Tag Archives: andrew v. abela

The state’s role in the economy

Andrew Abela argues that the state’s role in the economy and how it should perform this role are found in two of the most important principles of Catholic social doctrine: subsidiarity and solidarity. After spending time in Italy recently, he says that country is stagnating economically because the state has promoted solidarity at the expense of subsidiarity . . . .

Dr. Andrew Abela

My family and I have been living in Rome for the past several months. While here, I’ve met with a number of business leaders, academics, and other professionals to hear their concerns about the economic conditions in Italy and the rest of Europe. Without exception, the biggest issue they all raise is the excessive amount of state intervention in the economy.

In the forthcoming Catechism for Business, we address the question: What is the state’s role in the economy, and how should it perform this role? The answer can be found in two of the most important principles of Catholic social doctrine: subsidiarity and solidarity.

The principle of subsidiarity says that it’s immoral for higher-level organizations to interfere with the legitimate functioning of lower-level organizations. It was first formally defined by Pius XI, who wrote: “Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do” (Quadragesimo anno, 79). The severity of the language never ceases to impress me: It is “a grave evil” — the stuff of mortal sin — for the state to interfere in the legitimate operations of lower-level governments, businesses or the family.

Italian business people lament the excessive government interference. A restaurateur specializing in locally grown food says it’s hard to source basic ingredients. Her local farmer can’t sell her eggs because of a new EU regulation that egg-sellers must first wash them with an approved device costing about $26,000.

The worst complaints came from senior executives in a health-care supply company. Since health care in Italy is run by the government, the government is both the regulator and the biggest customer of health-care companies. As regulator, it puts extensive constraints on how businesses are run. As a customer, the government is currently taking two years to pay its bills. How is one supposed to run a business with receivables aging 730 days?

Solidarity, according to Blessed John Paul II, is “not a feeling of vague compassion or shallow distress at the misfortunes of so many people, both near and far. On the contrary, it is a firm and persevering determination to commit oneself to the common good” (Sollicitudo rei socialis, 38).

Based on these two principles, John Paul taught that the state should play a role in enabling unemployment support, adequate wage levels, and humane working conditions, both directly and indirectly: “Indirectly and according to the principle of subsidiarity, by creating favorable conditions for the free exercise of economic activity. Directly and according to the principle of solidarity, by defending the weakest, [and] by placing certain limits on the autonomy of the parties who determine working conditions” (Centesimus annus, 15).

More specifically, the state has the role of determining the legal framework within which the economy operates, “and thus of safeguarding the prerequisites of a free economy, which presumes a certain equality between the parties, such that one party would not be so powerful as practically to reduce the other to subservience” (Centesimus annus, 15). In simple terms, the state’s main role with respect to the economy is to maintain a level playing field.

In understanding the role of the state in the economy, both principles are necessary. According to Pope Benedict XVI, the “principle of subsidiarity must remain closely linked to the principle of solidarity and vice versa” (Caritas in Veritate, 58).

Here in Italy, the country is stagnating economically because the state has attempted to promote solidarity at the expense of subsidiarity. Italian labor law, for example, makes it very difficult to lay off or terminate employees. As a result, businesses are reluctant to hire new employees for fear of being stuck with them. The unemployment rate among young Italians has hit 30%.

Subsidiarity is important because it “respects personal dignity by recognizing in the person a subject who is always capable of giving something to others. Subsidiarity is the most effective antidote against any form of all-encompassing welfare state” (Caritas in veritate, 57). Likewise, solidarity “is first and foremost a sense of responsibility on the part of everyone with regard to everyone [93], and it cannot therefore be merely delegated to the State” (Caritas in veritate, 38).

A Charter Member of Legatus’ Northern Virginia Chapter, Andrew V. Abela, Ph.D., is chairman of the Catholic University of America’s Business & Economics dept. He is co-author, with Joe Capizzi, of the forthcoming Catechism for Business.

Private property and Catholic teaching

Dr. Andrew V. Abela writes that the Catholic Church has always defended citizens’ right to private property. In fact, the Church teaches that the right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether . . .

