What does Catholic Social Teaching say about the economy? It’s more complicated than you think.
Strong statements by Pope Francis in recent years have brought renewed attention to the church’s teaching regarding the moral limits of markets. Yet recent essays in America by Arthur Brooks (“Confessions of a Catholic Convert to Capitalism,” 2/6/2017) and Stephanie Slade (“A Libertarian Case for the Common Good,” 8/6/2018) have argued for the church to more fully embrace potential contributions of market economies to the common good. This debate is necessary; however, both of these essays misunderstand the church’s teaching regarding the relationship between markets and the common good.
To be fruitful, this debate must attend to three things: the specific definition of the common good in Catholic social doctrine, the particulars of the church’s understanding of markets and the particular historical construction of the market in which we are currently living. Francis’ teaching is in continuity with a long tradition of papal social doctrine that has wrestled with the power of markets for good and ill for more than a century. As markets continue to evolve, so must our moral reflection on them.
The teaching of Pope Francis on economics is in continuity with a long tradition of papal social doctrine that has wrestled with the power of markets for good and ill for more than a century.
The Common Good
The common is good a fundamental principle of Catholic social thought. The term is as widely supported as it is misunderstood. It is frequently equated with the average degree of economic flourishing among the individual members of society and thus reduced to the assumption that economic growth is a sufficient measure of social well-being.
The Compendium of the Social Doctrine of the Church, the official Vatican summary of papal social teaching, distinguishes the common good from “the simple sum of the particular goods” of each member of society. The compendium notes that this good is “‘common’, because it is indivisible and because only together is it possible to attain it” (164). It is the specifically “social and community dimension of the moral good.” In David Hollenbach’s words, the common good “fulfills needs that individuals cannot fulfill on their own” and realizes “values that can only be attained in our life together.” It designates a certain kind of agency: working together for the good of the whole.
The Catholic understanding of the common good is indebted to Aristotle, who, Thomas Smith observes, contrasted it with the competitive pursuit of goods such as wealth, security and honor. The common good concerns the flourishing of the entire community, and it is something that increases rather than diminishes when shared.
This notion of a shared good of the entire community resonates with belief in God as a triune communion of persons. The Pastoral Constitution on the Church in the Modern World, “Gaudium et Spes,” from the Second Vatican Council, roots the common good in Jesus’ prayer to the Father in John 17 that “all may be one as…as we are one.” The council noted a “likeness” between the “union of divine persons” and the unity of humankind. This brings theological depth and specificity to the common good.
The political common good is of interest to the church because it is an incomplete but real fulfillment of the eschatological unity to which we are all called. The comparison with the unity of Jesus and the Father calls attention not simply to outcomes but also to the character of relationships. “Gaudium et Spes” states that humans “cannot fully find themselves except through the sincere gift of themselves” (24). Finally, “Gaudium et Spes” challenges limited notions of the common good, expanding it beyond the local community or nation, making clear that we have rights and duties regarding the “whole human race.”
In its treatment of the role of the church in the contemporary world, “Gaudium et Spes” considers and distinguishes economic and political aspects of society, which it discusses in separate chapters. As the theologian David Cloutier notes, each has its own associated good. The treatment of economics focuses on the universal destination of goods, and the discussion of the political order centers on the common good. Here we find the oft-excerpted definition: “The common good embraces the sum of those conditions of social life whereby men and women, families and associations may more adequately and readily attain their own perfection” (74).
Lifted from its context, there is always the danger of reading “conditions” here as if they are purely external situations in which we pursue individual flourishing. But the context in the document makes clear that the common good is the collective work of the community. Individuals, families and groups “are aware that they cannot achieve a truly human life by their own unaided efforts. They see the need for a wider community, within which each one makes his or her specific contribution every day toward an ever-broader realization of the common good” (74). Awareness of this need drives the establishment of various forms of government or “political community” that exist “for the sake of the common good.” This expresses the ancient Catholic judgement that government is not a response to human sinfulness but an essential consequence of our social nature created by God.
