In debates between Christian theologians and economists over the nature of capitalism, facts and figures count for almost nothing. At times the two seem to speak separate languages—perhaps most strikingly when they use the very same words.
On the one hand, economists purport to be practical people concerned not with the rightness or wrongness of actions but only with acquiring knowledge of the economic dimensions of those actions. Preachers and theologians, on the other hand, are just the opposite, focusing on those aspects of man that transcend material production; for them, man is possessed of a dignity that can’t be measured in per capita income. While it may come as a surprise to many, this difference in emphasis actually has the effect of leading our economists and businessmen to preach a message for the world’s poor that is charged with greater hope than what is typically taught by many of our leading theologians and preachers.
Take Asia, for example, and especially the comparative cases of Hong Kong and Manila. Until quite recently Hong Kong was the epitome of colonialism and the embodiment of dog-eat-dog capitalism; yet it was also attractive enough that even its poorest faced the future believing that it would bring greater improvement. And then there is the Philippines, a devoutly Christian nation that is home to some of the friendliest and hardest working people on earth, as well as to some of the cruelest exploitation of the poor by the rich outside the now-defunct Communist bloc.
The contradiction is summed up by the presence of more than 100,000 Filipinas in Hong Kong, many of them women with university degrees, working as maids to strangers’ children as a means of providing for their own back at home. For all the lectures on human rights and democracy coming out of Manila, the brutal fact of Philippine life is that millions of its people are forced to leave their families to do dirty work elsewhere because they have no way to feed their families—this in a strategically located land with an educated, English-speaking workforce and bursting with natural resources. That the only Catholic nation in all of East Asia is synonymous with misery and missed opportunities is troubling, to say the least.
Even those who know nothing else about economics know that its nickname is “the dismal science.” In the years since Thomas Carlyle coined the phrase in 1849, there have been plenty of others who have seen economists as little more than quartermasters in the Army of Mammon, toting up their accounts, oblivious to the human carnage around them. Indeed, badmouthing economists may be one of the truly universal traditions, shared by figures on the left, right, and center. Karl Marx called them “sycophants” of the bourgeoisie. Edmund Burke, father of conservatism, used the word pejoratively in his Reflections on the Revolution in France when he lamented that “the age of chivalry is gone; that of sophisters, economists, and calculators has succeeded, and the glory of Europe is extinguished forever.” More tartly, George Bernard Shaw is said to have observed that “if you laid economists end to end, you would still never reach a conclusion.” And who can match Edmund Clerihew Bentley’s four-line gem:
John Stuart Mill, By a mighty effort of will,
Overcame his natural bonhomie
And wrote “Principles of Political Economy.”
However amusing we might find such witticisms, I wish to suggest that they are also grossly unfair. Indeed, I would go so far as to argue that, whether economists know it or not, the ideas of wealth and capital that they champion are arguably more spiritual than material. And likewise, whether religious figures know it or not, their tendency to look at the world’s poor and see only gloom and doom shows them to be beholden to ideas about wealth and capital that are far more materialistic than spiritual.
At the most basic level, intelligent discussion between economists and religious figures is often hampered by the tendency of each to exclude the other’s insights from the conversation. Economists, for example, often overstep the bounds of their discipline to interpret the world exclusively through their own concepts; in doing so, they move from the reasonable proposition that economics constitutes a critical aspect of human nature to the idea that economics defines that nature. Similarly, preachers and theologians frequently portray economics as a study of and justification for greed. A much more useful approach is suggested by Pope John Paul II.
According to the Pope, economic freedom is a good, but it is only one of man’s freedoms. If we could extract from our religious activists an acknowledgment as limited as this one—that economic freedom is a good—it would do wonders for the poor, especially if they were taught to understand why and how it is good. Perhaps then they would come to see economic freedom as enhancing possibilities and solidarity rather than taking them away. Moreover, recognizing economic freedom as a good can serve to ground a dynamic view of work—one that sees it as more than animal toil, and even as a process that, at its best, allows all people the opportunity to do and be their best.
In his encyclical on the subject of work, Laborem Exercens (1981), John Paul II rightly places it at the heart of the Church’s social teaching. Work, he suggests, is “a good thing for man”a good thing for his humanity—because through work man not only transforms nature, adapting it to his own needs, but he also achieves fulfillment as a human being.” Work “expresses his dignity and increases it”; it provides him with the wherewithal to have a family, and it links him with his neighbor. An economist would add that in so doing a person also contributes to the wealth of his neighbors.
