DRI-180 for week of 12-22-13: Render Unto Caesar: A Response to Pope Francis’s Denunciation of Capitalism

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Render Unto Caesar: A Response to Pope Francis’s Denunciation of Capitalism

Papal exhortations to the faithful typically receive dutiful press coverage, but seldom create firestorms of controversy. Pope Francis’s recent apostolic exhortation is a historic exception. It is universally characterized as a “denunciation of capitalism.” Popes are not esteemed for the cogency of their economic commentary, but the Pope has become the darling of the political Left for the extravagance of his views – at least, those excerpted in print, broadcast and digital media.

Historically, Catholic doctrine is hostile to commerce and finance, so we should not be stupefied by papal adherence to tradition. Still, ascendancy of the Pope’s remarks to a position of dominance in public discourse suggests the extremity of the views expressed. They merit extensive examination – and reply. The paragraphs most often excerpted are numbers 53-60, from which the following have been taken:

“…We have to say ‘thou shalt not’ to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not news when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by while food is thrown away while people are starving? This is a case of inequality. Today, everything comes under the laws of competition and the survival of the fittest where the powerful feed upon the powerless…”

“…People continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting… A globalization of indifference has developed… we end up being incapable of feeling compassion at the outcry of the poor… as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us…”

“While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This… is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. ..they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born… Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion… a deified market …becomes the only rule.”

Was the Pope Mis- quoted/translated/interpreted?

In the conservative fortnightly National Review, longtime theologian and analyst Michael Novak tries to make the case that Pope Francis did not really mean what he apparently said. Novak finds the phrase “trickle-down” suspect, claiming that it does not appear in the original Spanish version of the apostolic exhortation. Thus, it must have been added by somebody in the translated version used as the basis for excerpts by the American news media.

Novak recalls Pope Francis’s background in Argentina, a land recently dominated by “crony capitalism;” e.g., government favoritism extended to business friends of those in power rather than truly free markets governed by the Rule of Law. Surely this must be the “capitalism” that the Pope is excoriating, Novak declares.

Novak’s case has a certain visceral appeal, particularly in its indictment of the appellation “trickle-down,” which is left-wing code language used to discredit tax cuts. Alas, the Pope’s own clarification of his comments, published in Time Magazine, offers no support to that interpretation. Not only does he fail to repudiate or qualify his use of the term “trickle-down,” Pope Francis expands on his earlier exposition with remarks couched in the same vein.

Pope Francis’s statements are neither factual nor analytical. They do not spring from any empirical foundation or develop a logical chain of reasoning. They are the kind of ad hoc, emotive outpouring long associated with the political Left. Thus, it is not surprising that Rush Limbaugh characterized them as “pure Marxism,” despite the absence of any Marxist trappings (surplus value, alienation, class conflict, etc.) or call for revolution.

The immediate reaction to these statements is shock at their utter, blatant falsity to fact and history. Even a non-economist recognizes instantly that the Pope – or his ghostwriter – is simply regurgitating prefabricated sludge with no intellectual or empirical content and no relationship to reality. Consider only those comments excerpted above, for example.

A Direct Rebuttal to Pope Francis

We can safely assume that Popes operate on a plane of existence utterly dissimilar to yours and mine. This presumably applies even to Francis, who is portrayed as humble and constantly in search of opportunities to interact with ordinary people. Yet if he were really in touch with day-to-day reality, he would surely know that it is indeed “news” when “an elderly homeless person dies of exposure.” In America, such events are the stuff of the nightly news, local and national, broadcast, telecast and online. So are stock-market fluctuations. This is not surprising; both events are the stuff of human drama. Roughly half of all Americans have a relatively direct financial interest in the stock market. That includes the “majority” that Pope Francis contrasts with the “happy few” in the “minority” whose earnings are “growing exponentially.” It is one thing to hear “outcry of the poor” – or claim to – but another thing entirely to heed it by contributing concretely to their welfare. Research shows that the predominant contributors are the very people that Pope Francis stigmatizes, the holders of financial assets who monitor their value and nurture it.

This represents the intellectual quality of the Pope’s statement well – a false dichotomy built upon an empirical falsehood, tending to create an impression that is the opposite of the truth, couched in rhetoric drenched with emotion.

If “such an economy kills,” how do we explain the soaring life expectancies during the 20th century? In particular, what do we make of the fact that the least free countries – Soviet Russia and its contemporary descendant, the African dictatorships – have made the smallest gains while the largest have accrued to the freest countries and markets? Does the Pope’s use of “inequality” refer to earned income? Wealth? These are all monetary measures of material wealth and the context strongly indicates that the Pope is referring to some such denominator of inequality. But he also lectures us sternly to abjure materialism and “the culture of prosperity,” which “deadens us.”

Strictly speaking, we should be striving for human happiness, towards which real income and wealth are only means and for which they are mere proxies, albeit plausible ones. Research shows that the incidence of happiness is nowhere nearly as unequal as that of income or wealth. Shouldn’t the Pope be celebrating this fact? By decrying the maldistribution of the very prosperity he wants us to repudiate, isn’t he vitiating his own case?

But even if we grant the Pope a dispensation from his own religious doctrine and allow him to become a materialist for purposes of this discussion, he can’t very well hold the free-market responsible for inequality if unfree markets produce even more inequality. And that is what records, at least up to the 21st century. Indeed, it was the Industrial Revolution and the growth of commercial society and free markets that created the middle class and made the study of income inequality relevant. Prior to that time, there were only nobility, merchants and the poor.

