Admirable Goals But Weak In Understanding A True Free Economy

Pope Francis’s new encyclical Fratelli tutti touches on many issues relevant to national and international economic policy. These will generate considerable debate and, given the influence of the Roman Catholic Church, deserve consideration. The majority of the almost 200 pages focus on issues that go beyond economics and economic policy. […]

Pope Francis’s new encyclical Fratelli tutti touches on many issues relevant to national and international economic policy. These will generate considerable debate and, given the influence of the Roman Catholic Church, deserve consideration. The majority of the almost 200 pages focus on issues that go beyond economics and economic policy. The Pope makes many valuable statements on the promise and perils of new communication technologies; the importance of forgiveness; his condemnation of war; and the need for more fruitful encounters across cultures. I will stick, however, to the topics I am less ignorant, his statements on economics.

Only in passing does Pope Francis mention a principle which should guide the Social Doctrine of the Church and those who try to interpret its teachings: “There is no one solution, no single acceptable methodology, no economic recipe that can be applied indiscriminately to all.” We do not find here statements about where to set interest rates, what industries should be nationalized or privatized, or where tariffs should be set. That is good. We find, however, a repeat of what we saw in his previous Encyclicals: a deep distrust of a world order which he sees as being controlled by economic interests and an unbridled neoliberal ideology that sustains them.

The document is best when focusing on topics where theologians have more authority: the view of the human person and teachings that come from the Scriptures. It is inspired by the life of St. Francis of Assisi. Regarding “fraternity and social friendship” the Pope writes, “Francis felt himself a brother to the sun, the sea and the wind, yet he knew that he was even closer to those of his own flesh.” This shows that although we should have a healthy respect for all Creation, there is a hierarchical order, and humans come first.

The current Pontiff also mentions St. Francis’s difficult and courageous trip to visit to Sultan Malik-el-Kamil in Egypt. The narration of that visit, and St. Francis’s plea for respect and tolerance, serves to prepare the ground for the multiple mentions by the Pope of his visit with Grand Imam Ahmad Al-Tayyeb and the joint document that they released in February of 2019, Document on Human Fraternity for World Peace and Living Together.

The Pope comes from Argentina, a country which during most of his life has been one of the most nationalistic countries on Earth. I welcomed therefore his statement that “a myopic, extremist, resentful and aggressive nationalism is on the rise. In some countries, a concept of popular and national unity influenced by various ideologies is creating new forms of selfishness and a loss of the social sense under the guise of defending national interests.” Nationalism has been a distinguishing character of Peronism, a political ideology and reality that the Pope never criticized and which some say he adheres to. Since the advent of nationalistic Peronism, his native Argentina got stuck in a road of social and economic decay and increased corruption.

Navigating between his fondness for local cultures and identities and a global and universalistic (catholic) philosophy is a balancing act for Pope Francis. I think he struggles with it. By not siding completely with either side, he becomes open to criticism from both my libertarian and conservative friends. The former attack him for his nationalism, the latter for his globalist views. 

To the economic liberals he says that “‘opening up to the world’ is an expression that has been co-opted by the economic and financial sector and is now used exclusively of openness to foreign interests or to the freedom of economic powers to invest without obstacles or complications in all countries.” The Pope argues that that openness creates local conflicts and disregard for the common good, and that it is “exploited by the global economy in order to impose a single cultural model.” Transnational economic powers “operate with the principle of ‘divide and conquer.’”

I sympathize with Pope Francis’s view that we have to go beyond numbers, or even “physics,” as he writes, to understand economic truth. He writes that today’s powers, from the left (which he rarely criticizes by name) and from the neo-liberal side, “need young people who have no use for history, who spurn the spiritual and human riches inherited from past generations, and are ignorant of everything that came before them.” I have also written about my frustrations that many who defend the free economy do not follow F.A. Hayek’s advice to pay attention to what we learn from traditions and customs that evolved over centuries but cannot be proven by pure rational analysis. Pope Francis writes: “Room needs to be made for reflections born of religious traditions that are the repository of centuries of experience and wisdom. For religious classics can prove meaningful in every age; they have an enduring power [to open new horizons, to stimulate thought, to expand the mind and the heart].” Yet often they are viewed with disdain as a result of “the myopia of a certain rationalism.”

