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Interesting article by Thomas Woods and his perspective on recent statements by Benedict XVI and his encyclical [i]Caritas in Varitate.....


http://www.takimag.com/site/article/truth_charity/


Truth & Charity
Posted by Thomas E. Woods Jr. on August 07, 2009
“Pope calls for global government,” read the headlines in early July. Then, as night follows day, the Pope’s conservative supporters lined up to eviscerate the media for distorting the Pope’s meaning.  Those darn liberals—how dare they twist the Pontiff’s words like that.

This is not exactly the first time such a thing has taken place. The pattern, over the past couple of decades, runs as follows: the media more or less accurately portrays something the Pope said or did, and then his conservative supporters, anxious to explain away these unusual statements and activities, devise convoluted explanations as to what the Pope really meant.

It is worth reproducing the relevant passage of the Pope’s new encyclical, Caritas in Veritate:

In the face of the unrelenting growth of global interdependence, there is a strongly felt need, even in the midst of a global recession, for a reform of the United Nations Organization, and likewise of economic institutions and international finance, so that the concept of the family of nations can acquire real teeth. One also senses the urgent need to find innovative ways of implementing the principle of the responsibility to protect and of giving poorer nations an effective voice in shared decision-making. This seems necessary in order to arrive at a political, juridical and economic order which can increase and give direction to international cooperation for the development of all peoples in solidarity. To manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration: for all this, there is urgent need of a true world political authority, as my predecessor Blessed John XXIII indicated some years ago. Such an authority would need to be regulated by law, to observe consistently the principles of subsidiarity and solidarity, to seek to establish the common good, and to make a commitment to securing authentic integral human development inspired by the values of charity in truth. Furthermore, such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights. Obviously it would have to have the authority to ensure compliance with its decisions from all parties, and also with the coordinated measures adopted in various international forums. Without this, despite the great progress accomplished in various sectors, international law would risk being conditioned by the balance of power among the strongest nations. The integral development of peoples and international cooperation require the establishment of a greater degree of international ordering, marked by subsidiarity, for the management of globalization. They also require the construction of a social order that at last conforms to the moral order, to the interconnection between moral and social spheres, and to the link between politics and the economic and civil spheres, as envisaged by the Charter of the United Nations. [emphases in original; internal endnotes removed]

Whatever we may say about this passage, was it really so unreasonable for reporters to have interpreted it as they did?

I actually didn’t want to write anything about the Pope’s encyclical.  In 2007, I wrote a book, Sacred Then and Sacred Now: The Return of the Old Latin Mass, in defense of the Pope’s restoration of the traditional Latin liturgy, an area in which Benedict XVI is quite knowledgeable and has much of value to say. I like this Pope. He is smart and serious, not frivolous or vain. He is in many ways a substantial improvement over his predecessor. (I cite as evidence the very fact that the media believes the opposite.) And having been viciously denounced and ridiculed by some pretty despicable people, he certainly has all the right enemies.

I have reluctantly yielded to the urging of quite a few correspondents and typed up a few thoughts. So here goes: Caritas in Veritate strikes me as at best a relatively unremarkable restatement of some familiar themes from previous social encyclicals. At worst, it is bewilderingly naïve, and its policy recommendations, while attracting no one to the Church, are certain to repel.

The response to the encyclical throughout the right-of-center Catholic world was drearily predictable: with few exceptions, it was a performance worthy of the Soviet Politburo, with unrestrained huzzahs everywhere.

It is one thing to receive a statement from the Pope with the respect that is due to the man and his office. It is quite another to treat his every missive as ipso facto brilliant, as if the Catholic faith depended on it. If his supporters are trying to live down to the Left’s portrayal of Catholicism as a billion-person cult, they could hardly do a better job.


The Pope Is Not an Absolute Monarch

My book The Church and the Market: A Catholic Defense of the Free Economymakes a distinction between those aspects of economics that fall within the Pope’s purview as a teacher of faith and morals and those that do not.  I’ll repeat that thesis here as a prelude to my comments.  (Anyone who already gets this can skip this section.)

The phenomena that economics touches upon, which include money, banking, exchange, prices, wages, monopoly theory, and many other topics, are replete with moral significance. But the positive, scientific statements about these phenomena that constitute the discipline of economics are necessarily value neutral. (By “scientific” I mean only that they involve causal relationships, not that economics is or should resemble one of the physical sciences.) Describing the workings of fractional-reserve banking is a positive task, not a normative one. Discussing whether such a system is desirable is a normative task, and qualitatively separate from explaining the mechanics of that system. One cannot make an intelligent comment about the former unless he understands the latter, and it is the latter with which economics, properly understood, concerns itself.

