sollicitudo Rei Socialis, the pope had seen that the right to personal economic initiative is a fundamental human right, second only to the right to religious liberty. Like religious freedom, economic initiative also flows from the “creative subjectivity” of the human person. This line of thought led the pope to discern the role of enterprise in economic activity.
John Paul II saw creativity at work in such acts of discovery and discernment. He even saw in them a new form of “capital.” As pastor and theologian, of course, he went beyond a purely economic evaluation of innovation to make ethical judgments about its impact on individual persons and the common good. Although the origins of the word “capital” lie in a more primitive economic era, when capita referred to heads of cattle and the major form of economic capital lay in the ownership of land, the same word also suggests the Latin caput (head), the human seat of that very creativity, invention, and initiative the pope sees in “creative subjectivity.” Indeed, the pope himself alluded to the crucial shift from the primitive meaning of capital as land to its modern meaning as human capital, as we must now examine.
The pope’s thinking on this point again parallels that of Abraham Lincoln. In Laborem Exercens, the pope asserted “the principle of the priority of labor over capital.”7 Similarly, in his First Annual Message to Congress on December 3, 1861, rephrasing some of the words he had used at the Wisconsin State Fair in 1859, Lincoln wrote:
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital, producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation.8
Yet Lincoln also saw that the great cause of wealth is human wit, and grew quite eloquent in praising the role of invention in drawing wealth from the hidden bounty of creation. Similarly, he saw in the Patent and Copyright Clause of the U.S. Constitution a remarkable incentive for inventors and creators (and thus one of history’s great boons to human freedom), since the prospect of the temporary ownership of ideas (as property) “added the fuel of interest to the fire of genius.” In a similar spirit John Paul II wrote:
The earth, by reason of its fruitfulness and its capacity to satisfy human needs, is God’s first gift for the sustenance of human life. But the earth does not yield its fruits without a particular human response to God’s gift, that is to say, without work. It is through work that man, using his intelligence and exercising his freedom, succeeds in dominating the earth and making it a fitting home. In history, these two factors—work and the land—are to be found at the beginning of every human society. However, they do not always stand in the same relationship to each other. At one time the natural fruitfulness of the earth appeared to be and was in fact the primary factor of wealth, while work was, as it were, the help and support for this fruitfulness. In our time, the role of human work is becoming increasingly important as the productive factor both of non-material and of material wealth. Work becomes ever more fruitful and productive to the extent that people become more knowledgeable of the productive potentialities of the earth and more profoundly cognizant of the needs of those for whom their work is done.9
In a way different from that of Ludwig von Mises and Friedrich Hayek, but with an analogous concern, the pope saw work as building up the tacit, experiential, evolving network of a good society: “It is becoming clearer how a person’s work is naturally interrelated with the work of others. More than ever, work is work with others and work for others: It is a matter of doing something for someone else.”10
In an odd way, then, modern capitalism centers more and more attention on caput, on factors such as knowledge, insight, discovery, enterprise, and inquiry. “Human capital” becomes the major cause of the wealth of nations, more important even than natural resources. A country without natural resources can in fact become wealthy; another country quite rich in natural resources can remain very poor. The reader can think of his or her own examples, but for me—all due complexities added—Japan and Brazil offer a potent contrast. Such considerations led the pope to a new meaning of “capital.” In our time in particular there exists another form of ownership which is becoming no less important than land: the possession of know-how, technology, and skill. The wealth of industrialized nations is based much more on this kind of ownership than on natural resources.