Incredible as it seems, Pope Francis labors under the misapprehension that famine and starvation result from food wastage by the rich. This flies in the face of centuries of starvation due to natural disaster and cyclical change, succeeded by political famines maneuvered by dictatorial governments superintending unfree markets. It was tremendous improvements in agricultural productivity, effected by technological changes implemented by competition and free markets, that brought us within sight of a starvation-free world.

It was resistance to competition and free markets in Africa, China and India that delayed this milestone. Only in the last twenty years have these barriers begun to crumble. Is the Pope blind to these miraculous improvements? Or does he allow use of the word “miracle” only in a supernatural context? Should he put Catholic Church investigators on the case, he will find the role of the free market much easier to verify than, say, that of Bernadette of Lourdes.

Economists throughout the world are struck dumb by the Pope’s revelation that today, “everything comes under the laws of competition.” Around the world, but most especially in the West and above all in financial markets, government sits tall in the saddle as never before. Government controls interest rates; government runs banks like public utilities; government tries to drive some industries out of business and lavishly subsidizes others. Government seizes control of our health care and arbitrarily makes and changes laws relating thereto. Government monitors our communications on the pretext of protecting us from external threats just as it monitors our personal behavior on the pretext of protecting us from ourselves. Today a Wall Street Journal op-ed laments the “demonization of free markets” that has taken place over the last five years. The author morosely pleads for mercy from the reign of terror unleashed by government on the competitive marketplace.

And Pope Francis declares us in thrall to “ideologies which defend the absolute autonomy of the marketplace?” In what universe does the Pope reside? Even more to the point, where do I go to sign up for the regime the Pope is warning us against?

Does the Pope recall the six million Jews murdered by the German government, elected by a plurality of voters in a democratic election? Is he aware of the dozens of millions murdered in Soviet Russia? The question is not rhetorical; Pope Francis grudgingly admitted in Time that “Communism is wrong” without citing its bloody past or its failure to provide economic freedom. What about the larger human toll taken by Communism in Red China, and the economic reversal behind its recent rise to prominence? All of these governments claimed to be exercising “vigilance for the common good,” just as the Pope prescribes. Indeed, the similarity of their rhetoric to the Pope’s is positively chilling. But the Pope is silent on the relative incentives and historical record of success of government in serving human wants, compared to the free market.

The only form of “corruption” cited by the Pope is tax evasion. But the historic form of abuse for centuries have been high taxes and inflation, which absolute monarchs and absolute democracies alike have used to appropriate the resources of the populace and “keep citizens from enjoying their purchasing power.” Is it perfectly proper for governments to oppress their citizens with taxes and inflation? The Pope regrets the constraints imposed upon “countries” by debt and debt service. But these are created by government spending, not by financial speculation. They are felt by the majority whom the Pope ostensibly cares for so deeply. Is debt only bad because it inconveniences government and not because it has to be repaid by taxpayers? And what about the crony capitalism cited above, which Pope Francis presumably witnessed up close and personal in Argentina? (South America was the birthplace of the practice and the term.) Is it only private citizens who possess the capability for corruption, not government?

The Pope defines the “survival of the fittest” as a condition in which “the powerful feed upon the powerless.” But this can hardly explain the inequality that is the centerpiece of his diatribe against capitalism. If the rich become rich by taking from the poor, eventually the poor run out of money altogether. There is very limited scope for this type of redistribution, but that is all. In our current context, in which a sizable number of fabulously rich coexist with a huge middle class and a relatively well-off class of poor people, the only possible explanation must involve production by the rich. Otherwise, where does the wealth come from? You can only take so much from poor people and keep doing so generation after generation. The volume of wealth created by free societies is produced by a class of tremendously productive rich people who stimulate productivity by middle-class and poor people; that is the only possible way the total volume of wealth can come into being. But this is way over the Pope’s head; he is wallowing in a trough of emotion, untroubled by logic or quantitative considerations.

Pope Francis is similarly silent about the Vatican and the Catholic Church, each of which have a centuries-old history of corruption, depravity and hypocrisy. Popes have enjoyed mistresses, waged war and accumulated vast wealth. The Vatican has tolerated and covered up the practice of pedophilia by its priests. Hypocrisy, La Rochefoucauld reminds us, is vice’s tribute to virtue, so we should not object to Pope Francis’s decorous avoidance of such matters. But the virtue of humility he affects in his daily ministrations would be equally well practiced in his apostolic pronouncements. Today the Church does not meddle in affairs of science by arguing about the age of the Earth, the date of Creation or the Great Flood. It should extend its circumspection to economics, about which Pope Francis clearly knows no more than the least among his flock. In the realm of intellectual inquiry, the Pope should render unto Caesar that which is Caesar’s.

Where is the Pope Coming From?

Pope Francis confidently asserts that the theory of free markets has “never been confirmed by the facts.” As shown above, it is confirmed both empirically and logically by people who spend their lives in that pursuit. It does not require us to hold “naïve trust in those wielding economic power.” Economic power is wielded by consumers, unlike government power which does demand trust and faith on our part but seldom rewards it.

What is Pope Francis thinking about? Even the Pope, who is used to people taking his word on faith, must have had something in mind when making such blanket assertions. In Part Two, the history of opposition to free markets – particularly that relevant to the Catholic Church – will be reviewed and analyzed. It will place the Pope’s statements in a clearer, if no less defensible, light.

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