Likewise, economic policy may possess a moral dimension, but not a single proposition of economic theory involves a moral claim. For example, Frank Knight conceived of capital as a homogeneous unit whose individual processes occurred synchronously, and therefore could be understood without introducing time into capital theory. F.A. Hayek, as well as the Austrian School of economics to which Hayek belonged, conceives of capital as a series of time-consuming stages of higher and lower order, with the highest-order stages the ones most remote from consumers (mining and raw materials, for instance) and the lowest-order stage immediately preceding the sale of the finished product.

Nothing in the Deposit of Faith even comes close to deciding this and countless other important economic questions one way or the other. Not even the most uncomprehending or exaggerated rendering of papal infallibility would have the Pope adjudicating such disputes as these. Yet misunderstandings or ignorance regarding such seemingly abstruse points are so often at the heart of the policy recommendations that bishops’ conferences propose and papal encyclicals can seem to imply.

It is obviously not “dissent” merely to observe that the cause-and-effect relationships that constitute the theoretical edifice of economics are not a matter of faith and morals. They simply do not fall within the range of subjects on which a Catholic prelate is endowed with special insight or authority. Catholic laity cannot head up petition drives against them. They are facts of life. Facts cannot be protested, defied, or lectured to; they can only be learned and acted upon. There is no use in shaking our fists at the fact that price controls lead to shortages. All we can do is understand the phenomenon, and be sure to bear it and other economic truths in mind if we want to make statements about the economy that are rational and useful.

Moreover, those who posture as defenders of Catholic social teaching by and large do not acknowledge that the proposals they implicitly or explicitly advance could have anything but favorable consequences for all. No trade-offs (between higher wages and unemployment, for example) are considered. Naturally, no room for objections can exist when the very possibility of objection is foreclosed by the way the argument is framed: for example, if we want higher wages, we simply demand them. Anyone who does not join in this demand must not want higher wages. This begs the question, of course, since whether high wages can be produced by man’s ipse dixit, rather than through capital accumulation, is precisely the matter at issue.

For instance, the idea of a “living wage” for heads of households is an example of a policy I would institute only if, (1) I did not understand what factors lead real wages to rise on their own, without the use or threat of violence; or (2) I wanted to hurt people by making them less employable. (Why not offer a living wage of $10,000,000 per hour, if it’s so easy to raise wages by fiat?) I lack the space to defend this claim here, so I refer interested readers to my chapter on the subject in a book called Catholic Social Teaching and the Market Economy, published by London’s Institute of Economic Affairs in 2007 and available for free download.

It is certainly possible, though very unlikely, for a Catholic to reply this way: the Church insists that the living wage and whatever else must be instituted because justice demands them, even though they will make people, particularly those they were designed to help, materially worse off. However, no ecclesiastical document I have ever seen has taken this position. These documents carry the assumption that their suggestions will accomplish their stated ends and increase people’s well-being. That assumption, in turn, implies that the only thing standing between today and a more prosperous future is sufficient political will rather than constraints imposed by the very nature of things. And that merely assumes the very thing that needs to be proven.

It begs the question yet again to declare that authority has spoken and the matter is closed—the very matter at issue is whether these subjects are of a qualitative nature to be susceptible of ecclesiastical resolution in the first place. If the law of returns, for instance, is an objective fact of nature (which it is), then the Pope himself cannot declare it to be false, or expect success from policy prescriptions that ignore it, any more than he can fashion a square circle. It is no insult to papal authority to exclude the possibility of square circles. (As a matter of fact, leaving aside the famous and oft-misunderstood dissent of St. Peter Damian, the consensus among the Scholastics before the triumph of nominalism was that God himself could not violate the law of non-contradiction—by, say, creating a square circle.)

It is one thing, for example, to identify the well-being of the family as an important ingredient of a healthy society. It is quite another to propose specific policy measures designed to help families, since whether these policies will have their intended effect involves causal analysis, which, it should be unnecessary to point out, is analytically separate from faith and morals. Surely some matters are to be left to the laity to discuss and determine among themselves.


Pope Paul VI’s Advice for the Developing World

Pope Paul VI’s Populorum Progressio (1967), for example, went beyond the moral observations one might make about Third World development to actually offering policy prescriptions, thereby putting Catholics in the unfair position of appearing to “dissent” from the Pope when proposing alternatives. Peter Bauer, the prophetic development economist who warned for decades about the harmful effects that Western aid programs would have, noted that there was nothing particularly Catholic or even Christian about the document, and that it merely repeated, with some religious overtones, the conventional wisdom.