Thus, Catholicism views the common good as a particular kind of good that concerns the whole of society. It corresponds with a particular form of agency: collective and political action. The common good is distinct from the economy but related to it as both address different aspects of social life.
The political common good is of interest to the church because it is an incomplete but real fulfillment of the eschatological unity to which we are all called.
Catholic Social Thought and the Market
Catholic social teaching has been concerned with the market since its inception. Indeed, the rise of liberal economics was one of the “new things” to which Pope Leo XIII addressed his encyclical “Rerum Novarum” in 1891. This teaching has been refined in relationship to the changing face of capitalism over the years. A relatively stable core teaching on the relationship between markets and the common good is evident from Pius XI in 1931 through Pope Francis today.
St. John Paul II’s “Centesimus Annus”provides a concise summary of this core teaching. In the wake of the collapse of Soviet communism, the pope explicitly addressed the question of whether “capitalism” should now be considered the goal for developing nations. He offered a classic Catholic sic et non.
On the positive side, “If by ‘capitalism’ is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative.”
John Paul immediately balanced this affirmation. “But if by ‘capitalism’ is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative” (42).
John Paul reflected on what markets can and cannot do. “It would appear…that the free market is the most efficient instrument for utilizing resources and effectively responding to needs. But this is true only for those needs which are ‘solvent,’ insofar as they are endowed with purchasing power, and for those resources which are ‘marketable,’ insofar as they are capable of obtaining a satisfactory price” (34). While John Paul thought it best that people receive the training they needed to participate fully in economic life, he nevertheless held that “It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied” when they can find no “no place on the market.”
Daniel K. Finn notes that with his discussion of the problem of a “satisfactory price,” John Paul is addressing the market failure of external costs. When the full environmental and social costs of production are not represented in the price, seemingly rational market activity leads to exploitation and environmental destruction. John Paul continued, warning of “a radical capitalistic ideology…which blindly entrusts the solution of [exploitation, marginalization and alienation] to the free development of market forces” (42).
The Catholic Church accepts the good that markets can bring in strict economic terms (production and distribution) and in the specific sorts of freedom they can facilitate. But papal social teaching has consistently stressed that markets are limited and imperfect tools with potentially destructive aspects (inequality and exclusion, environmental degradation, erosion of community). For this reason, they are but one aspect of broader social flourishing, one that must be yoked to the common good through other modalities of human freedom—namely, politics. Thus, contrary to the argument of Arthur Brooks, capitalism is not fundamentally “content-neutral” or “amoral.” The market is a powerful set of practices that can bring many benefits when oriented to the common good and profound disruption and suffering when it overruns its proper limits. It is precisely this tension that modern Catholic social teaching has responded to over the past century and a half.
The Catholic Church accepts the good that markets can bring in strict economic terms and in the specific sorts of freedom they can facilitate. But papal social teaching has consistently stressed that markets are limited and imperfect tools with potentially destructive aspects.
Those challenging the church’s critique of markets often urge that we look to the overall impact of capitalism. Arthur Brooks argues that the spread of free enterprise around the world has “pulled billions back from the brink of starvation” over the “last few hundred years.” But this timescale glosses over precisely the different relationships between the market and the common good with which Catholic social thought is concerned and which were fundamental to the positive effects of the market. The laissez-faire era that accompanied the Industrial Revolution brought enormous gains in production along with massive social upheavals and cyclical depressions, many of which were nearly as bad as the Great Depression. That depression left the world in such disarray that free market liberalism, Soviet communism and fascism appeared equally politically plausible at the time.
