Catholic Business

Ambiguities of the word "Capitalism"

I don't like the word "capitalism"--it has too many meanings to different people. I was pleased to see that Pope Benedict did not use the word even once in Caritas in Veritate, his encyclical letter on the economy, preferring instead to speak of the "market economy." 

Here's a thoughtful account of the problems with the word "capitalism":

Capitalism: Yes and No

Academic responses to Caritas in Veritate

 

From the Economist:

Pope Benedict XVI released his third encyclical, Caritas in Veritate (Charity in Truth), in July 2009; it was supposed to come out earlier, but the Vatican wanted to be able to respond to the developing economic crisis. Now, business and law academics have had time to mull over Benedict’s words and decide what they imply for corporate governance.

The rest of the article is here.

A Revitalization of Agriculture

Pope Benedict's Angelus message for Sunday, 14 November 2010

Dear Brothers and Sisters,

In the Second Reading of today's Liturgy, the Apostle Paul underlines the importance of work for the life of man. We are reminded of this idea on “Thanksgiving Day”, that is traditionally celebrated in Italy on this second Sunday in November, as the offering of thanks to God at the end of the harvest season. Although in other geographical areas farming periods naturally differ, today I would like to draw inspiration from St Paul's words to reflect on agricultural work in particular.

The full gravity of the current economic crisis, discussed these past few days at the “G20 Summit”, should be understood. This crisis has numerous causes and is a strong reminder of the need for a profound revision of the model of global economic development (cf. Encyclical, Caritas in Veritate, n. 21).

It is an acute symptom which has been added to a long list of many far more serious and well-known problems, such as the lasting imbalance between wealth and poverty, the scandal of world hunger, the ecological emergency and the now widespread problem of unemployment.

In this context, a strategic revitalization of agriculture is crucial. Indeed, the process of industrialization has often overshadowed the agricultural sector, which although benefiting in its turn from modern technology has nevertheless lost importance with notable consequences, even at the cultural level. It seems to me that it is time to re-evaluate agriculture, not in a nostalgic sense but as an indispensable resource for the future.

In the present economic situation, the dynamic economies are tempted to pursue advantageous alliances, which nevertheless may have detrimental results for other poorer States, situations of extreme poverty among the masses and the depletion of the natural resources of the earth that God has entrusted to man, as it says in Genesis, so that he may till it and keep it (cf. 2: 15). And in spite of the crisis it can still be seen that in the old industrialized countries, lifestyles marked by unsustainable consumerism are encouraged. These also prove damaging for the environment and for the poor. Then a really concerted aim for a new balance between farming, industry and services is necessary so that development may be sustainable, so that no one will lack bread and work, air and water, and that the other fundamental resources may be preserved as universal rights (cf. Encyclical Caritas in Veritate, n. 27). Thus it is essential to cultivate and spread a clear ethical awareness that is equal to facing the most complicated challenges of our time. Everyone should be taught to consume in a wiser and more responsible way. We should promote personal responsibility along with a social dimension of rural activities based on the undying values of hospitality, solidarity and sharing the toil of labour. Many young people have already chosen this path and many professionals are also returning to agricultural enterprises, feeling that in this way they are not only responding to personal and family needs but also to a sign of the times, to a concrete sensibility for the common good.

Let us pray to the Virgin Mary that these reflections may serve as an incentive to the international community, as we thank God for the fruits of the earth and the work of mankind

Pope speaks to Roman business leaders

"The Roman business reality, made up in great part by small and medium enterprises, ... today operates also in a context characterized by globalization, by the negative effects of the recent financial crisis, by the so-called "financialization" of the economy of businesses themselves. It is a complex situation, because the present crisis has sorely tested the economic and productive systems of several countries. Nevertheless, it must be lived with confidence, because it can be considered as an opportunity from the point of view of the revision of models of development and of a new organization of the world of finance, a "new time" -- as has been said -- of profound revision."

Read the rest here, courtesy of Zenit. 

Finance in the service of society

Pope Benedict XVI on the Financial Industry, in Caritas in Veritate: 

Finance, therefore — through the renewed structures and operating methods that have to be designed after its misuse, which wreaked such havoc on the real economy — now needs to go back to being an instrument directed towards improved wealth creation and development. ... Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. ... If love is wise, it can find ways of working in accordance with provident and just expediency, as is illustrated in a significant way by much of the experience of credit unions. (#65)

What would George Bailey do?  Take a look at this video: 

A Times of Malta article writes about the significance of Caritas in Veritate for the island of Malta, a country where the Roman Catholic faith has a strong influence on all aspects of life.

Finance and ethics...

Pope Benedict, in Caritas in Veritate, wrote: 

What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development (#40).

Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another (#65).

David P. Goldman, in First Things' Spengler blog, writes today:

A close look at the circumstances of the bank bailout of the past year, particularly the government’s decision to pay out AIG’s guarantees of other banks’ subprime derivative at 100 cents on the dollar, might reveal embezzlement on the grand scale. ... [more]

Caritas in Veritate and US Federal Regulation

Today's post is a guest post by Dr. Brian Engelland, Chairman of the Department of Marketing, Quantitative Analysis and Business Law at Mississippi State University's College of Business, and a Visiting Professor at the Catholic University  of America's Department of Business and Economics for Fall 2009.  

