Tag Archives: free markets

After One Hundred Years

Joseph Dunn writes that big government hinders the poor from gaining wealth . . .

DunnAfter One Hundred Years
Joseph J. Dunn
CreateSpace, 2013
414 pages, $26.99 paperback

Dunn’s new book, subtitled Corporate Profits, Wealth and American Society, weaves the rise of large corporations, expansion of the federal government, and the growth of America’s vibrant nonprofit sector into an enjoyable epic. Dunn reveals how these developments affected the prosperity of the middle class and the security of those in need.

Dunn delivers a timely exploration of how corporate profits, personal fortunes and philanthropy have benefited American society over the course of a century. The book is clear about innovation as an essential source of new jobs, rising tax revenues, and improved money flows at non-profits.

Order: Amazon, Barnes & Noble

Reforming capitalism for freedom

MICHAEL M. MILLER writes that our economy needs serious reform — business as usual is not acceptable. However, a correct diagnosis of the problem is in order before making significant changes. He also argues that the free market requires serious moral restraint — especially on the part of those with power like big businesses and government  . . . . 

Michael M. Miller

Michael M. Miller

In the wake of the financial crisis, one of the recurring themes among business and political leaders is the need to reform capitalism and create new ways to think about business and the role of profit.

The common narrative is that “business as usual” doesn’t work. We’ve tried the free market and while it made money for some, it also caused the housing boom, the financial crisis, and created a society where all that matters is making as much profit as possible. The financial crisis is calling us to come up with new models of how we should arrange the economy. There are two issues here: first, a new way of looking at business and second, the reform of the current economic system. Let me address both, beginning with business.

It’s good that business leaders are making an effort to understand that business is about more than just profit. Profit is important, of course, but as Blessed John Paul II reminded us, profit is not the main purpose of business. The main purpose is to serve human needs and wants. Profit is one of the indicators that reveals whether you are meeting those needs.

I also agree that business as usual is not enough. We’ve had some serious moral crises in business from fraudulent accounting to big banks colluding with the government to receive special bailouts. What’s more, business is not outside the requirements of morality. Most corporate social responsibility programs have a serious flaw — they are relativistic. You can’t build a culture of business ethics if there is no truth and no right and wrong. Though mainstream business leaders rarely talk about it, business has the moral and social responsibility to cultivate a healthy moral ecology. This means honesty and obeying the laws; it also means respecting families and not exploiting women to sell products.

Let’s move to the issue of reforming the economy. There is incessant talk about the need to reform capitalism, but my first question is: What do we mean by capitalism? Unfortunately, the term “capitalism” has become proxy for “that which is bad” and often becomes a substitute for the sins of greed and avarice. There’s another problem — and a more serious one. In common parlance word “capitalism” is usually identified with a free-market economy both by its detractors and defenders. But capitalism and the free market are not always the same thing. There are many different varieties of capitalism: oligarchic capitalism, corporate capitalism, crony capitalism, managerial capitalism, and free-market capitalism to name a few.

Most of the critics of capitalism lament so-called “market fundamentalism” or “unfettered markets,” but we don’t have anything of the sort. What we have in the U.S. is a type of managerial-crony capitalism where big business and big government collude to make regulations that serve their interests. When things went wrong with our managerial capitalist system, instead of assigning blame correctly we blamed this mythical free market.

Our economy does need reform, but if we are going to address a problem we have to identify it correctly. The problem is that our diagnosis is wrong. The source of the financial crisis was not “market fundamentalism” but a complex interrelationship of government regulation, lobbying by interest groups, the manipulation of interest rates and the money supply, big business and government collusion, and political and social policy all mixed in with age-old vices like greed and imprudence.

There is a tendency to think that the default position of capitalism is a free market and that regulations and government interventions are necessary to resist this return to what is called “unfettered” or “savage” capitalism. But this is a serious misconception. In practice, the free market requires serious moral restraint — especially on the part of those with power like big businesses, government and interest groups. They have to exercise restraint and virtue not to use their power to gain an unfair advantage by colluding or lobbying the government for protection. One of the most important, though often neglected, elements of authentic corporate social responsibility is for companies to help maintain and encourage a free and competitive economy that enables entrepreneurs to compete — even if this means a possible loss to their own business. Too often companies, once they become successful, look to government to undermine the free and competitive economy that they benefited from.

Free economies are like free societies. As William Allen said well, you cannot have self-government without self-governors. In the same way you cannot have a free economy without free and virtuous people. A real free and competitive market, to use Lord Acton’s line, is “the delicate fruit of a mature civilization.”