In short, the Holy Father’s understanding of work goes well beyond viewing it as mere exertion. Rather, it involves the essence of man himself. The Pope speaks of this economic activity as labor. We might speak of it just as easily as capital, in the sense that work becomes more human to the degree that man does not simply take the world as given but adds to it, as a co-creator with his Maker. As the Pope notes in Centesimus Annus, “the possession of know-how, technology, and skills” has replaced natural resources as the secret to wealth in the industrialized nations. This is a view of man that sees him primarily as a soul that is capable of improving and adding to God’s bounty on earth.
But there is another model of man’s relation to the earth—one that can be traced to a figure of considerable relevance because he was both economist and preacher. The influence of the Rev. Thomas Malthus’ “Essay on the Principles of Population” continues to be felt more than two centuries after it was written. Prior to Malthus, nations assumed as a matter of course that the greater their populations the richer and better off they would be. Malthus posited something far more disturbing: that a nation’s wealth declines as its population increases.
Today, this dubious assumption is accepted as gospel—and not just in religious circles. Indeed, at the United Nations it is practically dogma. In contrast to the Pope’s view of man, this one sees him primarily as a mouth to be fed. Naturally the holders of such a view do not incline to cheerfulness. Nor have they learned much from the substantial evidence that Malthus was wrong in his predictions.
Hong Kong is a particularly prominent example. Today it is considered the envy of Asia. But it wasn’t way back in the 1950s, when China fell to the Communists and Hong Kong was flooded with hundreds of thousands of desperate refugees. Lacking natural resources and utterly dependent on its unpleasant motherland for water and food, the colony’s situation had deteriorated so badly that a local UN official declared that it could only survive through massive Western aid and the resettlement of refugees elsewhere. An American newspaper proclaimed Hong Kong a dying city, and the British grimly entitled the lead chapter in their annual Hong Kong yearbook, “A Problem of People.”
In fact, the apocalypse everyone saw just over the horizon never did come to pass. On the contrary, Hong Kong experienced the greatest economic boom in its history. Today it supports a population of about seven million people—more than five times the number the government declared to be Hong Kong’s optimum “carrying capacity” back in 1954. Two systems, side by side: one capitalist, one socialist, one supposed to be the system of the bosses and the exploiters, the other invoking the name of the worker. Yet it was the supposedly exploitative market economy that not only made a place for its people at the table but allowed them to prosper. This is what economists mean when they say that the answer to poverty does not lie in trying to slice the existing pie into ever smaller pieces but to bake a bigger pie for all.
Indeed, the most pernicious part of Malthus’ work is not its stark prediction of human beings breeding themselves into extinction. It is that it encourages us to see people as liabilities rather than as the assets they are. Human social life comes to resemble a zero-sum game where one person’s prosperity comes at another’s expense. Viewed in this way, talk about profit does sound obscene. But this is a false logic—one that clouds much of our religiously informed thinking about economic matters today.
Consider the example of Bishop Rembert Weakland, who gave a sadly representative lecture at Georgetown University in 1997 on the tenth anniversary of the U.S. bishops’ pastoral letter on economics. In that talk, Bishop Weakland commented on the supposedly widening gap between poor and rich nations, the race to the bottom caused by globalization, and the plight of the poor, whom he claimed are paying the price for everyone else’s prosperity. “One aspect is for sure in the globalization process: labor is suffering most.”
Bishop Weakland is not alone. One of the more popular metaphors for this standpoint is Spaceship Earth. First heard on campuses in the 1970s, it runs like this. Imagine the planet Earth as a space capsule containing five astronauts. One of them represents the developed world. And though this astronaut accounts for only one-fifth of the capsule’s population, he consumes anywhere from two-thirds to nine-tenths of its resources. The proportions reflect the figures given in the United Nations’ regular Human Development Report, which shows the richest fifth of humanity having, for example, 90 percent of all Internet accounts, 74 percent of all phone lines, 82 percent of all export markets, and so forth.
Now there are two ways to interpret this information. I suspect that Bishop Weakland would interpret it to say that, in effect, one astronaut is hogging far more than his fair share.
But how might an economist read it? Well, he might begin by asking where all those resources came from. And if he looked for an answer in the same HDR figures, he would discover that the developed world produces 86 percent of the world’s resources; in almost all cases, then, the rich astronaut is consuming less than he’s made. But an economist would likely go even further: rather than taking existing wealth as a given and coming up with justifications and formulas for redistributing it, he’d probably be more interested in removing impediments that hold the others back.
