When some people hear the Catholic Church teaches “no one can be at the same time be a good Catholic and a true socialist” (Quadragesimo Anno 120), they ask in reply, “But can a good Catholic be a true capitalist?”—as if capitalism were a sin opposite yet equal to socialism. But while the Church teaches that “no Catholic could subscribe even to moderate socialism” (Mater et Magistra 34), it has never said the same thing of capitalism, which it views as something that can be compatible with Catholic moral principles.
We must point out that the debate over capitalism is not about whether we should have laissez-faire capitalism instead of state-regulated capitalism. Since capitalism can exist only when the government enforces private property rights and recognizes contractual agreements, it’s impossible to leave the state out of it entirely. The question is, rather, “How should the state view and intervene in the affairs of free-market economies?” To that question, Pope Pius XI offered two answers.
First, the state should not treat capitalism as something intrinsically evil, since it “is not to be condemned in itself” (Quadragesimo Anno 101). Second, following Leo XIII, the state should make sure free markets adhere to “norms of right order” by correcting violations of these norms. These include conditions that “scorn the human dignity of the workers, the social character of economic activity and social justice itself, and the common good” (101). The state could, for example, require factory owners to implement commonsense safety measures to protect workers from occupational hazards.
But nowhere did Pius XI say that socialism could be acceptable provided it adhered to certain moral norms. He admitted that, “like all errors,” socialism “contains some truth” (120). But the truths of socialism (which are shared by Christianity, thus making them not strictly socialist in nature) are not enough to redeem a system that, he writes, “is based nevertheless on a theory of human society peculiar to itself and irreconcilable with true Christianity.”
So not only are Catholics forbidden to be socialists and free to be capitalists, they are free to criticize capitalism without becoming socialists by default.
Adam Smith, the father of modern economic thought, warned about capitalism’s vices. For example, he noted how the ability to freely set prices can lead businessmen into “a conspiracy against the public or in some contrivance to raise prices.” But Smith recognized that capitalism is a worthwhile system because it works despite human imperfections. Socialism, on the other hand, requires everyone always to be perfectly altruistic, and that’s why it always fails.
So when Pope Francis says that under capitalism “people can easily get caught up in a whirlwind of needless buying and spending” (Laudato Si 203), he’s right. Markets may be able to provide lots of things to buy, but that doesn’t mean we should try to find meaning and happiness in those things. The pope also said that “once greed for money presides over the entire socioeconomic system, it ruins society.” But greed is a property of morally defective capitalists; it is not intrinsic to capitalism in the same way that confiscation and redistribution are intrinsic to socialism.
William F. Buckley put it well: “The trouble with socialism is socialism. The trouble with capitalism is capitalists.”
When Pope Francis visited the United States in 2016, he even gave an address to Congress where he affirmed that capitalism could be a good thing when it is properly ordered toward the good. He commended the U.S.’s efforts to fight poverty and said that “part of this great effort is the creation and distribution of wealth.” He said:
The right use of natural resources, the proper application of technology, and the harnessing of the spirit of enterprise are essential elements of an economy which seeks to be modern, inclusive, and sustainable. “Business is a noble vocation directed to producing wealth and improving the world. It can be a fruitful source of prosperity for the area in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good” (interior quote from Laudato Si 129).
Pope Francis’s former mentor, Fr. Juan Carlos Scannone, says the pontiff “doesn’t criticize market economics but rather the fetishization of money and the free market.” When critics labeled Francis a Marxist for his criticism of “trickle-down” economics, the pope said in response that “Marxist ideology is wrong.”
In fact, Pope Francis’s dual criticisms of capitalism and socialism echo the writings of John Paul II.
In Centesimus Annus, John Paul II said that profit has a “legitimate role” in the function of a business but that it’s not the only indicator that a business is doing well. The human dignity of workers matters too, and if capitalism is left unchecked, it can become “ruthless” and lead to “inhuman exploitation” (33).
Despite his criticisms, the pope saint never said that this system is intrinsically evil as is socialism nor does he offer an alternative economic system in its place. In fact, John Paul II reaffirms the teaching of previous popes who said that the Church not only does not offer the world a “Catholic” system of economics, it can’t offer such a system.
The Church’s authority relates to teaching about faith and morals; but economics is a science that studies the production, distribution, and consumption of goods and services. As Nobel economist James Buchanan put it, economics studies “the ordinary business of man making his living.” Economics can answer questions such as “What gives rise to the wealth of nations?” but not moral questions such as “How should I make use of my wealth?” The Church can offer moral and theological principles to guide secular disciplines, but it can’t replace those disciplines.
To make an analogy, the Church offers principles to doctors to guide them in practicing medicine morally. Some of these values have their roots in classical wisdom, like the Hippocratic Oath’s condemnation of abortion and assisted suicide, and some in teachings stemming from divine revelation. But the Church doesn’t tell doctors how to restore health in their medical interventions. Only the science of medicine can tell us how to cure a person’s illness.
Likewise, the Church offers principles to economists to guide them in the moral application of economics, but it doesn’t dictate a “Catholic” way to create wealth. That’s the job of those competent in the science of economics. This is why Pope Pius XI taught that “economics and moral science each employs its own principles in its own sphere” (Quadragesimo Anno 42). He said God entrusted the Church with exercising its authority “not of course in matters of technique for which she is neither suitably equipped nor endowed by office but in all things that are connected with the moral law.”
Since economics is not a field related to theology or the moral law, John Paul II made it clear that “the Church has no models to present.” Instead, economic models “that are real and truly effective can only arise within the framework of different historical situations, through the efforts of all those who responsibly confront concrete problems in all their social, economic, political, and cultural aspects.” The Church does have, however, a role to play in offering guidance on economic questions that overlap with moral and social doctrine. “For such a task,” he says, “the Church offers her social teaching as an indispensable and ideal orientation” (Centesimus Annus 43).
John Paul also asks if capitalism is the economic model that should be proposed to developing countries. He admits the answer is complex and says it depends on what you mean by “capitalism”:
If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then 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” (CA 42).
John Paul did not directly call this system capitalism, but the name is still appropriate. When people are free to sell services and goods in the marketplace and can retain profits for their good and the good of their company, then capital will naturally accumulate. However, the pope goes on to say:
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 human 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 (42).
Although capitalism is subject to abuse when it operates without legal limits, John Paul II stressed that “the Church’s social doctrine is not a ‘third way’ between liberal capitalism and Marxist collectivism” (Sollicitudo Rei Socialis 41). Instead, the Church’s moral teachings can be used to order actions that take place in free markets toward promoting the common good of society and protecting society from evils like socialism that would destroy the common good and reap “a harvest of misery” (Graves de Communi Re 21).