What emerged in the postwar reconstruction in the West were various forms of democratic socialism guided by Keynesian management of markets. That era was marked both by a historically unprecedented period of sustained economic growth and by an equally unprecedented increase in equality. It was this social democratic era of capitalism, not the laissez-faire era that preceded it, that created the middle-class societies that we consider normal. Figures as diverse as Michael Novak and (then-Cardinal) Joseph Ratzinger have identified this form of capitalism as the implicit ideal of Catholic social doctrine. In an address to the Italian Senate, Cardinal Ratzinger said, “In many respects, democratic socialism was and is close to Catholic social doctrine and has in any case made a remarkable contribution to the formation of a social consciousness.” In this era, the market was oriented toward the common good through strong government regulation and very substantial tax-funded public investment. These positive outcomes were also driven by strong unions and a concord between business, labor and government to cooperate in the national common good.
In the late 1960s, postwar capitalism entered into a sustained crisis. The growth of these mass production economies depended on the demand provided by expanding national markets. Internal demand began to stagnate once large portions of the population already owned homes, large appliances and cars. The 1970s oil crisis further pushed the U.S. economy into stagnation.
Keynesian economics had no tools to address a simultaneous combination of high unemployment and high inflation. Into this crisis stepped neoliberal economists and allied foundations and institutes long opposed to the New Deal, who proposed that the answer was to abandon macroeconomic attempts to manage the economy and to allow microeconomic forces to steer the economy to efficiency and growth. The outcomes of this approach are abundantly clear: decades of low inflation, but also a fundamental disconnect between economic growth and equity. In the United States, inflation-adjusted income has stagnated for 90 percent of earners since 1978, and economic inequality has returned to the levels that preceded the Great Depression.
These market-focused ideas are no longer new. For five decades, neoliberal ideas have been the dominant inspiration for economic policy. Individualized, market-based structures have replaced the collective social insurance and public funding mechanisms of the New Deal. To take but one example: We have moved from state-subsidized universities and grants to individual student loans. This policy shift communicates to us that, yes, we are free to choose our own path (as we were in state-funded systems). But it also communicates the neoliberal belief of the policy shift’s architect, the University of Chicago economist Gary Becker, that human capital is primarily an individual concern.
This neoliberal freedom comes with a literal price: We must choose a career that will enable us to pay back those loans. The common good may need more grade school teachers and rural doctors, but those positions will not pay off high loan balances.
Neoliberalism often presents itself as a project of deregulation. But as Notre Dame economist Philip Mirowski observes, like any market system, neoliberalism is a massive exercise in policy construction. In a lecture in 1951, Milton Friedman proposed that what is “new” about neoliberalism is that it goes beyond the idea of laissez-faire. Rather than letting the market be, it seeks to promote competitive market action wherever possible.
But in “Caritas in Veritate,” Pope Benedict XVI offered a sobering catalogue of the world these new market-focused policies have created: “New forms of competition between states” have “led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State” (25).
Neoliberalism often presents itself as a project of deregulation. But as Notre Dame economist Philip Mirowski observes, like any market system, neoliberalism is a massive exercise in policy construction.
Market Effects Beyond the Economy
The effects of neoliberalism extend beyond purely economic matters in two ways. First, market logic has heavily influenced the design of what we call “social media” and its impacts on our social lives and civil society. Second, living in this world of cultivated competition has a profound influence on how we experience relationships with others and, thus, how we understand ourselves and society.
Social media has become such an unavoidable part of social life that we easily forget how it differs from other forms of social relations. Unlike families, workplaces and local communities, social media platforms offer complete consumer freedom to choose with whom we associate. These media platforms have a market-like structure. Young people now grow up in a world where their social status is quantified before their eyes, where each thought or pose is immediately judged and evaluated in real time. Social media platforms construct a world where attention, friends and dating are experienced within a market framework. To a degree unimaginable to previous generations, our personal lives provide no refuge from market competition.
Milton Friedman proposed that Adam Smith’s “invisible hand” was relevant to any dimension of human life where large numbers of individuals pursue their own self-interest while interacting with others. But it is F. A. Hayek’s idea of the market as an information processor more powerful than democratic deliberation or expert synthesis that inspired the very algorithms that structure our social and civil lives. Indeed, one of the founders of Wikipedia cited Hayek’s idea as his inspiration in an interview in Reason magazine.