This difference reminds me of the old story about two shoe salesmen sent to a foreign country only to find out that everyone there walks around barefoot. The first calls up his company’s headquarters and says, “Bad news: nobody here wears shoes.” The other calls his company and says, “Great news! Nobody here wears shoes.” Traveling through the underdeveloped world, one can’t help but notice how optimistic investor classes nearly always are. To invest money in Mexico or China in the 1980s and 1990s—or, for that matter, in Korea or Taiwan in the 1950s, 1960s, and 1970s, or in Vietnam and Nicaragua today—you simply have to be optimistic. But no matter how large the risk or how unpromising the circumstances, there’s always someone who sees wealth and value just waiting to be unlocked.
Globalization means many things, but primarily it describes the expansion of goods, services, labor, and capital across borders that were once considered impregnable. It is, of course, true that this process is motivated less by the Sermon on the Mount than the bottom line. Yet, as John Paul himself points out, “[While] earthly progress must be carefully distinguished from the growth of Christ’s kingdom . . . to the extent that the former can contribute to the better ordering of human society, it is of vital concern to the Kingdom of God.”
Let’s consider some numbers. We know that about three billion people live on less than $2 a day, and that many treat this as a scandal that cries out for our immediate attention. Fair enough. But there’s one question that’s rarely asked: What happened to Earth’s other three billion? As the Organization for Economic Cooperation and Development has noted, a good chunk of these people were lifted out of poverty in the last half-century by market openings and the increased trade that followed.
According to the anti-globalizers, all this has been accomplished on the backs of the poorest of the poor. But the research tells a different story. Two economists—David Dollar and Aart Kraay—recently decided to test the numbers by studying the effects of globalization on the poorest fifth of society in eighty countries. What they found exploded the most common myths. First, and most important, they found that as average income rises, the incomes of ordinary poor people rise proportionately—which is another way of saying that growth did reach the poor, dramatically and directly. They also found that the more a country opens itself to trade and investment, the better its poor tend to do. In the words of Dollar and Kraay, “This is not some process of ‘trickle down,’ which suggests a sequencing in which the rich get richer first and eventually the benefits trickle down to the poor. The evidence, to the contrary, is that private property rights, stability, and openness directly and contemporaneously create a good environment for poor households to increase their productivity and income.”
When the poor are separated out by country and region, moreover, astonishing patterns show themselves. For example, half of those who moved out of poverty within these past two decades were in East Asia—again, in those countries that have been more open to trade and globalization. By contrast, the countries whose poor have done worst are those that have closed themselves off to globalization, most notably Sub-Saharan Africa.
It is worth reflecting on this fact because it suggests that the lessons of globalization are very different than those proposed by the Bishop Weaklands among us. But there is more. In 1994, the World Bank published a report aptly entitled “The East Asian Miracle,” which focused on the performance of the region’s seven most dynamic economies: Japan, Hong Kong, South Korea, Singapore, Thailand, Taiwan, and Indonesia. Since 1960, these economies “have grown more than twice as fast as the rest of East Asia, roughly three times as fast as Latin America and South Asia, and five times faster than Sub-Saharan Africa. They also significantly outperformed the industrial economies and the oil-rich Middle East-North Africa region. Between 1960 and 1985, real income per capita increased more than four times in Japan and the Four Tigers and more than doubled in Southeast Asian [newly industrialized nations].” And here’s the most startling fact of all: “If growth were randomly distributed, there is roughly one chance in ten thousand that success would have been so regionally concentrated.” It is worth noting too that, contrary to what our anticapitalists would predict, in most of these Asian nations economic inequality has been reduced rather than increased.
Which brings us back to where we began. If you follow the business press, the story I’ve told will be familiar. But if you primarily read the religious press, it might come as a bit of a shock. In a database search of four representative Catholic publications—Commonweal, America, U.S. Catholic, and the National Catholic Reporter—I discovered a sorry state of affairs. Searching for articles that contained the words “globalization” or “trade,” I found 1,163 stories. Here are some typical headlines:
- “Nearly 1 billion starve while markets boom” (NCR)
- “Gumbleton says United States has unjust amount of wealth” (NCR)
- “Making Profit the World’s Highest Law” (NCR)
- “A New Imperialism” (Commonweal)
- “Global Village or Global Pillage?” (Commonweal)
- “Who Pays the Price for Trade: Farmers, Workers and the Unemployed” (Commonweal)
- “Which Mexico Is It? Globalization is the new form of slavery, dressed in the camouflage of the so-called market economy (America)
- “Globalization Under Siege” (America)
The almost complete indifference of these influential publications to the extraordinary human benefits of capitalist expansion suggests that something more than ignorance is at work. It suggests that the ideological commitments of many of our religiously informed activists, writers, and leaders have led to self-inflicted blindness.
