Monday, September 23, 2013

Expanded Capital Ownership and the Catholic Church, I: The Situation


The Catholic Church has always defended the natural right of every human being to be an owner of capital. The social, political, and economic necessity of this, however, was not made explicit until Pope Leo XIII issued Rerum Novarum in 1891. The goal was to counter the rapidly spreading socialist error that justice requires the abolition of private property. The pope clearly explained that, far from abolishing private property in capital, justice and respect for human dignity require that “The law . . . should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (§ 46)

This was a great advance. It did not, however, address the problem of how people are to become capital owners without depriving anyone else of what those others own, or how people are to gain the power necessary to restructure the system in the way the pope had pointed out is desirable, even essential if civilization is to survive.

In 1931 Pope Pius XI issued Quadragesimo Anno. In this encyclical, “On the Restructuring of the Social Order,” and its “sequel,” Divini Redemptoris (“On Atheistic Communism”), 1937, the pope explained a breakthrough in moral philosophy: the “act of social justice.”

Frequently, as he pointed out, the individual is helpless to effect necessary changes in the institutions of the social order so that they function justly to the advantage of all. If individuals are helpless, however, the solution is for individuals to organize, study the situation and (in conformity with the right principles) act directly on the institutions as effective members of organized groups, not helpless individuals.

While Pius XI’s work resulted in what CESJ co-founder Rev. William J. Ferree, S.M., Ph.D. referred to as “a completed doctrine of social justice” as a manual for social change, two specifics were omitted. These were, one, an explicit presentation of the principles of economic justice to refine and expand on the principles of social justice, and, two, guidelines that named future savings as well as past savings as possible sources for financing new capital formation.

Both of these omissions were critical. Fortunately, in 1958 and 1961 lawyer-economist Louis O. Kelso and Aristotelian Mortimer J. Adler collaborated on two books that addressed these omissions, The Capitalist Manifesto and The New Capitalists, respectively. (We won’t address the question as to whether “capitalism” accurately describes the system Kelso and Adler presented.)

The subtitle of The New Capitalists is revealing: “A Proposal to Free Economic Growth from the Slavery of [Past] Savings.” In the book, Kelso and Adler described how, rather than limiting the financing of new capital to what can be withheld from consumption, the present value of future increases in production can be turned into money and used to finance new capital formation. If implemented, this would break the “slavery” of past savings that limited the rate of growth to the rate at which people could refrain from consumption, and open up the effectively unlimited industrial and commercial frontier with rates of growth determined by what could be produced and consumed.

The Catholic Church, however, is not concerned with how new capital is financed. The Catholic Church is indifferent to the particular means or system as long as the method of finance is not illegitimate or unethical. Leo XIII’s and Pius XI’s mentions of past savings were by way of example, not a restriction of means or a mandate requiring that people be forced to cut consumption, save, and then invest. Given that past savings and future savings are morally equivalent and equally effective, it doesn’t matter which one is used.

CESJ contends that, since it can be shown that future savings are more effective, and permit everyone (not merely the rich) to participate in capital ownership, future savings are morally superior to past savings, but that is not the important issue to present to the head of the Catholic Church. What is needed at this “turning point in history” is a presentation of the principles of economic justice to clarify what has only been implied (sometimes very indirectly) before.

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