Reading “Caritas in Veritate”: Notes on Chapter Three
The central themes of this chapter are the nature of gift and gratuitousness, and what it means to have a market economy – whether domestic or global – built on love and ordered toward integral human development. A helpful way to think about this challenge is in terms of the distinction drawn in sec. 36 between “commercial logic”, which is to say the spirit of a market geared strictly toward the creation of wealth, and the pursuit of common good and redistributive justice; Benedict’s claim is that understanding the latter goals as strictly “political” and so extrinsic to economic activity leads to grave social injustices.
It is important to emphasize – as I’ve seen remarked before; I just can’t recall where – that the central argument of this chapter is not that healthy markets require robust regulatory states and political systems that ensure a just distribution of wealth; this is certainly among its claims (see e.g. the second paragraph of sec. 41), but it clearly is not the primary one. Rather, as suggested just above, the point Benedict makes most often is that since economic activity has a “human significance, prior to its professional one” (sec. 41), markets themselves must therefore be geared toward social justice and informed by the logic of gift; and so it is not enough for government to step in and impose these values simply as a corrective. As he puts it in sec. 39 (though note that one could pull a similar quotation from almost any paragraph in this chapter):
When both the logic of the market and the logic of the State come to an agreement that each will continue to exercise a monopoly over its respective area of influence, in the long term much is lost: solidarity in relations between citizens, participation and adherence, actions of gratuitousness, all of which stand in contrast with giving in order to acquire (the logic of exchange) and giving through duty (the logic of public obligation, imposed by State law). In order to defeat underdevelopment, action is required not only on improving exchange-based transactions and implanting public welfare structures, but above all on gradually increasing openness, in a world context, to forms of economic activity marked by quotas of gratuitousness and communion. The exclusively binary model of market-plus-State is corrosive of society, while economic forms based on solidarity, which find their natural home in civil society without being restricted to it, build up society.
(Whatever translator came up with “world context” should never be allowed near the English language again.) Hence our questions should be: In practice, what does it mean for everyday economic activity to incorporate such relationships? Beyond obvious demands like those of fair pay and honest disclosure, what does market ethics (if we might coin a term) consist in?
One suggestion that comes up repeatedly as an answer to the first of these questions is that the market must have room for the economic activity of those “who freely choose to act according to principles other than those of pure profit, without sacrificing the production of economic value in the process” (sec. 37); hence for “commercial entities based on mutualist principles and pursuing social ends” (sec. 38) that exist alongside enterprises that are public or more narrowly profit-oriented. Benedict calls this a way of “civilizing the economy” (ibid.), and it can be seen as a counterpart to the call for dispersed, multi-leveled, and cooperative political authority that comes in the second paragraph of sec. 41. Similarly, in sec. 40 there is an articulation of the more familiar demand for corporate managers to be attentive to more than just the demands of their shareholders: workers, clients, suppliers, producers, and the broader “community of reference” all have a stake in the life of the business, and so a long-term and appropriately wide-ranging view of the ends of economic activity is consequently is an inescapable demand.
Ultimately, then, it seems best to read this chapter as directed toward business leaders even more than political ones, since as Benedict puts it “attitudes of gratuitousness cannot be established by law”, while markets and political institutions alike “need individuals who are open to reciprocal gift” (sec. 39). It certainly seems right to regard a widespread failure to embody such openness as among the chief causes of social injustice.
Thoughts?
P.S. Here is the text of the encyclical, and here are the previous entries for this reading group. Next weekend, we’ll discuss chapter four.
Filed under: Caritas in Veritate, economics, government/law, morality, reading groups, religion
Thoughts?
There is a lot to tackle in your post, but I’ll start with this assertion:
Beyond obvious demands like those of fair pay and honest disclosure, what does market ethics (if we might coin a term) consist in?
While I am not supportive of “fair pay” policies, etc… (the overall market will determine what your services are worth), I do believe that “market ethics” connotates a thoughtful stewardship of our social capital, not just monetary capital. In theory, decision making – particularly at corporate levels – does not account for socical capital, and I think Benedict’s core point is that we do a terrible job addressing this. How we address it is a more difficult question to answer.
For example, the centralization of the American automotive industry in and around Detroit, Michigan may have appeared like a move to increase social capital whent the industry was profitable. The concentration of all these plants in one area has now lead to a dramatic decline in social capital (not to mention property value.) This is a good example of decision makers not accounting for the effect their own failures can have on a large swath of society.
I’ll take issue with Benedict here:
<One suggestion that comes up repeatedly as an answer to the first of these questions is that the market must have room for the economic activity of those “who freely choose to act according to principles other than those of pure profit, without sacrificing the production of economic value in the process”
I am assuming the principles Benedict mentions here include the attention to “workers, clients, suppliers, producers, and the broader community” also cited in your post. I have to ask – how does he know that markets don’t account for these factors?
Benedict makes the fatal flaw of assuming markets are ordered by central figures who have amassed all of the resources, political leverage, and legal authority. Thus, these central figures must be aligned with the concept of promoting the common good and obtaining economic justice. He deeply discounts the ability of market (and its daily participants) to identify practices that promote the common good and obtain economic justice. I will use the classic example for this point: Walmart. (i know, bear with me…)
The typical case against Walmart is that it crowds out the very “common good”-oriented small businesses Benedict seeks to establish a marketplace for. Walmart (supposedly) achieves this by profit-focused supply-chaining, using foreign sources of cheap goods, in combination with punitive workplace policies. An adherence to corporate edicts and increasing stock values are the company’s strategic goals. In Benedict’s worldview, a company like Walmart would be prevented from market capitalization because it represents profit-first capitalism in contrast with the goals of love and human development.
