Thursday, August 17, 2006

Economics and community

My response to JB's last comment in the Monarchist post. JB's comments are in italics.

You say, "When did large communities come to exist except through conquest. (And the Civil War can be seen as a war of conquest.)" The US in the 1790s and early 1800s was indeed a large community without having really conquered anything. The Louisiana Purchase more than doubled the size of the nation with Jefferson's signature and no bloodshed. There was no "conquest" involved here.

And what of the indigenous peoples who inhabitated that territory? They didn't sign over the sovereignty. Hence, military conquest was needed to back up a treaty signed by colonial powers handing land back and forth between themselves. No one ever asked for the opinion or consent of the natives. Even if there are legitimate exceptions in history, the fact remains that the majority of large political communities come to exist through conquest, and the same is true of the United States, whether one looks at its treatment of indigenous peoples, or the action of the Federal Government with respect to the Confederacy.

Of course money in politics is "necessary." When is money not necessary? And most towns do in fact still have town meetings. Go to any local public library or community center and you'll see them.

Yes, but where do the majority of people live? Do the majority live within the metropolitan beltways? or within small towns? Small towns may still have some form of town meeting, but my other point is that these are relatively powerless to protect the community from having their economy wrecked.

The ability of money to influence an election in a small community is less obvious, because the scale of running a campaign to get voters is diminished, and should be virtually unnecessary where the citizens know one another. Instead, in a small community money plays a role when some candidate is trying to directly bribe the voters or indirectly, by make an impression through spending money, and making promises that the party (for example, the initiation of new construction projects to celebrate the grandeur of the community) will continue once he is elected.

Again, you claim, "So what if major players try to influence local elections? What motive do you think they have other than preserving party control? Certainly it's not to protect the local community. In most areas subsidiarity is dead." Party politics is relevant at the local and national level. Of course we want to preserve party control, from the bottom up. The Party platforms, of both parties, have ramifications for local, state and national interests. I'm not sure I understand what your point is. What is your solution here?

The solution is decentralization coupled with the protection of local economies and, ultimately, a return to a real Federation, if not beyond. Is it necessary for the major parties to have their tentatcles all the way down? There are no actual and distinct local and state interests, because there is no subsidiarity. Allowing companies to outsource jobs and remove production for the sake of the national economy has a real deleterious effect on local communitise. The burden of band-aid solutions, like social security and so on, should be taken up by the states, if they had actual economic independence and self-sufficiency.

You say, "when the two parties such have a hold and are not interested in doing anything about protecting local communities, it just becomes a game of 'politics as usual'--no great improvement will take place, and all the talk of substantive differences on important issues pales in comparison to the agreement between the two parties on preserving the status quo." What do you mean, "not interested in doing anything about protecting local communities."? To what extent? How are local communities not being protected and what do we mean by protection? If I vote for a Conservative who cuts taxes, for example, this will have a ripple effect down to the local communities because everyone in them will have more cash, to do with it what they please within the community.

To your example: More cash to do what? Consume non-essential goods, which are produced outside the United States? I don't see how that benefits the community. Is that tax return sufficient for the start and cultivation and maintenance of a home business? Cutting taxes, by itself, does nothing to reform the economic structures and practices as they exist in this country.

Not doing anything to protect native production, the economic independence and self-sufficiency of local communities on a humane, eco-friendly scale, and reducing our dependence on oil = not interested in doing anything about protecting local communities

"An empty tautology if the law is made in their favor. If legal justice is that those who absolutize the acquisition of property then they may not be breaking laws, but their justice isn't true justice." How is the law tailored in favor of the rich? You've begun with a premise that I don't readily accept. We do still live in a rule of law society. Who is above the law in the United States? This isn't Cuba. You make quite a good number of assertions and axioms without providing any concrete examples of either, in this case.

"Rule of law" is easily perverted if the standard of justice is not the right one.

The right to acquire (and to dispose of) property is near-absolute. (The only qualifications here in the U.S. to the right to acquire and dispose of I can think here is eminent domain, taxation, and obvious punishments.) Hence the exercise of this right is by definition just, and in accordance with the law. There is no need to be "above the law" if the law favors and protects one's activities. The "right" is not properly subordinated to the common good of society.

