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Contents © 2005
by Jim Holman.
All rights reserved.

LETTERS
April 2005

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QUITE PROGRESSIVE, IN SOME WAYS

As a ethnically Jewish atheist, I have no idea how I got onto your mailing list.

Frankly, your paper is interesting to read. It seems quite progressive in some ways, and I applaud the articles that discuss poverty and promote self-examination. Then there was the ad on the back of a recent issue, urging me (with a picture of an angry Jerry Falwell?) to switch away from my phone company because they hired foreigners and promoted the "culture of death." You know, I never thought of myself as belonging to the culture of death before. It's kind of got a cool ring to it. Still, though — it's the sort of thing you might call yourself or one of your friends, and it's hurtful coming from a stranger.

No, I'm not a "person of faith." Seems like faith is the problem these days — for example, faith in our president has gotten people to believe that Saddam and Osama were best buddies, that the tax cuts benefited the average American, and that the oil will never run out if we drill in ANWAR. Faith seems to have replaced critical thought in this country. I'm not buying, thank you very much.

Besides, I get my religious news and insight from www.landoverbaptist.org.

Please take me off your mailing list and spare the trees.

Scott Schafer,
Sausalito

CAPITALISM THE ONLY WAY

Christopher Zehnder's article "Escape from Capitalism" (February 2005) contains a number of questionable statements about economics and morality. In opening, Zehnder says Fair Trade promoter Michael Malone brings "farms into cooperative structures to assure farmers a better price for their produce." There are many reasons to form cooperatives, but guaranteeing a better price isn't one of them. Fair Trade products get higher prices because some customers pay more if workers are paid more than the market labor price. While the value of Fair Trade as a means of alleviating poverty is suspect by many concerned for the poor, Fair Trade principles can exist in any business structure and are not limited to cooperatives.

Zehnder then introduces Michael Greaney and his Center for Economic and Social Justice, which promote an economic model developed by Louis Kelso. Greaney says his "Employee Stock Ownership Plan where every worker is also an owner" represents "binary economics" and a new "third way" beyond capitalism and socialism. Greaney says this approach reflects "an application of the social teaching enshrined in the encyclicals of Popes Leo XIII and Pius XI."

The great Austrian economist, Murray Rothbard says in his memo, "Readings on Ethics and Capitalism," that Pius XI's Quadragesimo Anno clearly reflects the anti-capitalist, papal-fascist honeymoon that existed after the Lateran Treaty of 1929 establishing Vatican City. Pius charged that capital claimed all the profits and left the barest minimum to labor to sustain and reproduce themselves. While saying Communism was bad, he also said Socialism allowed for "stern insistence on the moral law, enforced with vigor by civil authority." He touted that the new syndical and corporative organization of society (Fascism) was closer and often similar to Christian social reform.

On the other hand, Pope Leo XIII openly attacked Socialism in his Rerum Novarum in 1891. He was very clear morality should not be enforced by government. He also said, "if some individuals own the land and others exchange the fruits of their labor for the products of the land, all share in its fruits." To Leo, there isn't an apparent conflict in the interests of capital and labor. He said "these two classes (labor and capital) should exist in harmony and agreement ... each requires the other; capital cannot do without labor, nor labor without capital." These two encyclicals couldn't be clearer or more different that one wonders how they are routinely lumped together.

There's a substantial body of evidence that the Catholic Church and her thinkers have supported capitalism both philosophically and practically for hundreds of years. For a current view of Capitalism and the Church, John Clark says in his Seattle Catholic magazine article, "The Capitalist Response" (www.seattlecatholic.com/article_20020927_The_Capitalist_Res ponse.html) that Pope John Paul II is really the first modern Pontiff to delve into capitalism proper, and analyze it on its own merits.

In Centessimus Annus John Paul II was as close as a pope has ever come to fully endorsing a specific economic system. Speaking of capitalism, Pope John Paul II writes that the mechanisms of the market offer "secure advantages;" they help to "utilize resources better;" they "promote the exchange of products;" above all "they give central place to the person's desires and preferences" which, in a contract, meet the desires and preferences of another person. Nevertheless, these mechanisms carry the risk of an "idolatry" of the market. The Holy Father is simply echoing what had been said time and time again by the other pontiffs: capitalism is an efficient economic system, financially empowering its participants and serving the common good; however, it is not without peril if one views money as a god. It's also perilous to expect an economic system to do the work of religion, and vice versa. For a more detailed analysis, I recommend Thomas Woods' book, The Church and the Market : A Catholic Defense of the Free Economy.