We now know how disastrous Populorum’s advice was: the aid entrenched the worst regimes and indefinitely delayed necessary reforms, and it tore a dozen countries apart as various ethnic and racial groups descended into violence as they tried to grab hold of a share of the grant money. The very idea of foreign aid introduced perverse incentives into these societies; it now made less sense to create things that please your fellow man and more sense to devote unproductive effort to campaigns to get aid money for yourself. (I review the subject in more detail in The Church and the Market and cover the literature in 33 Questions About American History You’re Not Supposed to Ask.) Hong Kong, Chile, and South Korea, on the other hand, became prosperous after aid was discontinued and they were forced to adopt sensible and sane economic policies.

Paul VI also adopted the fashionable Prebisch/Singer thesis that a secular deterioration in the terms of trade between the developed and the developing world, to the disadvantage of the latter, was bound to emerge in light of the supposed tendency of manufactured goods to rise in price while the prices of commodities (in which developing countries tended to concentrate) fell. In fact, the alleged deterioration in the terms of trade never occurred, as Gottfried Haberler was already arguing ten years before Populorum Progressio, if anyone was bothering to listen. Yet it was on these faulty grounds that Paul VI then proceeded to discourage free trade as a path to prosperity for the developing world. (I realize some readers of this site may oppose free trade, but the conservative argument against it is that it allegedly hurts the rich country and benefits the poor country—surely we concede that someone benefits from free trade, right?) Countries that have followed that advice have lagged far behind those that have integrated themselves into the international division of labor. There is no denying this.

Was it “dissent” to have observed that the Pope’s factual error about the terms of trade was indeed a factual error? Was it “dissent” to have pointed out that these recommendations would not have their intended effect? Were we to believe that the Pope’s authority over faith and morals extended also to cause-and-effect analysis applied to international development aid?  These questions should answer themselves.


Pope Benedict XVI on Foreign Aid

By the 1980s and 1990s, the consensus among observers of all kinds was that Bauer had been vindicated, and that these programs had indeed done more harm than good. Even the most intractable opponents of common sense, like the New York Times and the International Monetary Fund, were forced to this conclusion. And yet we read, in 2009, in Pope Benedict XVI’s Caritas in Veritate:

In the search for solutions to the current economic crisis, development aid for poor countries must be considered a valid means of creating wealth for all. What aid programme is there that can hold out such significant growth prospects—even from the point of view of the world economy—as the support of populations that are still in the initial or early phases of economic development? From this perspective, more economically developed nations should do all they can to allocate larger portions of their gross domestic product to development aid, thus respecting the obligations that the international community has undertaken in this regard. [emphasis in original]

All right, I’ll say it: this is wrong in every respect. However well intentioned it may be, it is absolutely wrong. We can express our unhappiness with statements like this as respectfully and non-flippantly as possible, but to remain silent about them leaves the false impression to potential converts that they would be committed to obviously debatable propositions like these should they choose to enter the fold.

In the wake of the new encyclical’s release I came across a few disparaging references by conservative Catholics to Paul VI and Populorum Progressio, against which these critics (rather implausibly, in my view) wished to contrast the more sober and sensible Caritas in Veritate.  What’s interesting about this is that I don’t recall any of these critics, some of whom were alive during Paul’s pontificate, offering such remarks at that time. But if Populorum’s advice is ill considered to the point of having been refuted by experience by 2009, then it was at least open to discussion in 1967. Where was that discussion? Why is Populorum being critically examined only now, after the damage has been done?

Now I repeat: only the most uncomprehending or superstitious Catholic would think the Pope’s authority over faith and morals granted him some kind of magical insight into the best model to pursue for Third World development. Were that true, then economics in general and development economics in particular should be abandoned immediately, since simple inquiries with the Pope would yield all the answers we might need.

This is why Pope Leo XIII once declared,

If I were to pronounce on any single matter of a prevailing economic problem, I should be interfering with the freedom of men to work out their own affairs. Certain cases must be solved in the domain of facts, case by case as they occur…. [M]en must realize in deeds those things, the principles of which have been placed beyond dispute…. [T]hese things one must leave to the solution of time and experience.


Sins of Omission

In addition to some of its more unfortunate statements, Caritas in Veritate is also a gigantic missed opportunity. There are legitimate moral concerns to be raised about the structure of the world’s monetary systems, but Benedict XVI does not discuss them.