I would like to think that separation of powers and subsidiarity go hand in hand. They compliment each other.

Despite separation of powers, the Federal Government has not protected subsidiarity. Subsidiarity becomes even more necessary as a counter to the centralizing tendency of modern nation-states, but in the past 2 centuries has been the loser.

Your comments on Walmart are very interesting. How is Wal-Mart the worst offenders against justice and how are they "further decreasing economic opportunities for members of the community." I would say it's precisely the opposite. Have we reached an insurmountable impass? Perhaps. Again, you've made these broad brush assertions without any real example to back it up. With regard to profit, the overwhelming majority of an industry's profit is actually reinvested into the business to increase production levels, wages, hire new people, etc. Many people seem to think that profits are stored in the backroom of the company or horded by some greedy CEO, but this is not the case. Money is continually flowing in and back into the company. For a tour de force defense of walmart, I recommend the following article from the Mises Institute.

http://www.mises.org/story/2219

It touches on the usual accusations levied against Wal-Mart that you appear to support. I will highlight a good passage and leave the rest to speak for itself. It also gives a good review of common misunderstandings about economic concepts such as prices, cost, wages, etc.

Many of Wal-Mart's critics are socialists who probably resent the fact that Wal-Mart provides an increasingly clear example of how capitalism can shower abundance on its entire population, as their socialist utopias never could. Many of the critics seem to be motivated by fear of change and fear of economic progress. They have a deep distrust of economic freedom and see doom and gloom around every corner as an economy is advancing.
As to be expected from the Austrian school. Who has economic freedom? The corporation? The rich? What of the economic freedom of everyone else? Neglible and not worth protecting.

The economy is advancing? I don't think so--check out Lou Dobbs or Paul Craig Roberts--the economy is shifting to service industries as production is relocated and info/tech jobs are outsourced. The only non-service industries that are growing are those associated with real estate, and we in the middle of the real estate bubble. Just wait until that pops. I've posted some of PCR's articles here, along with links to his archives.

In the past, people like this denounced innovations like the assembly line and mass production for many of the same reasons that they denounce Wal-Mart today. They said that these new methods of production would reduce us all to miserable cogs in a machine enslaved to our employers.
And they did, until the rise of unions prevented the egregious abuses that were taking place. Since then, men were willing to be stuck in intellectually numbing job on the assembly line, so long as it paid the bills.

It is ironic that their intellectual descendants now panic at the thought of losing assembly-line manufacturing jobs overseas because of Wal-Mart. The next generation of ignorant critics will probably complain about the loss of Wal-Mart jobs to more efficient producers.
Because despite the evil of assembly-line manufacturing jobs, at least they are jobs here, filled by Americans.

Paul Craig Roberts: "Second Thoughts on Free Trade". (Typical response by a member of the Austrian school.) "Moving Our Economy Offshore"

The truth about Wal-Mart's critics is that they aren't really interested in economics at all, but they know that in order to be taken seriously they have to pretend to be addressing the issue from a rational point of view. Economic science is complicated and poorly understood by most people, so propagandists often use it as a tool to lend credibility to their arguments. By misusing economic concepts, terminology, and statistics, Wal-Mart's critics have been able to give many people the impression that they are on the side of science. I hope this essay has demonstrated the utter fallaciousness of that impression.
No, Wal-Mart's critics are not interested in unrestrained liberalism and capitalism. As for the true nature of economic pseudo-science, I'll leave that for another post.

As for Wal-Mart itself:
http://www.professorbainbridge.com/2005/02/walmart_a_devil.html
(Professor Bainbridge is no distributist, he's quite the opposite but even he admits that Walmart's practices are not humane.)
http://www.pbs.org/itvs/storewars/stores2.html
http://www.pbs.org/wgbh/pages/frontline/shows/walmart/talk/
The Wal-Mart Effect, by Charles Fishman
"Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs"
Wal-Mart: The High Cost of Low Prices
Wal-Mart Watch

A misc link by people actually debating whether a Wal-Mart should enter their community:
BigCitiesBigBoxes

Of course, I'm not calling you, TC, a Socialist, I know you're not, but a lot of the arguments you mentioned, and a lot of Catholics sign onto them to as well, ring familiar. I would hadly use Belloc as a sound economic theorist. Many of his theories are more or less socialist witha a Catholic gloss. This is not to disparage his other writings that cover theology, which are wonderful, but a problem I see over and over again is that many Catholics latch on to these utopian ecnomic theories like distributism, with little or no knowledge of their implications.

