A June 20, 2014 article in the British financial periodical The Economist, “Francis, Capitalism, and War: The Pope’s Divisions,” was a pleasantly positive spin on a subject with which many people have difficulties. We were especially impressed that the author agreed, that whatever his economic expertise or lack thereof, Pope Francis is asking the right questions, and that his insights deserve serious discussion and consideration.
With that in mind, we agree with Pope Francis that today’s economic situation could easily lead to a global war. Yes, capitalism can offer a peaceful alternative to war. That, however, is only if we define “capitalism” as a free market, private property-based economic system with limited government in which everyone can participate as both producers and consumers.
Is it, however, a free market when there is not a level playing field that all are free to enter and compete on equal terms? Is it a private property-based system when relatively few people own capital, and most have only their labor to sell?
As G.K. Chesterton observed, the problem with capitalism is that there are not enough capitalists. We find it more useful to reject the term “capitalism” altogether. It is too vague, frankly, and has too much baggage. This is not to mention the fact that the socialists invented the term as a pejorative to describe a system based on greed and materialism. That is why we prefer the term “the Just Third Way” instead of “capitalism.”
That does not mean that we consider it a proper role of government to try and take care of everyone’s wants and needs. As the guardian of the common good, the government is charged with maintaining the institutional environment within which (assuming our institutions are properly structured) people can take care of their own needs through their own efforts, whether through ownership of labor, capital, or (preferably) both.
A system can only offer a peaceful alternative to war if enough people share in its benefits. This is not the case with capitalism, defined as concentrated private ownership of capital, as advancing technology continues to displace human labor from the production process, lowering the value of human labor relative to technology as an input to production.
Government efforts to palliate the effects of growing redundancy of labor and the loss of income through redistribution and inflation are counterproductive. They build a sense of entitlement in those receiving benefits, and of resentment in those paying for it.
The only solution is to implement an aggressive program of expanded capital ownership in which every child, woman, and man can participate. By empowering people with capital ownership that would generate income to supplement and, in some circumstances, replace labor income, the conflict inherent in a system in which only a few own or control the means of production would be reduced, if not eliminated, thereby removing at least one cause of war.
Discounting and rediscounting bills of exchange through the commercial banking system linked to the central bank could finance such a program. Such a method of finance would have the advantage of providing a non-inflationary, asset-backed addition to the money supply, and obviate the presumed necessity of redistribution to achieve widespread capital ownership.
We believe that Pope Francis, following Pope Leo XIII’s lead, would instantly grasp the importance of widespread capital ownership. As Leo noted in 1891 in § 46 of Rerum Novarum, “We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.”
Pope Francis, however, has a more immediate problem: widespread distress caused by lack of jobs that, as the system is currently structured, are the only way to gain income in a way that respects human dignity even marginally. Ultimately, of course, a useless job that serves only to generate income is as degrading as a government handout — and why the popes have stressed the importance of widespread capital ownership.
That is why we must understand the “two-pronged” approach to Catholic social teaching found in the encyclicals. The first prong is to redistribute existing wealth to keep people alive and in reasonable health. Ideally this would be through private charity, but in extreme cases (and the world economy is, admittedly, currently an “extreme case”) redistribution by the State can be justified under the principle of double effect. Direct almsgiving, job creation, State welfare, and other, similar measures based on need are, in Catholic social teaching, an expedient to address an emergency situation — but they are not a solution.