If those moral concerns interest you, I suggest Jörg Guido Hülsmann’s brilliant work The Ethics of Money Production, or my The Church and the Market. (The former title was greeted with great enthusiasm in The Wanderer by Paul Likoudis, a good man whom I would classify as a third-way distributist of some sort, so its appeal extends well beyond the usual Misesian circles.) Hülsmann shows that within Catholic tradition there is ample testimony to the wickedness of monetary debasement, fractional-reserve banking, and numerous other institutional commonplaces we hardly give a second thought. As Hülsmann argues, there is no moral or economic case for the monetary system under which we are forced to live—a system that has never been introduced voluntarily but has always been enforced by violence, with the police empowered to suppress alternatives. The insidious nature of the government’s monopoly on money becomes even clearer when a currency degenerates into hyperinflation, all known examples of which have occurred under monopoly fiat-money systems. Short of a completely state-run system, it is as far from a free market as one can imagine.

The system we have now involves a government-privileged central bank with a monopoly on the creation of legal-tender money, charged with watching over a cartel of ostensibly private but also state-privileged commercial banks.  Its debasement of money makes it very difficult for people to save for the future without having to become speculators of one kind or another. A hard-money system, on the other hand, permitted the average person to save for the future simply by accumulating precious-metal coins, which, back in the days when they served as money, held or increased their value over time. Who today would save for the future by piling up Federal Reserve Notes? Society’s most vulnerable now must enter the stock market or take other kinds of risks just to hold on to their wealth. Is this not a moral issue?

The present system gives rise to the business cycle when it attempts to push interest rates below their free-market level. The resulting discoördination within the structure of production puts the economy on a path it cannot follow indefinitely. The bust then throws countless households into turmoil, and inevitably encourages the most despicable, predatory behavior on the part of firms seeking bailouts.

The monopoly central bank institutionalizes the problem of moral hazard. There is no physical limitation on the creation of additional paper money. For that reason, major market actors know there is no physical constraint on bailing them out in emergencies. The only obstacle, easily conquered, is one of political will. It should be obvious enough how a system like this both promotes an artificially elevated level of risk tolerance and benefits the already privileged at the expense of the average person.

All of these arguments and others besides are developed in more detail in Hülsmann’s book and in my own Meltdown and The Church and the Market. The encyclical unfortunately neglects these moral problems in favor of what strike me as platitudinous warnings about materialism and greed that I might encounter in secular form in any mainstream publication you care to name. Had the Pope instead raised the serious moral concerns I have outlined here, he would have lent his prestige to jump-starting a long-overdue examination of financial practices we have long taken for granted. Instead, although Benedict XVI surely would not think of it this way, the encyclical by and large told the Powers That Be what they wanted to hear: materialism and greed need to be kept in check by economic planners and stabilizers. (Quis custodiet ipsos custodes? one wonders.) In other words, the regrettably conventional recommendation of Caritas in Veritate appears to be closer regulation of the existing system.

Because these institutional factors are neglected, moreover, the encyclical lacks any systematic comprehension of business cycles, which by clear implication the reader is left to believe are caused by the aggregate sum of individual acts of wickedness. The interesting question—namely, why these acts of wickedness should occur in sudden, cyclical clusters—is not raised.

What, then, is a Catholic to do? There is no need to provide chapter and verse to the effect that the Pope is not (and was never thought of as) an absolute monarch whose every utterance is to be greeted with obsequious flattery. Any educated Catholic knows this. Throughout the vast bulk of Church history, the cult of personality—let’s call it what it was—that surrounded Pope John Paul II would have struck Catholics as downright bizarre.

St. Thomas Aquinas contended that a layman may rebuke his prelate, even publicly, if the latter is giving scandal. Under the heading “Whether a man is bound to correct his prelate,” St. Thomas writes: “It must be observed, however, that if the faith were endangered, a subject ought to rebuke his prelate even publicly. Hence Paul, who was Peter’s subject, rebuked him in public, on account of the imminent danger of scandal concerning faith.”

Now again, I like Benedict XVI, and I believe he has made important changes for the better in the life of the Church. But certain key passages of Caritas in Veritate, in addition to being unhelpful or ill considered, erect gratuitous obstacles to conversion on the part of countless Protestants and other non-Catholics. If St. Thomas’ counsel does not apply in this case, where would it apply?

Article URL: http://www.takimag.com/site/article/truth_charity/