The market’s argument against Benedict’s viewpoint is that the existence of companies like Walmart, and the overwhelming success of them, are proof positive that they do more to promote the social good then their smaller competitors. After all, the masses spend their hard-earned money at these stores for a reason. We know the reasons: Walmart provides people – specifically people of lesser economic means – the opportunity to buy all sorts of items at drastically reduced costs. If working conditions were terrible at Walmart, the company would have a hard time staffing, preventing the rapid proliferation stores across the country – the exact opposite of what we have seen over the past 20 years (the stores provide hundreds of thousands of jobs) Yes: Walmart does its best to alay the concerns of its board members and increase its value to shareholders, but it does this, generally speaking, by providing a service that undoubtedly contributes more to the “common good” than companies in its market category.
Of course, there is much that can be improved in an instution like Walmart. However, the market created Walmart, not the Catholic Church. Let’s not forget that the institutions Benedict would have as oversight for the market (the government, the Church) have historically – and currently – been seeded by corruption when money-making decision power is vested in them.
Matt C:
I don’t think it’s right to read Benedict as arguing that marketsessentially fail in that task of broader attentiveness, or that business models like that of Walmart need to be opposed altogether. (There’s clearly no across-the-board condemnation of a “profit-first” approach to business.) But while I agree with much of what you say about the capacity for larger corporations to contribute to the common good, it’s still far too simple to claim as you do that simply because Walmart is successful it follows that it promotes the social good more effectively than its smaller competitors: for one thing, corporations like Walmart are the beneficiaries of subsidies, tax loopholes, state-provided transportation infrastructure, etc. which arguably give them a leg up on smaller competitors that isn’t provided by the market alone; and more generally, it’s simply not true that our collective economic decisions are perfectly ordered toward the common good in the way that your analysis seems to assume.
Obviously the task of figuring out how to encourage the flourishing of entrepreneurship, small-scale enterprise, and a generally wide range of conceptions of economic activity in a world that – thankfully! – includes corporations like Walmart is a challenging one, and so I certainly take the point of your last paragraph. But, especially given the manifold ways in which the regulatory state works to the benefit of the largest and most powerful corporations, but also given the fact that in a fallen world market phenomena will never be perfectly freeing, I think that recommendations like the ones Benedict is offering here deserve some serious consideration.
(Sorry if that comment was unintelligible.)
John – I agree, I think I did take too much issue with Benedict’s message, but I also think his major points are clear.
I absolutely agree with you that the profit-and-success of a company are not always causally linked to the social good; we just had the best example of this happen with the housing/financial contractions. I also am in full agreement that major corporations benefit a great deal from socially-funded policies like infrastructure (not to mention power-hungry politicians!!)
But I have a personal passion on the intersection of Catholic doctrine and market economics. A little anecdote as an example…
I come from a heavily Roman Catholic area of the world. When I was in high school, a local business group that owned a bunch of woodlands nearby initiated a deal with Six Flags, the amusement park, to develop a new state-of-the art facility nearby the town I grew up in. The tricky part: getting the property re-zoned for commercial use by our town council (e.g. the public).
The town and area I am from is very rural, very colonial, and – unfortunately in my view – extremely anti-development. They like their trees (I do too!) but have watched economic stresses lead them to some of the highest property taxes in the state, along with punishing unemployment. There has not been a modicum of economic development within the town since I was born. Needless to say – the town nixed the Six Flags project, and since that time, has also nixed re-zoning of the land for all other commercial uses, including normal stoes such as Target, et al.
I remember a discussion I had on the Six Flags project with the parent of a friend of mine (we’re all Catholics), at her dining room table one evening. I was stating my dismay at the overwhelming distaste the local populace had for the project. My friend’s parent also was against the development. I said to her “I understand why people don’t want an amusment park near their house, but a lot of jobs will be created by the park.”
She said “Honey, you don’t want those kind of jobs.”
Granted I was only a teenager, but the tone still strikes me to this day. It is one thing for Catholics to stand up against ill-conceived profiteering; it’s a whole different story when they specifically inhibit economic development because the opportunities don’t match their standards. Not that this is a Catholic-only issue, but in my time I have found that there can be nothing more protectionist – and therefore damaging to the overall common good – than a stubborn Roman Catholic.
Pope Benedict emphasizes the importance of the market being subject to the discipline of Christian morality, including the virtue of charity. While this is one of the oldest principles of Catholic social thought, I don’t think it can be emphasized too often.
There is, however, a problem which he misdiagnoses. He correctly points out the need to deal equitably with all stake holders in an enterprise, but seems to think that the main problem is the dominance of the share holders and their concern for profit. The real problem is that share holders have become short term gamblers with little influence over the long term strategy of an enterprise. This leaves excessive power in the hands of an often predatory management which can loot a corporation, voting themselves huge salaries, bonuses, and golden parachutes to the detriment of workers, share-holders, and consumers. If they succeed in running their enterprise into the ground, they can now often turn to government and loot the tax payers as well.
John, any truly arms-length transaction will always tend to a kind of lowest common denominator – usually, the what’s-in-it-for-me kind of denominator. In a perfect market with perfect knowledge available to all, and no significant differences in market power, this translates into a “fair” price for what ever good is being exchanged. If we add into this market the Pope’s recommendation of “gratuitousness” all we have done is obscure what is a fair price.
And we have nothing like perfect markets and we do have significant market power differences.
Charity is important, but incorporating charity into markets is unlikely to work for both the best and worst of reasons – people are human, and human beings are really good at looking out for their own specific best interests. The Pope’s words won’t sway even a tiny fraction of the people on this earth, however well meant they might be. We will have to settle for better regulation.
Jake
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