If one gives a proper definition of socialism, one will be unable to show that Belloc's writings on distributism are socialist. If we accept as a definition "the collective ownership of the means of production and distribution" or something close, then distributism is not socialism. Distributism is the distribution of the means of production among the members of a community, as individuals and heads of households, not taken collectively. Smearing a doctrine with a name isn't a refutation, especially if the name is misapplied. As for utopian, it's only utopian if justice is utopian. Obviously in a degraded social order it might seem utopian, but it doesn't mean that the degraded social order itself is just nor does it have the proper understanding of justice to judge of it properly.

See the following for more: http://www.cjd.org/paper/roots/recon.html

The Debate Between Dr. Storck and Dr. Woods over the Austrian school:
(First link contains all of the links in the discussion, including the following.)
Dr. Kwasniewski's Summary
Mr. Storck's last response

13 comments:

James said...

I will reply to the more significant points made in this reply over the next couple days.

I just wanted to briefly comment on the introduction of Storck's theories. Is he really a doctor? Anyway, Storck is one of the most extreme to be found in Catholic circles. His economic theories are amateurish in the extreme and his website borders on the laugable. However, putting this aside, it was his unwarranted, callous attack on Thomas Woods that made it perfectly clear to me as to the extent of his extremism. In the midst of an academic debate over ecnomic theories, he all but spelled out his conviction that Woods should be excommunicated as a "dissenter" for his free-market advocacy. This link will take those interested to the article in question. Pay particular attention to the last paragraph. It's absurd, churlish and I think ad hominem. I think it also reveals that Storck felt cornered by Woods' powerful arguments and as a result, resorted to this attack. As far as I'm concerned, Storck is a discredited intellectual, completely out of touch with reality and it's hard for me to take anything he says seriously.

http://www.chroniclesmagazine.org/News/Storck/NewsTS071104.html

papabear said...

Extreme? I don't think so--I wouldn't say his theories are amateurish. He has a different understanding of what economics is and can be than say that of the Austrian school. No big deal. The Austrian school (or any other liberal or modern understanding of economics) isn't absolute.

Whatever concerns you may have with Mr. Storck I am sure you can bring up with him directly, either through Caelum et Terra (linked to the right), or through private correspondence.

I wouldn't call his attack "callous or unwarranted"--whether one wants to accept it or not, Dr. Woods is a liberal in his understanding of politics and economics. Mr. Storck is simply making the claim that Catholic social teaching is not liberalism, and that Catholic social teaching proper to the role of the Magisteruim, and does not fall outside it. Now one can disagree with his conclusion but this is one that can only be settled by the Magisterium and Sacred Tradition. So what of humble assent? Mr. Storck is merely point it out that Mr. Woods has taken it upon himself to draw the line as to what the authority of the Church covers and what it doesn't. That is to make himself the authority, not the Church, and is that not what private judgment is? This is an ad hom attack on Mr. Storck, who was not making an ad hom attack on Mr. Woods, but arguing that his position was one of dissent. Quite a different thing entirely.

What then do we make of a statement such as this?

A salary is the instrument that permits the laborer to gain access to the goods of the earth. "Remuneration for labor is to be such that man may be furnished the means to cultivate worthily his own materal, social, cultural, and spiritual life and that of his dependents, in view of teh function and productiveness of each one, the conditions of the factory or workshop, and the common good." The simple aggreement between employee and employer with regard to the amount of pay to be received is not sufficient for the agreed-upon salary to qualify as a "just wage," because a just wage "must not be below the level of subsistence" of the worker: natural justice precedes and is above the freedom of the contract.

301, Compendium of the Social Doctrine of the Church

Justice determines what the just wage is, not the fact that a contract was entered into by the two parties enter, and not by the "free market." If the "free market" (or the employer acting under the "compulsion" of the free market) provides a wage which is in actuality an unjust wage, is this not an unjust act? It is.

Let us recall that it was traditionally held that depriving a worker of his just wage is one of the sins that cry out to heaven for vengeance.

James said...

