When some people hear the Catholic Church teaches that “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 an opposing sin to socialism. Although 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.
Greed or God?
If you ask people what fundamental values drive capitalism, they might talk about greed, profits, or selfishness. That’s understandable if their only reference point for capitalism is a character such as Gordon Gekko in the movie Wall Street or an Ayn Rand book such as The Virtue of Selfishness. But the fundamental values that drive capitalism are actually good ones: freedom and creativity.
In a free market, no one can force you to buy what a business is selling; the business has to persuade you to enter freely into a mutually beneficial exchange. When I buy a donut for a dollar, it’s because, at that moment, I value the donut more than the dollar, and the baker values the dollar more than the donut. In that sense, capitalism can be summarized as: Give me what I want, and I will give you what you want. (In contrast, we might summarize socialism as: Give the state what you have, and it will give you what it thinks you need.)
Obviously, this isn’t “Give to those in need regardless of what you want” altruism, but capitalism isn’t meant to be a profound moral system. Capitalism is a tool, based on discovery of the nature of things, that in spite of its weaknesses encourages people to channel their natural self-interest in a way that indirectly brings about good for others through the products and services they create.
Yes, some people will create sinful goods and services, such as pornography or illegal drugs, that the world would be better off without. But as an economic tool, capitalism shouldn’t be blamed when it’s used to serve sinful desires any more than other tools (such as kitchen knives) are blamed when they’re used for evil ends (such as stabbing innocent people). It’s also a fallacy to compare real-world capitalism, with its admitted share of greedy, unscrupulous entrepreneurs, to an idealized socialism that never has and never can exist.
That capitalism is not essentially built upon greed is evident in the fact that even if people weren’t greedy, they would still be needy—and free markets allow people to exchange goods and services in order to meet their needs. In fact, capitalism allows people to accumulate so much wealth that they are capable of engaging in acts of altruism to a degree previously unknown in human history.
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. 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 conclusions.
First, the state should not treat capitalism as something intrinsically evil; it is an economic system “not to be condemned in itself” (Quadragesimo Anno 101). Second, following the thinking of Pope 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” (QA 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 believed that, “like all errors,” socialism “contains some truth” (QA 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 notes, “is based nevertheless on a theory of human society peculiar to itself and irreconcilable with true Christianity.”
But not only are Catholics forbidden to be socialists and free to be capitalists, they are free to criticize capitalism without becoming socialists by default.
Pope Francis and capitalism
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 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 famously 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 gave an address to Congress in which he affirmed that capitalism can be a good thing when it is properly ordered. He commended U.S. efforts to fight poverty and said that “part of this great effort is the creation and distribution of wealth.” He noted:
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” (LS 129).
Pope Francis’s 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 Pope St. John Paul II.
John Paul II and capitalism
In Centesimus Annus, John Paul II said that profit has a “legitimate role” in the function of a business but 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 never said that this system is intrinsically evil as is socialism, nor does he offer an alternative economic system. 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, such as the Hippocratic Oath’s condemnation of abortion and assisted suicide, have their roots in classical wisdom and others in teachings stemming from divine revelation. But the Church doesn’t tell doctors how to create health in their medical interventions. Only the science of medicine can tell us how to restore a person’s health when he becomes sick.
Likewise, the Church offers principles to economists to guide them in 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. That’s why Pius XI taught that “economics and moral science each employs its own principles in its own sphere” (QA 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, emphasis added).
In Centesimus Annus, John Paul II asks if capitalism is the economic model that should be proposed to developing Third World 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 II did not directly call this system capitalism, but the name is still applicable. 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 (CA 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” (Leo XIII, Graves de Communi Re 21).
Moral capitalism?
In Deuteronomy 6:5, the Israelites were commanded, “Love the Lord your God with all your heart, and with all your soul, and with all your might [or strength].” The word for “might” is meodekah and probably referred to one’s material possessions. In the ancient and the modern world, a person’s “strength” comes not from what he can bench press but from what he can purchase.
We are commanded to love God with all our economic strength and to use that strength to love our neighbor as ourselves. When we don’t, we incur the condemnation Pius XI rendered to the stingy rich of his time that gave credence to the arguments of the socialists:
It is certainly most lamentable, venerable brethren, that there have been, nay, that even now there are men who, although professing to be Catholics, are almost completely unmindful of that sublime law of justice and charity that binds us not only to render to everyone what is his but to succor brothers in need as Christ the Lord himself (QA 125).
Along with consumers spending wisely, producers can act justly to benefit workers. This can include making the best effort to provide just wages and benefits that do not adversely affect the company’s overall financial health.
It could also include voluntarily adopting policies that allow for profit sharing and for corporate decision making to be more widely dispersed among a firm’s employees. For example, witness the Catholic Mondragon Corporation in Spain, the largest worker-owned cooperative in the world—though socialists such as Noam Chomsky still complain that it exploits its workers because it seeks profits.
Such proposals for employers could fill an entire book, but we raise them here to make it clear that opposition to socialism does not entail support of the kind of capitalism John Paul II condemned: a system that lacks moral principles and a “strong juridical framework.”
Edward Feser, editor of The Cambridge Companion to Hayek, says capitalism is immoral when it turns into “fetishizing capitalism, of making market imperatives the governing principles to which all other aspects of social order are subordinate.” He notes that even a stalwart critic of socialism such as Hayek
explicitly allows for regulations to ensure safe working conditions and for a safety net for those unable to provide adequate food, shelter, and health care for themselves. The Hayek who thought that the smallest tax increase is but the first step toward the Gulag exists only in the imaginations of uncharitable critics and simpleminded admirers.
But carefully crafted economic policies are not enough to bring about authentic human fulfillment. Pope Leo insists that the only way to “restore” a fallen civilization is the “correction of morals”—transforming hearts and minds according to human and Christian virtue whose source is the life of God: grace.
There is no magic bullet. There is no quick fix, be it a bloody or unbloody revolution, a set of policy platforms, or an accumulation of regulatory laws, that can make the world perfectly good. There is always the cross and the task of evangelization that is ever the job of Christians.
Though this is, properly speaking, apolitical, that doesn’t mean the Church has no role guiding men and nations to the principles of right order—correcting and admonishing when, for instance, wicked solutions are proposed.
But the Church’s mission to souls means that it fully exercises its role by lifting up and offering the food that never perishes, the food that leaves you never hungry again, the food that no political order can offer but is necessary for happiness in the order of this life, and more importantly, in the order of the life to come.
Sidebar: The Fruits of Capitalism
Some people claim capitalism exploits workers and prevents Christians from caring for the poor, but that contradicts the facts of history.
In 1820, 94 percent of people lived on the equivalent of less than $2 a day, and for all previous human history that figure was probably closer to 99 percent. Today, after 200 years of industrial capitalism, only 10 percent of people live in such dire conditions. Although that’s still hundreds of millions of people who are suffering, capitalism shouldn’t be blamed for this but rather should be given credit for doing in 200 years what the human race couldn’t achieve in the previous 20,000.
Indeed, areas of extreme poverty around the world need more capitalism, not less.
In 1990, 60 percent of people in East Asia lived in extreme poverty, higher even than sub-Sahara Africa. By 2015, less than 3 percent of East Asia experienced extreme poverty, while poverty in southern African was stuck at around 40 percent. Capitalism explains much of this difference. East Asian “tiger economies” such as those of Taiwan, Singapore, and South Korea (along with China, a latecomer to some free-market activity) respect private property rights and have allowed businesses to grow and flourish.