MICHAEL M. MILLER is a research fellow at the Acton Institute and director of PovertyCure, which promotes entrepreneurial solutions to poverty in the developing world.

The market needs objective morality

Sam Gregg writes that Pope Benedict’s new encyclical, Caritas in Veritate, reminds us that we cannot make economic choices or act economically as if the demands of Christian love and truth have nothing to do with such choices and acts. The Pope reminds us that “it is good for people to realize that purchasing is always a moral — and not simply an economic — act” . . .

Dr. Sam Gregg

Dr. Sam Gregg

Amidst the fanfare surrounding the promulgation of Benedict XVI’s third encyclical Caritas in Veritate (Love in Truth) and what can only be described as the simplistic analysis offered by the mainstream media, a number of important insights have been lost — including those especially relevant for people engaged in the daily toil of creating wealth in the worlds of private enterprise, business and commerce.

The first is that this is a profoundly theological text. As with his previous encyclicals, Benedict reminds us that realities such as love, truth and hope are theological realities. The fact that they are theological realities — that is, ultimately known through our knowledge (lógos) of God (theos) — does not make them any less real than the economic world we engage every day of our lives.

All of us are tempted to regard theological imperatives as abstract concepts that have no relevance or place in the “real world.” If, however, we truly believe that the life, death and resurrection of the Person of Jesus Christ is real, then we should have no difficulty in integrating these theological truths into our daily lives.

This in turn means that we cannot make economic choices or act economically as if the demands of Christian love and truth have nothing to do with such choices and acts. The Pope observes, for example, that “it is good for people to realize that purchasing is always a moral — and not simply economic — act” (#66). That does not mean that business leaders, CEOs and entrepreneurs should act less competitively or creatively. As Caritas in Veritate affirms, there is a place for commercial logic and thinking economically. It simply means that Christians should assimilate the commandment of love of neighbor and our responsibility to live in truth into our economic lives.

How does this play out in practical terms? This means that, no matter how intense and stressful the competition, we should never, for example, treat our customers, competitors and employees as mere objects. This is a requirement of justice, but it also reflects the Christian’s recognition that these people are persons made in God’s image.

On a second level, Caritas in Veritate’s attention to love and truth has profound implications for the functioning of the market economy. Significantly Benedict does not call for a “third way” between the market economy and socialism. Nor does he present an alternative economic system to the market. Instead the market economy is more or less assumed to be the only alternative available. What matters is the degree to which the market economy is grounded in the truth — especially the moral truth — revealed to us through faith and reason.

Without internal forms of solidarity and mutual trust,” the Pope writes, “the market cannot completely fulfill its proper economic function” (#35). This surely has been amply confirmed by the recent financial crisis. America’s subprime mortgage collapse was partly attributable to the fact that thousands of people lied on their mortgage application forms. It is not surprising that mass violation of the moral prohibition against lying has devastating economic consequences. “The economic sphere,” the Pope reminds us, “is neither ethically neutral, nor inherently inhuman and opposed to society. It is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner” (#36). Against all relativists, Benedict maintains that market economies must be underpinned by commitments to particular basic moral goods and a certain vision of the human person if it is to serve rather than undermine humanity’s common good: “The economy needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centered” (#45).

At the heart of the economy are human persons. People whose minds are dominated by hedonistic cultures will make hedonistic economic choices. “Therefore,” Benedict writes, “it is not the instrument that must be called to account, but individuals” (#36). Nor does he regard the market as morally problematic in itself.

“The market is not … the place where the strong subdue the weak. Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations” (#36). What matters, Benedict says, is the moral culture in which market economies function.

In addition to these insights, Caritas in Veritate expresses plenty of prudential judgments with which faithful Catholics may legitimately take issue. I myself wonder if the encyclical fully appreciates the potentially tremendous negative impact of massive state-based redistribution of wealth. Of course Catholics may disagree among themselves (and even with the Pope) about those matters that the Church considers prudential. This includes the overwhelming majority of economic policy issues — though not on the subjects such as abortion and euthanasia as Pope Benedict affirmed in a 2004 letter to the then-archbishop of Washington, D.C.

Lastly, I would suggest one thing: Read the encyclical for yourself. It is dense and at times complex, but it also contains beautiful words of wisdom relevant to us all. We have a great Pope. Deo Gratis.

Dr. Samuel Gregg is research director at the Acton Institute. He is the author of many books, including “On Ordered Liberty” (2003) and his prize-winning “The Commercial Society” (2007).