Tag Archives: economics

Investor’s eye on socialism shows why it never works

Prudent financial and investment management is crucial to the success of any corporate enterprise. Thoughtful CEOs know they must conduct their business lives with the knowledge that they stand under the watchful eye of God. In the words of Pope Benedict XVI, “Every economic decision has a moral consequence.”

Legatus has long emphasized that as business leaders, we must employ the culture of life in our organizations. We know that even among fellow Catholics, the horrors of abortion are often not taken seriously. Unfortunately, our world seems to be backsliding on abortion, the greatest evil of our time. Sadly and shamefully, today’s Democratic party is pushing acceptance of mass atrocities — some even endorsing barbaric infanticide. (God help us!) Planned Parenthood is defending that crime. Any clear-thinking person is repulsed by the idea that some newborn lives are worth less than others, since each baby is created in the image and likeness of God. I am ashamed and frustrated with ‘proabortion Catholics.’

In my new book, In God We Trust: Morally Responsible Investing, I elaborate on how odd it is that even as the U.S. economy has prospered from pro-growth policies like taxrate cuts and deregulation, there exists a rising tide of sympathy for socialism among leftist politicians and young people.

When it comes to capitalism vs. socialism, anyone with common sense knows socialism doesn’t work. Wherever it’s been tried worldwide it always hurts the ones it’s supposed to help. Socialism always increases poverty, eliminates incentives, hurts productivity, increases corruption, destroys the economy, and destroys the well-being of its citizens. It’s exasperating to hear these newly minted naïve congresswomen (and men) proposing silly policies, which if implemented, would significantly reduce prosperity for everyone. Capitalism obviously creates job opportunities and incentives, and it has lifted billions of people out of poverty. Capitalism also creates wealth and philanthropy, both of which result from private-sector success. One of my favorite quotes from President Ronald Reagan is, “Socialism can only work in two places, heaven where they don’t need it, and hell where they already have it.”

At my firm, we’re strong believers in the merits of democracy and free-market capitalism. We are also highly focused on the culture of life. Indeed, it is our mission. Schwartz Investment Counsel, Inc. manages five pro-life mutual funds, which comprise the largest family of Catholic mutual funds in the country — Ave Maria Mutual Funds. Our world-class Catholic Advisory Board, made up of individuals well known to Legatus members, have asked my team of analysts and portfolio managers to screen out from each portfolio companies that support abortion and pornography. In doing so, we invest in exceptionally well-managed companies that often have long histories of success in growing their sales, earnings, and dividends in a morally responsible way. In addition, each company must have a strong financial position and prospects for continued success. Tom Monaghan asked my firm to undertake this mission 18 years ago and since then we have has been blessed to attract 100,000+ pro-life shareholders to our mutual fund complex. We’ve grown dramatically, and today manage over $2.3 billion in assets in the Ave Maria Mutual Funds, all of which are invested in a morally responsible way, i.e., no companies supporting abortion or pornography.

The culture of life should and must be a priority for every Legate.

GEORGE P. SCHWARTZ, CFA is chairman and chief executive officer of Schwartz Investment Counsel, Inc., the investment adviser to the Ave Maria Mutual Funds. He is a member of the Ann Arbor Chapter, and author of three books including his newest, entitled In God We Trust: Morally Responsible Investing

In God We Trust: Morally Responsible Investing

George P. Schwartz, CFA
TAN Books, 266 pages

Socialism as an economic system has never worked, asserts George P. Schwartz, investment fund manager and founder of the Ave Maria Mutual Funds, which offer portfolios that respect pro-life and pro-family values. In addition to presenting a rousing endorsement of free-market capitalism, Schwartz describes how investors can reap the benefits of economic growth without backing morally objectionable enterprises — insurance firms that cover elective abortions, for example, or companies with ties to pornography or Planned Parenthood. Earning profit from principal does not require sacrificing principles, and Schwartz shows how this is not only possible, but also the right thing to do.

 

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The free market & the Catholic faith

PAUL J. VOSS examines the Church’s relationship with the free market and business through four quotes from Church documents. He quotes from Pope Francis, Pope Benedict, Pope Leo XII and the Catechism of the Catholic Church. Voss writes that the Church should have an official Catechism of Business. Legates, he said, must to rise to the challenge . . .

Paul J. Voss

Paul J. Voss

The Catholic Church has not historically engaged intellectually with matters of business and economics. There is not, for example, an official Catholic “theology of business.”

The Church reasons that such activities largely fall outside the realm of faith and morals and thus, the judgment of the Church is limited in scope and comprehensiveness. I respectfully disagree. Conducting business necessarily involves morals and ethics — as well as a measure of faith. I submit, for your consideration, four discrete quotes on the topic. I ask readers to attempt to construct a unified argument presented by the Church (if such a unity can be found). The first is from Pope Leo XIII’s 1891 encyclical Rerum Novarum (On Capital and Labor).

“It is surely undeniable that, when a man engages in remunerative labor, the impelling reason and motive of his work is to obtain property, and thereafter to hold it as his very own.

“Thus, if he lives sparingly, saves money, and, for greater security, invests his savings in land, the land, in such case, is only his wages under another form; and so, consequently, a working man’s little estate thus purchased should be as completely at his full disposal as are those wages he receives for his labor. Socialists, therefore, by endeavoring to transfer the possessions of individuals to the community at large, strike at the interest of every wage earner, since they would deprive him of the liberty of disposing of his wages, and thereby of all the hope and possibility of increasing his resources and of bettering his condition in life” (#5).

The Catechism of the Catholic Church has little to say about specific matters of business and industry. However, this quote is insightful.

“The Church has rejected the totalitarian and atheistic ideologies associated in modern times with ‘communism’ or ‘socialism.’ She has likewise refused to accept, in the practice of ‘capitalism,’ individualism and the absolute primacy of the law of the marketplace over human labor.

“Regulating the economy solely by centralized planning perverts the basis of social bonds; regulating it solely by the law of the marketplace fails social justice, for ‘there are many human needs which cannot be satisfied by the market.’ Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended” CCC #2425.

The next quote comes from Pope Francis’ 2013 encyclical Evangelii Gaudium (The Joy of the Gospel).

“In this context [the disposable culture], some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting” #54.

The final (slightly edited) quote is from Cardinal Timothy Dolan (Wall Street Journal, May 22, 2014). “Yet the answer to problems with the free market is not to reject economic liberty in favor of government control. The Church has consistently rejected coercive systems of socialism and collectivism, because they violate inherent human rights to economic freedom and private property. When properly regulated, a free market can certainly foster greater productivity and prosperity. But, as [Pope Francis] continually emphasizes, the essential element is genuine human virtue.

“Business can be a noble vocation, so long as those engaged in it also serve the common good, acting with a sense of generosity in addition to self-interest.”

Each quote presents compelling and thought-provoking ideas. Yet how can the individual Catholic find a coherent argument — not to mention practical guidance — for conducting business from these various quotes?

Both The Vocation of a Business Leader (Pontifical Council for Justice and Peace, 2013) and A Catechism for Business (Catholic University of America, 2014) attempt to provide a framework, and they have added greatly to our understanding of just, ethical business practices. Yet more work remains. Certainly Legatus members will rise to the challenge of integrating theory and practice.

PAUL J. VOSS, PH.D., is president of Ethikos, a professional organization offering ethics training, and an associate professor of literature at Georgia State University.

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.