Greaney endorses Kelso's plan to "give" productive property to workers subject to "distributism". It's tiring to hear Catholics like Greaney suggest distributism is the more Catholic economic system. Time and time again we hear this concept has been endorsed by the recent pontiffs, yet the word "distributism" has never appeared in a single papal encyclical! Regardless of one's views of distributism, Greaney's statement that it reflects the social principals of the encyclicals seems a stretch.

Despite the overwhelming success of capitalism, Greaney still thinks we need "third way" economics. The great French pro-free market Catholic economist Daniel Villey reminds us in "Catholics and the Market Economy," translated in Modern Age (Summer and Fall, 1959), that Catholicism is not an economic theory, it is a religion. Its message is the salvation of souls, not the reorganization of society. Jesus did not tell us how to create wealth. With that in mind, Villey says, "we must choose, with no middle way, between the free market (capitalist) economy and the planned economy. There is no "third" or "middle" system to choose from.

Villey ends his article with a call to Catholics to defend Western ideals, including free-markets along with human rights and dignity. He also called the stock exchange "the temple of human rights" — a phrase which has shocked Catholics and others. Economist Rothbard commented that the reason people are shocked is because they don't understand the central importance of speculation in the market economy. Greaney's Employee Stock Ownership Plan is so similar to existing stock market offerings, it's hard to understand why he tries so hard to distance his program from Wall Street.

Perhaps Greaney simply dislikes stock market speculation. He quotes St. Thomas Aquinas as saying, "a profit gained by speculation is morally wrong". St. Thomas's Summa Theologica refers to The Moral Period where Stoics, like Epicureans, "consider speculation to be subordinate to the quest for happiness." The Catholic Encyclopedia article (at www.newadvent.org/) says speculation has advocates who claim it equalizes prices and prevents fluctuations which would otherwise be inevitable. Nowhere is it said that speculation is immoral; yet Greaney says it's the equivalent of "usury". It would be interesting for Greaney to provide the source of the St. Thomas quote and clarify the usury connection.

Greaney seems unsure about basic principles of economics and business and how they relate to morality. He correctly says "in the real world of capitalism, the wage earner does not necessarily receive a just share in the wealth he helps to create". The same thing could also be said about a capitalist or even a worker in a socialist society in that they may not necessarily receive a just share of wealth they help create. Again Greaney mistakenly blames an economic system for not doing the work of individuals in dispensing justice.

Greaney further refers to Kelso saying "capital ... is the source of income that is not a wage" suggesting wages are income to a business. This is incorrect. Labor is an expense, whether the business is owned by workers or not. As Greaney rightly says, labor can be a source of capital and income if labor invests savings or forgoes pay as an investment in future profits. Greaney's statement that it's impossible for low-wage workers to save is demeaning and not true. There's little connection between wages and savings. The average low-wage Chinese worker saves 40 percent while high-wage Americans save nothing. Saving is essential and those motivated to save will save.

As a business owner, Greaney's comment about the "big boss who sits back in his office and tells everybody else what to do" is laughable. Throughout the article, Greaney doesn't seem to appreciate the risk of capital, the time value of money, the simple value of receiving a steady paycheck, and the difficulty of providing one. Ownership comes with considerable responsibilities and risks that could result in total loss as well as a cure for poverty.

It's interesting how Greaney takes the Neo- Luddite view that technology is bad when implemented by capitalists to reduce labor costs but is good if workers own the business. Fundamental economic and business principals don't change based on who owns shares. Technologies that make production easier and more efficient are always good for both labor and capital. While appreciating Greaney's concern for workers, he little mentions the interests of customers who drive every economic transaction.

It was wonderful to hear Greaney speak so highly of a "truly free and open market". But in expecting the market to "determine just prices, just wages and just profits" he again expects too much. Greaney then correctly contrasts true free markets with "corporate welfare/mercantilism" but incorrectly associates these economic vices with "modern capitalism." Corporate welfare and mercantilism are the antithesis of true capitalism.

After the failure of Communism, free market capitalism is clearly the victorious economic system. There's no evidence that an "Escape from Capitalism" is indeed needed by society, is more Catholic or would be better at "Curing World Poverty" than free market capitalism. So why doesn't Greaney simply and openly endorse the free market instead of laboring on an unproven and perhaps impossible "third way"? It's hard to say but if Greaney supports 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 he certainly should.