You are correct in saying that Austrian economics is not absolute, but it seems that Storck and his disciples are the ones looking to absolutize ecnomics in a static schema. As a science of human action, this simply cannot be done. I would argue that the Austrian school is not an absolute system, it is just the best one based on a serious knowledge of economics and reality. And has Storck ever taken one economics class? And yet he goes on pontificating about concepts he really knows nothing about. People like to gloss over this, but ecnomics is a serious field in its own right and deserves special attention.

And as far as the authority of the Magisterium, there are degrees by which certain issues carry more or less weight. For example, the Church's teaching on the Real Presence carries far more authority theologically that what Leo XIII or JPII said about this or that economic system. There also seems to be a poor understanding among many, Storck is a prime example, regarding the Church's teaching on the development of doctrine. Characters like Storck seem incapable of grasping this. The Church takes place within history and time. As a result, she developes her teaching in light of new contributions and insights to various fields, economics being one of them. Look at politics; after the French Rev., the Church, rightly so, was very cautious of democratic forms of government with the rise of nation-states. But, and even Pope Benedict recently admitted this, the American Revolution gave the world a different example of "revolution" rooted in the rule of law, and this was acceptable. Clearly, JPII developed the contributions of Leo XIII in terms of economics. The list could go on. The point is, doctrine, especially social doctrine, develop, it's not fixed.

The authority of the Church does not apply equally to every issue, especially those not dealing directly with faith or morals. The Church gives a good deal of liberty to the social sciences to debate among themeselves as to the best solution or system. Even regarding philosophy, JPII said that the Church does not "canonize" any systerm over another, for to do so would be to betray the natural distinction between philosophy and theology, but that's another issue. These are just superficial remarks, I've yet to begin my reply to the orignal post.

With regard to the question of a just wage, I refer you to my article on Catholic Exchange. The just wage is the market wage. Any interference with the wage by the government (minimum wage hikes, etc.) ends up doing more harm than good and unemployement actually increases because employers cannot afford to keep as many on the payroll, in addition prices increase. History prooves this. Wages cannot be determined arbitrarily or on good intentions.

http://www.catholicexchange.com/vm/index.asp?vm_id=1&art_id=33941

More to come...

James said...

Incidentally, I was just recalling the parable Christ told, when the worker who was hired after the rest of the workers was paid the same as those who had been laboring for hours. The others complained that this was not "just," shouldn't they have received more since they did more? But the employer rebuked them, "why are you complaining? You received what we agreed you would receive when you came to me for work in the first place?" The point is, the employee has the total freedom to accept or reject the wage offered to him when is hired. If he thinks it's too low, he can go elsewhere, but don't complain later on. This is Austrian!

papabear said...

The point is, the employee has the total freedom to accept or reject the wage offered to him when is hired. If he thinks it's too low, he can go elsewhere, but don't complain later on. This is Austrian!

That's just ______. If the employers simply follow "the market" they have all the justification they need to offer the same wage as everyone else.

The parable has no application here--we can assume that the wage originally offered to those who worked all day was just. The point is that if God wishes to give us more than we deserve, one cannot complain about being treated unjustly.

papabear said...

You are correct in saying that Austrian economics is not absolute, but it seems that Storck and his disciples are the ones looking to absolutize ecnomics in a static schema. As a science of human action, this simply cannot be done.
Science according to whom? And by what standards? I think not.

I would argue that the Austrian school is not an absolute system, it is just the best one based on a serious knowledge of economics and reality. And has Storck ever taken one economics class? And yet he goes on pontificating about concepts he really knows nothing about. People like to gloss over this, but ecnomics is a serious field in its own right and deserves special attention.
Again, I deny that economics is a autonomous field. If anything is legitimate, it is those observations of how certain people behave. Anything beyond that, I would deny as being having the certitude proper to a science. If economics is a practical science (unlikely), it is subordinate to the science of politics, which is aimed at the common good.