Today it is possible to read most of the Catholic press devoted to these issues—and I include the diocesan papers, the bishops letters, the conferences, etc.—without ever coming across an elemental understanding of what truly makes poor countries prosper and what keeps them impoverished. You’d never know, for example, that there are factories in developing nations that aren’t sweatshops. That many people now have opportunities their parents only dreamed about. That more of their children are going to school. That in a place such as China, which scarcely a generation ago had to contend with starvation, people are now eating better than anyone has in previous history. And you’d never know that most of these countries beg for capitalist investment, because they understand that it is the only way to create jobs and prosperity.
Is the answer, then, to trade in the Gospel of St. Matthew for The Wealth of Nations? Hardly. As John Paul has noted on more than one occasion, however beneficial the market may be, there are things that it does not do well because it is not supposed to do them at all. And even when it does the right things well, those things must be done in an environment that orients them toward the greater good. Indeed, because the market excels at efficiency, there will always be a need for a check against its tendency to extend its writ too far. But the need for such limits does not point toward socialism. Rather, it points toward capitalism, rightly understood. As the Pope has written in Centesimus Annus as to whether, after the collapse of socialism, capitalism should be our goal:
If by capitalism is meant economic systems which recognize the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production, as well as free creativity in the economic sector, the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy,” “market economy,” or simply “free economy.” 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 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.
Many of those less friendly to the market than the Pope seem to be under the impression that when he talks about a framework circumscribing the market, he means some kind of mixed system halfway between the efficiency of the market and the “ideal” of socialism—that elusive “third way” that former Czech President Vaclav Klaus has said is the surest path to the Third World. And many of these market critics often quote other encyclicals, such as Sollicitudo Rei Socialis (1987), to suggest that the Pope has made completely contrary statements. But I don’t believe it makes sense to read the Holy Father as a schizophrenic. This is especially clear when he insists that the problem of socialism is primarily a problem of anthropology rather than economics.
For John Paul, socialism turned out the way it did—anti-growth, anti-human, and anti-worker—because it was based on a false understanding of human nature. And indeed the Pope wants to temper capitalism, not so much with regulations or policies (though some regulations or policies may be an outcome of such tempering) as with a vibrant moral culture within which the market operates. This is a culture that puts man at its heart, respectful of his God-given dignity and insistent on an understanding of labor that allows each man not only to have but to be. This is a culture, in the Pope’s words, of solidarity.
This is a lesson that the best economists have begun to learn—namely, that the economy is not a realm that can sustain itself alone. Capitalism is, after all, far from being value-free. It elevates the straight and narrow over the free and easy, and as such depends on virtues such as thrift, sobriety, and enterprise that must come from extra-economic sources.
Of course, the relationship between buyer and seller is not the love of neighbor commanded by the gospel. But it is not as far removed as we might think. In the market we expect to be treated decently. And surely one measure of solidarity is the creation of structures that give the poor the ability to sell the fruits of their labors to all the world—and to buy from that world what it can give them.
In this regard it is helpful to remember that there is a fundamental difference between a pro-market economy and a pro-business economy. It was, after all, Adam Smith and not Karl Marx who said that seldom do men of the same trade gather except to conspire against the common good. That’s why competition is so important, morally as well as economically. Because as any worker in the Third World can tell you, the absence of competition is not cooperation. It’s collusion.
Within the structure of markets and competition, there still remains plenty of room for redressing injustices and taking the side of the weak against the powerful. As the leaders of the developing world are well aware, one of the tremendous problems they face is First World protectionism that excludes them from our markets. In fact, we in the First World have traditionally been most protectionist in textiles and agriculture—two markets that poor countries can best compete in. This protectionism can take many forms. Think, for a recent example, of the strenuous opposition to George W. Bush’s decision to let Mexican truckers on American roads.
In any event, it seems clear to me that theologians and economists need each other. Theologians and religiously informed activists need to have some grasp of how the economy really works if their critiques are to be accurate and effective. And market economists, if they are not to succumb to the same hubris as the socialists, need a religiously informed culture to remind them that economics is made for man and not vice versa.
The Pope has said repeatedly that man’s destiny is freedom. An economics that understands this destiny will yield societies happier and healthier than the ones that see man as an animal raping the earth and breeding to his own destruction. The point is not that globalization is without its problems, but rather that even with all these problems it remains arguably the brightest hope on earth for the half of the planet that still lacks genuine opportunity. It strikes me as difficult to square the demands of the gospel with the idea that economics is a dismal science. If this is the way we must look at the process that has brought so many millions out of poverty, then our quarrel is not so much with Adam Smith or Milton Friedman but with the Providence that so clearly designed man to prosper in his freedom.
William McGurn is chief editorial writer for the Wall Street Journal. This essay is adapted from an O’Hara Lecture on Business Ethics delivered at the University of Notre Dame.