In conclusion, Greaney's concern for poor workers shows his heart is in the right place. His programs could be the only business instructions these workers ever get. That's why it's so important for him to get the message right. The beneficial role of capitalism in economics must be told as we preach the power of our Catholic faith to save souls. There's little reason to tinker with proven winners in economics or religion. And it's important to understand their differences.

Michael Denny,
San Francisco

Editor replies: It is certainly debatable whether capitalism has been a success. Workers earning slave wages in the third world, the moving of business to the third world to take advantage of this cheap labor, the resulting loss of good-paying jobs for our citizens, the degradation of the natural world, the homogenization of society our economic system has produced, the social and cultural dislocations — all these do not spell success. Perhaps these would not have arisen from Mr. Denny's "true capitalism," but they are certainly the fruit of capitalism as it is and has been practiced.

One wonders whether Mr. Denny has actually has read Rerum Novarum and Quadragesimo Anno, or has simply relied on Murray Rothbard. Pope Pius XI certainly condemned socialism in Quadragesimo Anno. Though he admitted that "like all errors, Socialism contains a certain element of truth, it is nevertheless founded upon a doctrine of human society peculiarly its own, which is opposed to true Christianity.... No one can be at the same time a sincere Catholic and a true Socialist." Both Pius XI and Leo XIII (in Rerum Novarum) condemned class warfare while acknowledging the injustices perpetrated on the poor by the wealthy. Both not only condemned socialism but the capitalist economic system which saw (and sees) workers as mere factors of production, not as men with rights to a share to the goods of this world. Indeed, it was Leo XIII who first insisted on the duty of employers to pay workers a just wage, which is not arrived at simply by the free interplay of market forces. Leo XIII and Pius XI both saw a role for government in regulating the economic order, and even to foster a more widely distributed ownership of productive property. "Wherefore, the law," says Rerum Novarum, "ought to favor this right [of private property] and, so far as it can, see that the largest possible number among the masses of the population prefer to own property."

Pope John Paul II in no way departs from the teachings of his predecessors as to the purpose of economic activity and the duties of employers and employees, as anyone who has read Centessimus Annus and Laborem Exercens can attest. Yes, he says some nice things about the free market system but also speaks of its inadequacy to meet human needs unless it is "appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied."

With Villey, Mr. Denny seems to want to remove religion from the sphere of the world and make it merely a matter of concern for the individual soul. The Church propounds no technical economic system or model, but she does speak to the moral character, which even monetary transactions have. The economy is not something ordered simply to itself; it is not exempt from morality or the cultural and religious order; it too is governed by the laws of God found in revelation and in natural law. The Church, as the moral teacher of mankind, teaches men how to act justly in the economic sphere. To quote Quadragesimo Anno, the Church "never can relinquish her God-given task of interposing her authority, not indeed in technical matters, for which she has neither the equipment nor the mission, but in all those that have a bearing on moral conduct. For the deposit of truth entrusted to Us by God, and our weighty office of propagating, interpreting and urging in season and out of season the entire moral law, demand that both social and economic questions be brought within Our supreme jurisdiction, in so far as they refer to moral issues."

And why? Because the economic order, as all else, has an end assigned it by God. This end, says Pope Pius, fits within a "teleological order" by linkage to which "we shall be led by progressive stages to the final end of all, God Himself, our highest and lasting good." Thus, even the natural aspects of society, including its political and economic aspects, have ultimately a moral and even theological character. It is the task of the Church to speak to these and to guide all things to their ultimate end in God.

As to speculation — which the Catholic Encyclopedia article cited by Mr. Denny defines as "the investing of money at a risk of loss on the chance of unusual gain" — it is like usury insofar as its goal is not a just gain, but the highest possible gain. The price set by speculation is not gauged by real human need (either of the seller or buyer) and thus not by any real value. Like usury, it ignores the principle of the just price.

I have no space to answer all of Mr. Denny's points; but I think he did not fully understand what was said in the article. But I will leave that to the reader's judgment. However, I have read the articles he cites, which purportedly show support for capitalism among later scholastic theologians. But even if the articles demonstrate such a support for capitalism (and I don't think they do), so what? If a bevy of late scholastic theologians disagree with the popes on matters of moral teaching, it is not the popes who are to be judged by the theologians, but they by the popes. And what's true for the theologians, is trebly true for Murray Rothbard and the whole Austrian school of economics.

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