Dr. Andrew Abela

With the current debate about increasing taxes, it’s worth taking a step back to look at what the Church says about private property. Is private property legitimate? Are there any limits to ownership? Are there limits to taxation?

The Catechism of the Catholic Church states that “God entrusted the earth and its resources to the common stewardship of mankind,” so the goods of creation are for the benefit of all. The Church teaches that this is to be achieved through private property, which “is legitimate for guaranteeing the freedom and dignity of persons and for helping each of them to meet his basic needs” (#2402). This emphasis on private property as necessary for human freedom comes from the Second Vatican Council: “Private property or some ownership of external goods confers on everyone a sphere wholly necessary for the autonomy of the person and the family, and it should be regarded as an extension of human freedom” (Gaudium et Spes, 71; emphasis added).

The Church recognizes that if you are politically free but have no wealth or savings, then you are not really free at all. If you are dependent for your housing, your health care, your next meal, on government or your employer, then really, how free are you? This is why the right to private property “has always been defended by the Church up to our own day,” as Blessed John Paul II wrote in Centesimus Annus (#30).

But he went on to say that “the possession of material goods is not an absolute right.” Why not? Because, since the goods of creation are for the good of all, the reason we own private property is to serve others with it, and therefore our right to property doesn’t extend to hoarding or wasting it. So, “‘man should not consider his material possessions as his own, but as common to all,’ because ‘above the laws and judgments of men stands the law, the judgment of Christ. God gave the earth to the whole human race for the sustenance of all its members, without excluding or favoring anyone.’” This is referred to as the “universal destination of created goods” (Centesimus Annus, 30-31; citing Leo XIII, Rerum Novarum, 22; St. Thomas Aquinas, Summa Theologiæ, II-II, q. 66).

Pope Benedict XVI emphasized this understanding of property as a basis for service to others in one of his early Angelus messages: “Telling the parable of the dishonest but very crafty administrator, Christ teaches his disciples the best way to use money and material riches, that is, to share them with the poor, thus acquiring their friendship, with a view to the Kingdom of Heaven” (Sept. 23, 2007).

So how do we do this? “No one, certainly, is obliged to assist others out of what is required for his own necessary use or for that of his family, or even to give to others what he himself needs to maintain his station in life becomingly and decently. But when the demands of necessity and propriety have been sufficiently met, it is a duty to give to the poor out of that which remains” (Rerum Novarum, 36).

Forty years later, Pius XI wrote that investing wealth in ways that creates work for others is an outstanding example of such munificence. (Quadragesimo Anno, 51).

The state has a role in contributing to the universal destination of goods where human generosity has not sufficiently risen to the task. John Paul II wrote that the state must contribute to the achievement of unemployment support, adequate wage levels and humane working conditions, “both directly and indirectly. Indirectly and according to the principle of subsidiarity, by creating favorable conditions for the free exercise of economic activity. Directly and according to the principle of solidarity, by defending the weakest, by placing certain limits on the autonomy of the parties who determine working conditions, and by ensuring in every case the necessary minimum support for the unemployed worker” (Centesimus Annus, 15).

The universal destination of created goods should not, however, be seen as a license to the state to take over the management of private property because, as Pope Benedict warned, “The State which would provide everything, absorbing everything into itself, would ultimately become a mere bureaucracy incapable of guaranteeing the very thing which the suffering person — every person — needs: namely, loving personal concern. We do not need a State which regulates and controls everything, but a State which, in accordance with the principle of subsidiarity, generously acknowledges and supports initiatives arising from the different social forces and combines spontaneity with closeness to those in need” (Deus Caritas Est, 28).

Similarly, the role of private property in achieving the universal destination of goods will only work “provided that a man’s means be not drained and exhausted by excessive taxation.

The right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether. The State would therefore be unjust and cruel if under the name of taxation it were to deprive the private owner of more than is fair” (Rerum Novarum, 47).

A charter member of Legatus’ Northern Virginia Chapter, Andrew V. Abela, Ph.D., is chairman of the Business and Economics department at the Catholic University of America.

