Monday, November 25, 2013

"Distributive Justice"?, XXII: Savings and Economic Justice


As we saw in the previous posting in this series, by the late 1880s it had become critical that the Catholic Church respond to the rapid spread of socialism in general, and georgism in particular, especially in the United States.  Civilization itself seemed to be in danger of falling into the trap prepared by the change in understanding of the natural law that was undermining the foundation of the social order.

While modern commentators may hesitate to assign so much importance to the effect that George’s theories were having on Catholic social thought and understanding of the natural law, many georgists have no such doubts.  George himself appeared to believe he was being singled out for criticism and condemnation in Rerum Novarum, as is evident from the 30,000-word “open letter” he fired off to Leo XIII to explain in great detail precisely why he, George, was right, and the pope was wrong.

The fact was, however, that Catholic teaching itself had, inadvertently, given massive leverage to those who sought to change fundamental principles of natural law to suit themselves.  By assuming that “the experts” knew what they were talking about with respect to the financing of new capital, the Catholic Church found itself in a seemingly impossible situation.  As Leo XIII explained what had by the 1890s become the “orthodox” financial dogma of past savings,

“If a workman's wages be sufficient to enable him comfortably to support himself, his wife, and his children, he will find it easy, if he be a sensible man, to practice thrift, and he will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income.” (Rerum Novarum, § 46.)

Of course, any sensible person will instantly understand that the pope as pope is not an expert in money, credit, banking, or even finance.  Since the pope is not speaking as pope on matters monetary, it necessarily follows that when he speaks of such matters, he is giving an opinion, and it cannot be taken as an infallible declaration . . . however much someone may want their own opinions validated by papal decree.

Nevertheless, whether you take papal statements on the presumed necessity of past savings to finance new capital as infallible, or merely as informed opinion, failing to mention the possibility of other, more feasible means of financing widespread capital ownership painted those trying to understand Catholic social teaching into a corner.  Without the possibility of using future savings collateralized with insurance instead of possessed wealth, Catholics (and everybody else) faced what seemed to be an impossible situation:

• If the traditional understanding of the natural law as based on reason is to be maintained, particularly with respect to the natural right of private property, then as technology advances and consequently becomes far too expensive for ordinary people to purchase out of existing savings, then only the rich as a rule have the capacity to own new capital.  Everyone else must necessarily work for the rich, who then have a moral obligation under charity to take care of the material needs of their employees and anyone else in want — as their resources permit, since most of the income of the rich must presumably go to finance new capital formation to grow the economy and create jobs.  What appears to be a demand for widespread capital ownership, then, is necessarily only a suggestion, prudential matter that can safely be ignored in light of the realities of corporate finance.

• Since the rich cannot be trusted to carry out their moral duty to take care of others, the traditional understanding of the natural law cannot be what has always been supposed.  It must change from being based on human reason (lex ratio) to being based on God’s Will (lex voluntas) — as interpreted by the speaker, of course.  Since this, ultimately, means that “might makes right,” the mighty — those in charge of the State — have the obligation to use their coercive power to force the rich to take care of others.  What seems to be a moral obligation under charity to take care of others must really be a legal duty under justice, enforceable by the State.  Because the demand for widespread capital ownership is necessarily only a suggestion or prudential matter, it can safely be ignored in light of the realities of corporate finance.

Incidentally, here in these two presumably exclusive alternatives (that, nevertheless, come to the same erroneous conclusion regarding the popes’ insistence on the necessity for widespread capital ownership), we see why the Catholic Church “only” criticizes capitalism (the first alternative), but condemns socialism (the second alternative).  Capitalism distorts the traditional understanding of the natural law discerned by reason, especially with respect to private property, while socialism abolishes it completely, replacing a concept of the natural law discerned by reason, with one based on faith.

Ironically (a word that gets used far too often when analyzing what went wrong with the popular and academic interpretations of Catholic social teaching), the insistence that Leo XIII must have meant something other than what he clearly meant when he spoke of the need for widespread capital ownership also undermined the other pillars of a just market economy.  Without widespread capital ownership to support them, it would be virtually impossible to maintain a limited economic role for the State, free and open markets, or the restoration of private property.

Further, these four pillars of a just market economy are applications of the three principles of economic justice that we discussed in posting XIII of this series, and that are implicit in Catholic social teaching.  Undermining or destroying these pillars (as capitalism and socialism do, respectively) invalidates the principles of economic justice by rendering them nullities.

That is why CESJ believes that a clear presentation of the three principles of economic justice are needed — and that a moral authority of the stature of the pope is, logically, the one to make the presentation, if only to validate the teachings of the Church he leads.  It is also essential that such an authority recognize the fact that the use of future savings is not only far more practical and feasible a source for financing new capital formation, it is morally superior to restricting the source of financing of new capital formation to past savings.

Unfortunately, as long as capitalism and socialism are seen as the only alternatives for structuring an economy, both justice and charity as traditionally understood are impossible — and as long as justice and charity are misunderstood, then anything other than capitalism or socialism is equally impossible.

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