The current Administration strongly supports an increased role for federal regulation over many sectors of the economy - banking, automobile manufacturing, and healthcare insurance, to name a few - as a means to improve economic development and cure social ills. What might Pope Benedict say about this strategy?  Let's look at Caritas in Veritate for clues.

First, the Holy Father suggests that "authentically human social relationships of friendship, solidarity and reciprocity" (CV 36) can indeed be conducted within economic activity, provided that it is structured and governed ethically. Further, he cautions that economic life needs just laws and regulations that ensure benefits to all stakeholders who contribute to the life of the business. Generally, then, he is in favor of government regulation when it is ethical and serves broad stakeholder interests.  

But the Holy Father sets very high standards for ethicality in regulation. Specifically, ethical regulation must incorporate trust and love of truth, strive toward the common good, be animated by charity, be enlightened by reason and faith, safeguard the human person, respect the transcendent value of natural moral norms, respect subsidiarity and promote the reciprocal sharing of duties. Furthermore, regulation should respect all of Catholic Social Teaching and not allow disparities in wealth to increase excessively. Finally, regulation can only be effective when regulators are able to incorporate their faith understanding into the decision process. Taken together, this represents a very high standard.  

Today in the United States, regulations are written with little presumption of trust, regulatory bodies adjudicate based upon secular notions of political correctness, and neither regulation nor regulator pays any attention to charity. Regulations disproportionately favor large corporations that lobby well, stress individual rights at the exclusion of duties, and are implemented in a rigid, autocratic mode that violates the principle of subsidiarity. Certainly, American-style regulation is not what Pope Benedict had in mind. Pursuing this approach to regulation is a cure that may be worse than the disease!  

One result is that small businesses are hurt disproportionately. A recent study found that small firms incur 40% more regulatory costs per employee than do large corporations, and these costs are a significant contributor to business failure. Since we know that small businesses drive economic growth, it makes economic sense to lessen the burden on small firms rather than increase it.

So where do we begin to improve federal regulation? Perhaps a first step to move in the direction that Pope Benedict envisioned is to apply charity by implementing differential levels of control. When I was a child, my parents claimed to apply the family rules equally across all of us kids, but in reality supervised us older trouble-makers much more closely than the younger ones. They knew which kids could create the most damage and they devoted their "regulatory" attention accordingly. In the same way, government regulation should be applied differentially so that the larger firms that could potentially create the biggest problems would receive closer scrutiny and have greater reporting requirements than smaller firms. 

A second step is to apply more subsidiarity to the regulatory process. Responsibilities for regulatory oversight could be delegated to individual firms, channel partners or industry groups, rather than be applied only at the federal level. Directives from on high tend to neuter individual firm responsibility for the quality of the products and services they offer to the public. Individual firms will act more responsibly and apply more innovation when their managers have greater involvement in the regulation-setting process.      

Differential control and delegated responsibility are two approaches inspired by Caritas in Veritate that could lift some of the regulatory burden away from fledgling businesses and respond more effectively to the needs of the common good. 

Caritas in Veritate online symposium at First Things

First Things magazine has an online symposium on the new papal encyclical Caritas in Veritate. The symposium includes an article by John Mueller, a commentator on this blog, called A Return to Augustinian Economics.

...Catholics on both the left and the right have analyzed Benedict XVI’s latest encyclical with the same dichotomous logic they applied to SRS [John Paul II's encyclical Sollicitudo Rei Socialis]: The Church says there is no Third Way. If not, we must choose between the First Way of Adam Smith and the Second Way of Karl Marx.

But, by emphasizing in his new encyclical the central role of gifts in the divine economy of creation and salvation, as well as in personal, domestic, and political economy, Benedict XVI (like John Paul II before him) poses a very different choice.

Following that neglected economic realist St. Augustine (whom the pope has called “my great master”) and Augustine’s contemporaries the Cappadocian Fathers, Benedict XVI says the choice is among the same three world views that confronted one another in the marketplace of Athens when the Apostle Paul (probably in a.d. 51) prefaced his proclamation of the gospel with a biblically orthodox adaptation of Greco-Roman natural law and “some Epicurean and Stoic philosophers argued with him” (Acts 17:18). As Benedict XVI succinctly summarizes, “For believers, the world derives neither from blind chance, nor from strict necessity, but from God’s plan . . . living as a family under the Creator’s watchful eye” (CV, 57).

Read the full article here.

Benedict, Love, and Money

Fr. Raymond de Souza wrote an insightful review of Caritas in Veritate.  He argues that in this encyclical Pope Benedict proposes that charity, not justice or prudence, should be the characteristic virtue in economic life: 

Is economic life intended to make us brothers, or is that asking too much? Benedict makes his claim here that it is not too much to ask. Charity is essential so that our treatment of each other is not limited to mere contractual obligations, but to the real flourishing of others.

This is a bold development, to say that economic life should be characterized by charity — a theological virtue — rather than the humbler natural virtues of justice and prudence. Caritas in Veritate understands that existing economic language and concepts don’t really express this, so develops a new principle.

The underlying principle — replacing justice with charity as the principal motivation of economics — is articulated as the “principle of gratuitousness” and the “logic of the gift.” “Gratuitousness” and “gift” encourage people to think not of their interest, but of service. So Benedict argues that labor unions should think not of their own members alone, but of the good of even foreign workers who might compete with union labor.

Read the whole article here.