Wealth, profit and the poor

Andrew Abela, Ph.D., asks how much of our own personal profits should we be willing to sacrifice in order to avoid or reduce layoffs during an economic downturn? That question requires conscientious discernment by those involved. While it’s perfectly legitimate to make a profit, the Church teaches that it’s not acceptable to do so illegitimately . . .

Dr. Andrew Abela

Dr. Andrew Abela

In today’s culture, successful business leaders are often the object of scorn. Some elected officials want to play Robin Hood and spread their wealth around. That said, it’s worth exploring whether it’s all right to make a profit.

The Church has made it abundantly clear that making a profit is morally acceptable. In his 1991 encyclical Centesimus Annus, Pope John Paul II wrote that “the Church acknowledges the legitimate role of profit as an indication that a business is functioning well” (#35).

Further, the Catechism of the Catholic Church teaches that “profits are necessary. … They make possible the investments that ensure the future of a business, and they guarantee employment” (#2432).

However, John Paul says profit should not be seen as a business’ only goal. “The purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society” (Centesimus Annus, #35).

Still less should it be seen as the highest goal of a business, where everything else is subordinated to profitability. “A theory that makes profit the exclusive norm and ultimate end of economic activity is morally unacceptable” (CCC, #2424).

“Profit is useful if it serves as a means towards an end that provides a sense both of how to produce it and how to make good use of it,” Pope Benedict XVI wrote in Caritas in Veritate. “Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty” (#21).

John Paul II agreed with that sentiment. “Christians charged with responsibility in the business world are challenged to combine the legitimate pursuit of profit with a deeper concern for the spread of solidarity,” he said in a message to participants of The Business Executive: Social Responsibility and Globalization conference in 2004.

But do we have a moral obligation to protect the capital that is entrusted to us as investment in our business? Clearly, the answer is yes. No one is served if the bottom line is ignored, leading to the business going bankrupt.

“Man, to whom in Genesis God entrusted the earth, has the duty to make all the earth’s goods fruitful, committing himself to use them to satisfy the multiple needs of each member of the human family,” Pope Benedict told members of the Centesimus Annus Pro Pontifice Foundation in 2008. “One of the recurring metaphors of the Gospel is, in effect, exactly that of the steward. With the heart of a faithful administrator man must, therefore, administer the resources entrusted to him by God, putting them at the disposition of all.”

It’s important to avoid a situation where “directors of business companies, forgetful of their trust, betray the rights of those whose savings they have undertaken to administer,” Pope Pius XI wrote in his 1931 encyclical Quadragesimo Anno, #132.

What should we do if we face a choice between immoral activity and allowing a significant loss to the capital that was entrusted to us? While managers have a moral responsibility to put forward their best efforts, they are never justified in doing evil in order to keep the company solvent. A central moral principle from the Catechism is that “one may never do evil so that good may result from it” (#1789).

How much of our own personal profits should we be willing to sacrifice in order to avoid or reduce layoffs during an economic downturn? That question requires conscientious discernment by those involved. In such situations, the Church counsels us to consider carefully what we truly need (with the virtue of temperance in mind), understand honestly what is due in justice to the employees at risk, and determine what course of action would be most consistent with the principle of solidarity.

“No one, certainly, is obliged to assist others out of what is required for his own necessary use or for that of his family, or even to give to others what he himself needs to maintain his station in life becomingly and decently,” Pope Leo XIII wrote in his 1891 encyclical Rerum Novarum. “But when the demands of necessity and propriety have been sufficiently met, it is a duty to give to the poor out of that which remains” (#36).

The Catechism confirms this sentiment in paragraph 2407: “In economic matters, respect for human dignity requires the practice of the virtue of temperance, to moderate our attachment to the goods of this world; of the virtue of justice, to preserve our neighbor’s rights and to render what is his or her due; and of solidarity, following the Golden Rule and in keeping with the generosity of the Lord, who ‘though he was rich, yet for your sake … became poor, so that by his poverty you might become rich’ (2 Cor. 8:9).”

A charter member of Legatus’ Northern Virginia Chapter, Andrew V. Abela, Ph.D., is chair of the Business and Economics department at the Catholic University of America and an associate professor of marketing.