The pope’s emphasis on the “community of work” also led him to appreciate “entrepreneurial ability.” It is not so easy, he saw, to discern just how to match human needs and human resources in a productive and efficient way. In many nations today, economic failure, not success, seems to be the rule. The pope discovered that a kind of social foresight is key to avoiding failure:
A person who produces something other than for his own use generally does so in order that others may use it after they have paid a just price mutually agreed upon through free bargaining. It is precisely the ability to foresee both the needs of others and the combinations of productive factors most adapted to satisfying those needs that constitutes another important source of wealth in modern society.11
In particular, the pope stressed the social aspects of entrepreneurship. A free economic system is nothing if not a social system of exchange, based upon voluntary agreement. The pope followed this logic closely:
Many goods cannot be adequately produced through the work of an isolated individual; they require the cooperation of many people in working toward a common goal. Organizing such a productive effort, planning its duration in time, making sure that it corresponds in a positive way to the demands which it must satisfy and taking the necessary risks—all this too is a source of wealth in today’s society. In this way the role of disciplined and creative human work and, as an essential part of that work, initiative and entrepreneurial ability becomes increasingly evident and decisive.12
At this point, everything that the pope had heretofore written about the acting person, about creative subjectivity, and about the fundamental right to personal economic initiative falls into place. He was in a position to render a systemic judgment: “This [modern economic] process, which throws practical light on a truth about the person which Christianity has constantly affirmed, should be viewed carefully and favorably.”13
This is an astonishing statement. The pope suggested that the free and cooperative economy sheds light on Christian teaching in a new way. And he did not neglect the virtues required to accomplish this task:
Important virtues are involved in this process such as diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships as well as courage in carrying out decisions which are difficult and painful, but necessary both for the overall working of a business and in meeting possible setbacks.14
The basis of the modern business economy, the pope wrote, “is human freedom exercised in the economic field.”15 This is a very important recognition. To papal approval for the free political life of democracy, it adds approval for a free economic life; and in both cases freedom implies accountability.
The pope even found it useful to say a good word for profit as “a regulator of the life of a business”:16 “The Church acknowledges the legitimate role of profit as an indication that a business is functioning well. When a firm makes a profit, this means that productive factors have been properly employed and corresponding human needs have been satisfied.”17 Like many good business writers today, the pope also stressed that profit is not the only regulator of the life of a business: “Human and moral factors must also be considered, which in the long term are at least equally importan
t for the life of a business.”18 Business writers such as the late Peter Drucker have stressed the crucial role of various types of human relations within firms; the pope spoke of a firm as “a community of persons . . . who form a particular group at the service of the whole of society.”19
The Limits of Capitalism
Nevertheless, Pope John Paul II did not forget the costs of modern capitalism, based upon human creativity, whose other face is necessarily what Joseph A. Schumpeter called “creative destruction.” The pope wrote that “the constant transformation of the methods of production and consumption devalues certain acquired skills and professional expertise, and thus requires a continual effort of retraining and updating.”20 He particularly worried about the elderly, the young who cannot find jobs, and “in general those who are weakest.”21 He referred to the vulnerable in advanced societies as the “Fourth World.”22
Meeting their needs is the unfinished work of Rerum Novarum, including “a sufficient wage for the support of the family, social insurance for old age and unemployment, and adequate protections for the conditions of employment.”23 All such deficiencies of a market system need to be redressed with practical wisdom. In some cases government will have to take a leading role; in other cases various sectors of civil society will. The pope was no libertarian—but neither was he a statist.
Christian ends leave a great deal of room within these boundaries for rival approaches to means, programs, and policies. The pope was also eager to distinguish capitalism rightly understood from the “primitive” or “early” type of capitalism of which he did not approve. The latter is characterized by (1) systems of “domination of things over people”; (2) systems “in which the rules of the earliest period of capitalism still flourish in conditions of ‘ruthlessness’ in no way inferior to the darkest moments of the first phase of industrialization”; and (3) systems in which “land is still the central element in the economic process, while those who cultivate it are excluded from ownership and are reduced to a state of quasi-servitude.”24 In the Third World (quite visibly in parts of Latin America), landless multitudes suffer cruelly and stream toward the nearest megalopolis where pitifully little work (or housing) is available to them. Like Hernando de Soto, the pope saw that such propertylessness and exclusion characterize the conditions in which “the great majority of the people in the Third World still live.”25
Social Justice Isn't What You Think It Is Page 18