And as far as the authority of the Magisterium, there are degrees by which certain issues carry more or less weight. For example, the Church's teaching on the Real Presence carries far more authority theologically that what Leo XIII or JPII said about this or that economic system. There also seems to be a poor understanding among many, Storck is a prime example, regarding the Church's teaching on the development of doctrine.
The development of doctrine that has taken place is the drawing out of conclusions from what the Church teaches concerning justice to current situations. Now, obviously since the situation is relatively recent, dating to the last 400 years or so, one will not find anything in the Church Fathers on capitalism. Nonetheless, the basic principles have always been present. It is the onus of those who wish to dismiss current papal teachings to show how their judgments do not flow from these moral principles which are a part of the Deposit of Faith.


Characters like Storck seem incapable of grasping this. The Church takes place within history and time. As a result, she developes her teaching in light of new contributions and insights to various fields, economics being one of them. Look at politics; after the French Rev., the Church, rightly so, was very cautious of democratic forms of government with the rise of nation-states. But, and even Pope Benedict recently admitted this, the American Revolution gave the world a different example of "revolution" rooted in the rule of law, and this was acceptable.
The Church has never taught that only one form of government was legitimate. Her criteria is much more broad and have not changed. There is no analogy here with the warnings about capitalism.

Clearly, JPII developed the contributions of Leo XIII in terms of economics. The list could go on. The point is, doctrine, especially social doctrine, develop, it's not fixed.
It can develop, but it cannot contradict what has preceded it.

The authority of the Church does not apply equally to every issue, especially those not dealing directly with faith or morals. The Church gives a good deal of liberty to the social sciences to debate among themeselves as to the best solution or system.
No--economics is a part of politics if it exists in itself. It does deal directly with "faith or morals."


Even regarding philosophy, JPII said that the Church does not "canonize" any systerm over another, for to do so would be to betray the natural distinction between philosophy and theology, but that's another issue. These are just superficial remarks, I've yet to begin my reply to the orignal post.
Irrelevant--philosophy as a body of conclusions from naturally knowable principles is not what is issue here. If those basic principles are also part of Divinely Revealed truth, and those same conclusions can be drawn as a elucidation of Church teaching, then that is what matters.

With regard to the question of a just wage, I refer you to my article on Catholic Exchange. The just wage is the market wage. Any interference with the wage by the government (minimum wage hikes, etc.) ends up doing more harm than good and unemployement actually increases because employers cannot afford to keep as many on the payroll, in addition prices increase. History prooves this. Wages cannot be determined arbitrarily or on good intentions.
There is no "arbitrariness" here--the just wage is something that is determined through reason--it is something reasonable. If one lives in a corrupt system where others don't have to play by the rules of Christian morality, then obviously trying to be just and doing the right thing may serve to be detrimental to one's own business. But the possibility of one's going out of business does not excuse an unjust act.

James said...

A brief note on the illusory system of Belloc known as distributism. Tomorrow I will begin writing my reply to TC's general observations on economics and the Church's relation to it. In particular TC's assertion that economics deals "directly with faith and morals." It does not! Economics is the study of subjective values and choices that individuals make on a daily basis, things that are not predictable. This is so important since so many Catholics hold this view. But more on that later.

The fact is, in the end, the distributism runs contrary to traditional notions of private property since the state is given the power to oppressively tax those it believes have expanded too far. It is ironic; advocates claim to be defending private ownership, but in the end, the logical conclusion of distributism is a direct attack on private property. The goal of distributism is to ensure that property ownership is spread far and wide, the problem is that once a particular entity or business is seen to have outgrown what the STATE understands is a "just" size, it will be taxed relentlessly to cut down its size and growth, in effect, killing it. To do this the state would have to be granted an enormous amount of power. So much for subsidiarity, eh? Nothing speaks more to bloated, centralized power than this spectacle. Who, in this utopian vision, ultimately determines what the "just" profit is or the "fair" size of a business? The state. Profit is also limited and the motivation to work will subsequently suffer. I found this useful quote in the process of gathering research.

“Chesterton and Belloc extol a world of small businessmen running owner-operated shops. The only problem is that in the real world, every small businessman is looking to expand.”

What small business is not hoping to grow? It's the nature of the business world. Distributists are more cynical toward the entrepreneur than the benevolent central government they trust to oversee everything. In the end, who do they trust? Survey says, "The state over the individual."

This underlines the completely different perspectives by which TC and I see this issue. I see the government as potentially the greatest threat to individual liberties, for this reason, I support federalism, and subsidiarity, while individuals like Storck and apparently TC view the businessman and the market as the primary threats and want to empower the government to keep them in check. They have a far more rosy view of government than I do.