Without naming Ronald Reagan, the Pope makes a statement that reminds us of one of Reagan’s most accurate comments, that freedom “is never more than one generation away from extinction.” Pope Francis writes, “Once more we are being reminded that each new generation must take up the struggles and attainments of past generations, while setting its sights even higher.” Separated from their true origin, many relevant terms are losing their meaning. The Pope asks, “What do certain words like democracy, freedom, justice or unity really mean?” He is right. But there are also contradictions in parts of this document. The Pope writes, for example, that “the best way to dominate and gain control over people is to spread despair and discouragement, even under the guise of defending certain values. Today, in many countries, hyperbole, extremism and polarization have become political tools. Employing a strategy of ridicule, suspicion and relentless criticism, in a variety of ways one denies the right of others to exist or to have an opinion.” I agree. I have not seen a world survey but, at least in the United States, it is the economic liberals who strive to present an optimistic view of the present and the future. The attack on the opinions of “deplorables” — the word used by a former presidential candidate to describe Trump voters — seems to fit neatly into the Pope’s concern, but I doubt that that was what he had in mind. The ridicule he dislikes has been used by both sides.

Later in the document he seems to be spreading fear when he states, “It is foreseeable that, once certain resources have been depleted, the scene will be set for new wars, albeit under the guise of noble claims.” This despite the fact that the champions of resource depletion, like those who confidently forecast that we would run out of oil, have been proven wrong over and over again. Due to the abundance of energy resources and new technologies, oil and other energy stocks are underperforming. And that is an understatement.

The Pope speaks about freedom and equality and how the current “neo-liberal” model fails to achieve the latter, but provides no concrete examples. As I have written in this column, I have found no empirical evidence that more economic freedom leads to higher inequality. The Holy Father is also dissatisfied, and so am I, with measurements of poverty. “Poverty must always be understood and gauged in the context of the actual opportunities available in each concrete historical period,” he writes. But again, it is countries that have economic freedom within a framework of rule of law that also tend to have less absolute poverty. The culprit is not global economic freedom, but corruption.

In a follow-up article I will address in more detail some of the economic statements that appear in this new encyclical. They will further show that when addressing private property, labor markets, and the informal economy, Pope Francis could profit from better advisers, and a more inclusive approach to Catholic traditions and economic science.

Pope Francis uses abundant quotes from Pope Emeritus Benedict and St. John Paul II, who, unlike him, are seen by Catholics who champion the free economy as more in line with economic truths. But all Catholic traditions should come together behind St. John Paul II’s analysis, quoted in this encyclical, that “the root of modern totalitarianism is to be found in the denial of the transcendent dignity of the human person who, as the visible image of the invisible God, is therefore by his very nature the subject of rights that no one may violate – no individual, group, class, nation or state. Not even the majority of the social body may violate these rights, by going against the minority.” We can rightly say Amen to that.

It would be refreshing if in this written encounter of the Pope with today’s culture he increased his appreciation for a true free economy. Two of the most influential champions in this free-market tradition, Ludwig von Mises (1881-1973) and Henry Hazlitt (1894-1993), had their own favorite terms to describe an economic system based on private property and freedom of exchange. Von Mises used the term “social cooperation.” Henry Hazlitt used the term “mutualism.” Will someone ever bring these two authors to the Pope’s attention? As St. John Paul II established in n. 42 of his encyclical Centesimus Annus, a free economy within a rule of law respectful of human dignity is completely compatible with Catholic doctrine. And I might add that the best social and economic analysis shows that only a free economy, with different degrees of government involvement, but with strong respect for a rule of law based on private property, can lead to true fraternity and social friendship across borders.

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