Social media has more or less absorbed contemporary civil society. Venerable institutions from previous eras—newspapers, journals of opinion and broadcast news networks—receive much of their traffic through social networks such as Facebook, Twitter and Reddit. These platforms create a marketplace of ideas where sourced journalism and considered opinion writing compete directly with shock news sites and conspiracy theories. Truth becomes an expression of subjective market preference, not an objective to be pursued collectively. Our division and incivility are not simply the result of moral weakness; they are the effects of these systemic market structures.
The market has an impact on broader society for a second reason: The more society is influenced by market logic, the more we experience ourselves as individuals in competition with others and the less we are able to imagine ourselves working with others in shared action for the common good.
Libertarians and other pro-market thinkers emphasize the social dimensions of market relationships. As Stephanie Slade argues, capitalism “provides a framework for people to interact peacefully and achieve mutually beneficial outcomes.” Commercial exchange elicits an “instinctive” thankfulness between parties. Labor abuse and monopoly behaviors are common enough to show this is far from a universal outcome. It is true that market exchange can elicit relationships that go beyond mere material benefit, but in contemporary market settings, these aspects of the relationship are always subordinate to the profit principle.
As an entrepreneur, I may develop deep personal connections to my suppliers and employees, but my entire enterprise is constrained by the need to make a profit. I can pay them at all only if I clear a profit, and thus I am forced to pay them as little as possible. We can propose alternative forms of market relations, such as the “Economy of Communion” movement highlighted by Benedict in “Caritas in Veritate,” but these do not describe the day-to-day working of the capitalism we currently have.
Neoliberals and libertarians often point beyond individual relationships to a broader “spontaneous order” that emerges from myriad interactions in the market. But whatever the projected harmony of this broader order, a fundamental component of the daily experience of relationship by members of market societies involves competition with others.
The more society is influenced by market logic, the more we experience ourselves as individuals in competition with others and the less we are able to imagine ourselves working with others in shared action for the common good.
The theologian Meghan Clark notes that one of Benedict’s central critiques of market relations in “Caritas in Veritate”concerns their anthropological impact, or how they form us in a way of being human that falls short of the fulness of communion to which humankind is called to share in the triune God. It is not that market societies do not promote relationships but that the kinds of relationships they encourage are constrained and limited, individual and competitive.
The political scientist Martijn Konings argues that there is a connection between the emotional burden of living in a neoliberal society and the more heartless aspects of contemporary politics. In a competitive market society, no one—rich or poor—is secure, and everyone is a potential competitor. People deal with the anxieties this produces by embracing the proffered vision that everyone gets what they deserve and deserves what they get. Every success is described as the result of personal virtue and hard work. This provides comfort that the abyss that threatens is not really random or capricious; rather, it is what happens to others who, unlike ourselves, lack discipline and initiative.
This vision exacerbates racial, ethnic and class divisions by ascribing the suffering of minority and underprivileged communities not to historic and present-day injustices but to deficient culture and poor choices. In this vision, safety nets are perceived as a moral hazard, a temptation to weakness. At Lampedusa, Pope Francis spoke movingly of the “globalization of indifference.” I have argued here that ours is a world made indifferent. Without a lived experience of the common good and access to the forms of action that achieve it, we become isolated, vulnerable and cruel.
Market economies have much to offer society when oriented toward the common good. For Catholic social thought, it is the task of politics to promote and set limits to the market so that it can serve the common good. This position can seem shocking in an era that has been dominated by neoliberal thought for five decades. But the postwar era of unprecedented market growth and equity took place when the market was allied with strong state support and oversight. Economic conditions change. We cannot simply reproduce that era, but we can seek to find a new balance in our changed circumstances. In order to get this balance right, we have to first recognize the distinct, political and collective nature of the common good.