To be continued...

James said...

One more thing regarding the relative autonomy of economics in relation to the Magisterium; I thought this was worth posting.

"Pope Pius XI, in Quadragesimo Anno acknowledged that limits must exist to what the moral theologian may legitimately say within the economic sphere, since 'economics and moral science employs each its own principles in its own sphere.' "Its own principles and its own sphere." Interesting...

papabear said...

Economics is the study of subjective values and choices that individuals make on a daily basis, things that are not predictable.

Where there is no distinction in object there is no distinction in science. If "economics" is merely a body of observations, then it is as useful as the truthfulness of its observations, which by their very nature cannot lead to universal laws, since free choice is not negated. If it goes on to make normative claims, then it falls within morals--within the realm of natural reason, the science of politics, within supernatural realm, the teaching authority of the Church.

The fact is, in the end, the distributism runs contrary to traditional notions of private property since the state is given the power to oppressively tax those it believes have expanded too far.
Traditional notions of private property are not absolute--is there a natural limit to how much property one needs?

To do this the state would have to be granted an enormous amount of power. So much for subsidiarity, eh?
Subsidiarity is not the same as limiting the authority of a government where such limits are not demanded by justice and in fact can be counter to justice. Your criticism fails on this point.

What small business is not hoping to grow? It's the nature of the business world. Distributists are more cynical toward the entrepreneur than the benevolent central government they trust to oversee everything.
Grow within limits perhaps? Or perhaps you're endorsing greed. It's hard to say. You fail to understand that wipespread economic power protects widespread political power, and therefore is a check against a centralized government.

As I've said before--whose freedom do you wish to protect? The freedom of the wealthy? And what of the freedom of those who are not? Creation was given for the benefit of the all, not for the few, and if the many who wish to be independent and do honest work are unable to do so because someone else has control over natural resources and the other means of production, there is a problem, whether you recognize it or not.

Profit is also limited and the motivation to work will subsequently suffer.
Nonsense--people will work in order to survive. I don't have any problem with them coming to realize, through law limiting acquisition, that a disordered appetite for wealth does them no good.

Since you quote a secondary source regarding QA, let's see what else QA says:


69. It is obvious that, as in the case of ownership, so in the case of work, especially work hired out to others, there is a social aspect also to be considered in addition to the personal or individual aspect. For man's productive effort cannot yield its fruits unless a truly social and organic body exists, unless a social and juridical order watches over the exercise of work, unless the various occupations, being interdependent, cooperate with and mutually complete one another, and, what is still more important, unless mind, material things, and work combine and form as it were a single whole. Therefore, where the social and individual nature of work is neglected, it will be impossible to evaluate work justly and pay it according to justice.
As you have in the case of a corrupt system, which the inaction you advocate protects.

71. In the first place, the worker must be paid a wage sufficient to support him and his family.[46] That the rest of the family should also contribute to the common support, according to the capacity of each, is certainly right, as can be observed especially in the families of farmers, but also in the families of many craftsmen and small shopkeepers. But to abuse the years of childhood and the limited strength of women is grossly wrong. Mothers, concentrating on household duties, should work primarily in the home or in its immediate vicinity. It is an intolerable abuse, and to be abolished at all cost, for mothers on account of the father's low wage to be forced to engage in gainful occupations outside the home to the neglect of their proper cares and duties, especially the training of children. Every effort must therefore be made that fathers of families receive a wage large enough to meet ordinary family needs adequately. But if this cannot always be done under existing circumstances, social justice demands that changes be introduced as soon as possible whereby such a wage will be assured to every adult workingman. It will not be out of place here to render merited praise to all, who with a wise and useful purpose, have tried and tested various ways of adjusting the pay for work to family burdens in such a way that, as these increase, the former may be raised and indeed, if the contingency arises, there may be enough to meet extraordinary needs.

