Last week we looked at the questions Pope Francis has been raising, what to do in the short term about the increasingly serious problems that are being raised, and whether capitalism (or socialism) could really bring peace or a lasting solution to poverty. Frankly, increasing charity and redistribution, while essential at present, can in no way be considered any kind of a solution.
As both Leo XIII and Pius XI pointed out, the solution — the second prong of Catholic social teaching — is to restructure the social order (“the system”), focusing on the institutions of money, credit, and taxation to encourage and enable widespread capital ownership. That will provide the basis for a lasting peace, not capitalism or socialism. This will require implementation of the three principles of economic justice:
• Participation or “Participative Justice.” “Participation” is the input principle that all people have a right to live in a culture that offers them equality of dignity and opportunity to contribute their labor as well as their capital, to the production of marketable goods and services. This requires equal access to the means of acquiring property in income-producing capital. As technology displaces or replaces labor, the ownership of capital becomes essential for a person in the modern world to earn a living. Such social means are necessary for all members of a society or wealth-producing institution to exercise their fundamental rights to become empowered to contribute to the success of the whole and to their personal success.
Distribution or “Distributive Justice.” “Distribution” is the out-take principle — based on the exchange value of one’s economic contributions — that all people have a right to receive a proportionate, market-determined share of the value of the marketable goods and services they produce with their labor, their capital, or both. Under Kelso’s binary theory of economics, every person is entitled to earn both from their human or “labor” contributions and from their capital contributions (non-human things in the form of productive land and humanly-created capital assets) that combine to produce all goods and services sold in the market. Kelso rejected the “Labor Theory of Value,” which ignores the reality of ever-advancing technologies that continue to eliminate many jobs throughout the world. Further, distribution based on need, rather than on contribution, is valid for charity. Charity, however, should never be a substitute for justice that could reduce the need for charity.
Feedback or “Social Justice” (formerly “Limitation”). “Social justice” is the feedback principle that balances “participation” and “distribution” when either essential principle is violated by the system. Social justice includes a concept of limitation that discourages personal greed and prevents social monopolies. It holds that every person has a personal responsibility to organize with others to correct their organizations, institutions, laws and the social order itself at every level whenever the principles of “participation” or “distribution” are violated or not operating properly.
The three principles of economic justice are the basis of the four pillars of an economically just society:
A limited economic role for the State (“There is no need to bring in the State. Man precedes the State, and possesses, prior to the formation of any State, the right of providing for the substance of his body.” — Rerum Novarum, § 7),
• Free and open markets within an understandable and fair system of laws as the most objective and democratic means for determining just prices, just wages and just profits — the residual after all goods or services are sold (“It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to needs.” — Centesimus Annus, § 34),
• Restoration of private property, especially in corporate equity and other forms of business organization. It is important to note that “property” is not the thing that is owned. It is the set of rights, powers, privileges, and limitations that belongs to an owner. Typically, shareholders do not receive the full stream of income attributable to their share ownership, and, when dividends are paid, are subject to double, sometimes triple taxation. (“A working man’s little estate thus purchased should be as completely at his full disposal as are the wages he receives for his labor. But it is precisely in such power of disposal [i.e., control and enjoyment of the fruits] that ownership obtains, whether the property consist of land or chattels.” — Rerum Novarum, § 5), and
• Widespread capital ownership, individually or in free association with others, achieved through universal access to capital credit repayable with “future savings” (profits) from the future goods and services for which each new growth investment is reasonably expected to produce, in addition to whatever savings they accumulate, or wealth they inherit. Thus, the poor and middle class without past savings are enabled to acquire direct ownership of capital in an advanced economy. (“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.” — Rerum Novarum, § 46).
Pope Francis may not be offering the right answers at the moment, but let’s give him a chance. After all, it shouldn’t all be up to him. The heads of the Catholic Church have been saying the same things regarding what to do about the economy for nearly 125 years. It might be time for us to do a little listening.