The election of a new pope has repercussions far beyond the Catholic Church, Christianity, and even all religion. Especially since the Catholic Church became a truly international organization with the loss of the Papal States in the 19th century, people of goodwill everywhere look to the head of the Catholic Church as a voice for good, even if they do not always agree with what he says.
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| Pope Leo XIV |
That is why it is important to understand just where Pope Leo XIV may be coming from, at least as suggested by his choice of name. He has explicitly stated he was inspired by Leo XIII, and that is of great significance for the Just Third Way of Economic Personalism, even though CESJ is not a religious organization.
While not the first social encyclical, Leo XIII’s Rerum Novarum was the first social encyclical to suggest a specific program. The goal was primarily to counter socialism, which can be summed up as the abolition of private property in capital. As Leo XIII declared in §46, “The law . . . should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” To enable people to become owners, Leo XIII recommended workers be paid more so they could “practice thrift, and . . . put by some little savings and thus secure a modest source of income.” (Ibid.)
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| Pope Leo XIII |
Does this mean Leo XIV should immediately initiate a program of increased wages and broad-based capital ownership? Perhaps — but as pope he has neither the authority nor the power to do so. The real significance of Rerum Novarum, and what Leo XIV may see as offering hope to a world sorely in need of it is not a specific program or means of implementing it, although in worldly terms that is of the utmost importance. This may seem esoteric, but Leo XIII’s breakthrough was the implication every single human being has the potential to organize with others and work directly on social institutions to make the world better for everyone.
With the issuance of Rerum Novarum, people realized they were no longer limited to trying to influence the common good indirectly by having governments pass presumably good laws to impose virtue on others or having an allegedly virtuous elite set individual examples by acting justly. It must be possible for all people of every faith and philosophy to become virtuous through their own efforts.
This, in turn, requires the institutions of society become “structures of participation and shared responsibility” for all rather than structures of sin oppressing the many while promoting the interests of a few, as Pope John Paul II put it in §46 of Centesimus Annus and Pius XI explained in §77 of Quadragesimo Anno: “[I]n order that what [Leo XIII] so happily initiated may be solidly established, . . . two things are especially necessary: reform of institutions and correction of morals.”
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| Pope Pius XI |
To summarize Leo XIII’s argument in Rerum Novarum, just wages are important to secure a decent livelihood for workers and their families and save to buy capital despite being dependent on an employer. Broad-based ownership of capital is important because it allows all individuals and families to secure a decent livelihood without imposing a condition of dependency. Widespread capital ownership also vests people with “social identities” as persons by making otherwise nominal rights to life and liberty effective.
Both wages and ownership, however, are at the level of individual virtue, the “correction of morals” Pius XI noted. These and other measures are not the required reform of institutions. They are, rather, a precondition for effecting the reform of institutions. Just wages and widespread capital ownership are not the end, but the means to achieve the restoration of the social order.
There was, however, a fatal omission from Leo XIII’s proposals. He left out an effective means to finance widespread capital ownership in a way which neither infringed on the natural rights of existing owners nor harmed the common good. Specifically, Leo XIII assumed as a matter of course there is only one way to finance expanded capital ownership. That is, production — and thus ownership of the means of production — can only be financed by refraining from consuming total production and accumulating the excess as money savings.
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| Louis Kelso |
Under this “slavery of past savings” assumption, as labor-displacing technology advances and becomes increasingly expensive, as a rule only the rich can afford to purchase the new machinery and become productive. Many people therefore conclude only those who can afford to reduce consumption without suffering ill effects — the already wealthy — can or should own capital. The rest of us are limited to wages and welfare, which over time brings the world to its present condition.
This is where Leo XIV has an opening and the opportunity and means to bring the vision of Leo XIII to fruition. The only thing Catholic social teaching has lacked is a financially feasible and morally sound means by which every child, woman, and man on Earth can potentially own capital without relying on coercive redistribution, charity, or government welfare. That is now possible.
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| Mortimer Adler |
In 1958 lawyer-economist Louis O. Kelso and “Great Books Philosopher” Mortimer J. Adler published The Capitalist Manifesto. This is a mistitled yet revolutionary plan for a just distribution of wealth to preserve a free society. They followed up in 1961 with The New Capitalists, which the subtitle describes as “A Proposal to Free Economic Growth from the Slavery of [Past] Savings.”
Briefly, Kelso claimed — and proved, by his invention of the Employee Stock Ownership Plan (ESOP) — people without capital could become capital owners by expanding commercial bank credit and paying for the new and future capital using the profits of the capital itself. Capital credit insurance and reinsurance would replace traditional forms of collateral. This has the potential to realize Leo XIII’s vision of a world which works for the benefit of everyone, both in this life and in preparation for the next — and that, in my opinion, is what Leo XIV may have in mind.
These ideas are explained in much more detail in two recent books, Economic Personalism: Property, Power and Justice for Every Person (2020) and The Greater Reset: Reclaiming Personal Sovereignty Under Natural Law (2022), and on the website of the Center for Economic and Social Justice, www.cesj.org as “the Economic Democracy Act.”
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