72. In determining the amount of the wage, the condition of a business and of the one carrying it on must also be taken into account; for it would be unjust to demand excessive wages which a business cannot stand without its ruin and consequent calamity to the workers. If, however, a business makes too little money, because of lack of energy or lack of initiative or because of indifference to technical and economic progress, that must not be regarded a just reason for reducing the compensation of the workers. But if the business in question is not making enough money to pay the workers an equitable wage because it is being crushed by unjust burdens or forced to sell its product at less than a just price, those who are thus the cause of the injury are guilty of grave wrong, for they deprive workers of their just wage and force them under the pinch of necessity to accept a wage less than fair. Woe unto them who have created such a state.

88. Attention must be given also to another matter that is closely connected with the foregoing. Just as the unity of human society cannot be founded on an opposition of classes, so also the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching. Destroying through forgetfulness or ignorance the social and moral character of economic life, it held that economic life must be considered and treated as altogether free from and independent of public authority, because in the market, i.e., in the free struggle of competitors, it would have a principle of self direction which governs it much more perfectly than would the intervention of any created intellect. But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life - a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated. Therefore, it is most necessary that economic life be again subjected to and governed by a true and effective directing principle. This function is one that the economic dictatorship which has recently displaced free competition can still less perform, since it is a headstrong power and a violent energy that, to benefit people, needs to be strongly curbed and wisely ruled. But it cannot curb and rule itself. Loftier and nobler principles - social justice and social charity - must, therefore, be sought whereby this dictatorship may be governed firmly and fully. Hence, the institutions themselves of peoples and, particularly those of all social life, ought to be penetrated with this justice, and it is most necessary that it be truly effective, that is, establish a juridical and social order which will, as it were, give form and shape to all economic life. Social charity, moreover, ought to be as the soul of this order, an order which public authority ought to be ever ready effectively to protect and defend. It will be able to do this the more easily as it rids itself of those burdens which, as We have stated above, are not properly its own.

104. Accordingly, when directing Our special attention to the changes which the capitalist economic system has undergone since Leo's time, We have in mind the good not only of those who dwell in regions given over to "capital" and industry, but of all mankind.

105. In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure.

106. This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.

107. This concentration of power and might, the characteristic mark, as it were, of contemporary economic life, is the fruit that the unlimited freedom of struggle among competitors has of its own nature produced, and which lets only the strongest survive; and this is often the same as saying, those who fight the most violently, those who give least heed to their conscience.

108. This accumulation of might and of power generates in turn three kinds of conflict. First, there is the struggle for economic supremacy itself; then there is the bitter fight to gain supremacy over the State in order to use in economic struggles its resources and authority; finally there is conflict between States themselves, not only because countries employ their power and shape their policies to promote every economic advantage of their citizens, but also because they seek to decide political controversies that arise among nations through the use of their economic supremacy and strength.

109. The ultimate consequences of the individualist spirit in economic life are those which you yourselves, Venerable Brethren and Beloved Children, see and deplore: Free competition has destroyed itself; economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain; all economic life has become tragically hard, inexorable, and cruel. To these are to be added the grave evils that have resulted from an intermingling and shameful confusion of the functions and duties of public authority with those of the economic sphere - such as, one of the worst, the virtual degradation of the majesty of the State, which although it ought to sit on high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is become a slave, surrendered and delivered to the passions and greed of men. And as to international relations, two different streams have issued from the one fountain-head: On the one hand, economic nationalism or even economic imperialism; on the other, a no less deadly and accursed internationalism of finance or international imperialism whose country is where profit is.

papabear said...

Rather than relying on selective proof-texting, those who adhere to the Austrian school would do well to read the encyclical in its entirety and understand what it is saying.

http://www.vatican.va/holy_father/pius_xi/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno_en.html

41. Yet before proceeding to explain these matters, that principle which Leo XIII so clearly established must be laid down at the outset here, namely, that there resides in Us the right and duty to pronounce with supreme authority upon social and economic matters.[27] Certainly the Church was not given the commission to guide men to an only fleeting and perishable happiness but to that which is eternal. Indeed" the Church holds that it is unlawful for her to mix without cause in these temporal concerns"[28]; however, she can in no wise renounce the duty God entrusted to her to interpose her authority, not of course in matters of technique for which she is neither suitably equipped nor endowed by office, but in all things that are connected with the moral law. For as to these, the deposit of truth that God committed to Us and the grave duty of disseminating and interpreting the whole moral law, and of urging it in season and out of season, bring under and subject to Our supreme jurisdiction not only social order but economic activities themselves.

42. Even though economics and moral science employs each its own principles in its own sphere, it is, nevertheless, an error to say that the economic and moral orders are so distinct from and alien to each other that the former depends in no way on the latter. Certainly the laws of economics, as they are termed, being based on the very nature of material things and on the capacities of the human body and mind, determine the limits of what productive human effort cannot, and of what it can attain in the economic field and by what means. Yet it is reason itself that clearly shows, on the basis of the individual and social nature of things and of men, the purpose which God ordained for all economic life.

43. But it is only the moral law which, just as it commands us to seek our supreme and last end in the whole scheme of our activity, so likewise commands us to seek directly in each kind of activity those purposes which we know that nature, or rather God the Author of nature, established for that kind of action, and in orderly relationship to subordinate such immediate purposes to our supreme and last end. If we faithfully observe this law, then it will follow that the particular purposes, both individual and social, that are sought in the economic field will fall in their proper place in the universal order of purposes, and We, in ascending through them, as it were by steps, shall attain the final end of all things, that is God, to Himself and to us, the supreme and inexhaustible Good.


110. In the second part of this Encyclical where We have presented Our teaching, We have described the remedies for these great evils so explicitly that We consider it sufficient at this point to recall them briefly. Since the present system of economy is founded chiefly upon ownership and labor, the principles of right reason, that is, of Christian social philosophy, must be kept in mind regarding ownership and labor and their association together, and must be put into actual practice. First, so as to avoid the reefs of individualism and collectivism. the twofold character, that is individual and social, both of capital or ownership and of work or labor must be given due and rightful weight. Relations of one to the other must be made to conform to the laws of strictest justice - commutative justice, as it is called - with the support, however, of Christian charity. Free competition, kept within definite and due limits, and still more economic dictatorship, must be effectively brought under public authority in these matters which pertain to the latter's function. The public institutions themselves, of peoples, moreover, ought to make all human society conform to the needs of the common good; that is, to the norm of social justice. If this is done, that most important division of social life, namely, economic activity, cannot fail likewise to return to right and sound order.

So is the Catholic adherent of the Austrian school adherent going to pick and choose what he wants to assent to, like a cafeteria Catholic?

papabear said...

Note, Pope Pius XI does not give an [philosophical] account of science and their subordination--his main point is that economics is subordinate to moral science, because of the order of ends.

papabear said...

Oh, to forestall any strawman arguments:

True distributists
(1) Do not think the end justifies the means--so actions that are intrinsically unjust may not be employed to bring about the desired goals.

Hence, the importance of understanding that the right to property is not absolute, and that the Christian conception of property is not the same as the "pagan" conception which Pius XI castigates.

(2) The desired state of affairs, widespread distribution of property, may not be achievable within a short period of time, or in an especially degraded society, at all. (This is something that prudence realizes.) Nonetheless, Catholic distributists agree with the moral teachings of the Church, the criticisms of the popes of the capitalist ideology, and recognize, along with the popes, as evils the evil consequences that occur when such an ideology or moral stance is dominant within a society.

papabear said...

An edit:
Economics is the study of subjective values and choices that individuals make on a daily basis, things that are not predictable.

Where there is no distinction in object there is no distinction in science. If "economics" is merely a body of observations of what people choose, then it is as useful as the truthfulness of its observations, which by their very nature cannot lead to universal laws, since free choice is not negated. If it goes on to make normative claims, then it falls within morals--within the realm of natural reason, the science of politics, within supernatural realm, the teaching authority of the Church.

I never claimed economics deals directly with faith and morals--what I claimed is that economics falls under the authority of the Church (in so far as it deals with human action, which you recognize with the word "choice".)

Observations of how people behave, especially the vicious and the greedy, do not determine morality or the science of politics (as Aristotle understands it)--unless you'd prefer to deal with a version of the "is-ought" problem. There is nothing within economics as a body of observations that justifies an absolute claim to be neutural and value-free, which must therefore be adopted by all--any such claim that its observations and judgments are of what is "best" or ideal" (much less any normative claims that are drawn from them) must depend on a higher science which can give such evaluations, which is moral science.

An individual's values (and choices) may be his own (hence subjective), but that does not mean they cannot be evaluated according to Christian morality.