Sunday, February 04, 2007

A Preface to Catholicism, Protestantism, and Capitalism

Catholics, so long as they held closely to the social teachings of the Church, could never act in favour of capitalism.Amintore Fanfani

To try to run an economy by the highest Christian principles is certain to destroy both the economy and the reputation of Christianity. Michael Novak

Catholicism, Protestantism, and Capitalism was last published in 1984, at which time Notre Dame University Press issued its edition with two introductions: one which accepted the book’s basic premise, and another which trashed it.

Thus part of the reason for making Fanfani’s classic work available again is to set the record straight, and to put to rest the arguments advanced against it by libertarian economists and war-mongering neo-conservatives, who suggest that the intellectual roots of capitalism are compatible with – and even a natural outgrowth of – the tradition of thought and culture bequeathed to us by the Catholic Church.

Fanfani’s contention is just the opposite: that there is an unbridgeable gulf between the Catholic and the capitalistic conception of life. While most criticisms of that position are ably refuted throughout the book, it may be too much to expect – in this era of spin and media magic – that a reader will approach this text with a mind open enough to be persuaded by it. Such a sad state of affairs is due in no small part to the work of a single man who has come to represent all that Catholic thought has to say on economic subjects: that man is Michael Novak.

In 1978, intrigued by the relationship between religion and economics, Novak joined the American Enterprise Institute, founded to preserve and strengthen private enterprise, among other things. In 1979 he made his first public defense of capitalism; he has been hard at work developing a theology of capitalism ever since. His theology is expressed mainly in two books, the 1982 Spirit of Democratic Capitalism and the 1993 Catholic Ethic and the Spirit of Capitalism. Both were also AEI projects; and the latter included a revision of the Introduction that criticized Fanfani’s book in its 1984 edition – it, too, written by Michael Novak.

It can of course be argued that Novak is read exclusively by the neo-con crowd, that his following is limited, that few Catholics care what he thinks. All happily true, to some extent. This new edition of Fanfani’s work is intended to appeal to a range of people who, regardless of Novak’s position, are predisposed to second thoughts about the way capitalism works: traditionalists, agrarian conservatives, anti-corporate leftists, etc. Nevertheless, among Christians, particularly in America, there remains an almost total conviction that capitalism is simply the way of doing business. But as Fanfani demonstrates in his book, the notion that capitalism is the ideal economic system is – especially for Catholics – inadmissible and indefensible.

Sixty years ago, however, living in the shadow of the Depression and Pius XI’s Quadragesimo Anno, most Catholics accepted, at least in principle, that unbridled capitalism isn’t all it’s cracked up to be. Today such an assumption is found only among left-wing Catholics whose commitment to the material betterment of the masses is often rooted in a Socialist tradition as antithetical to the Faith as its capitalist ancestor. The absence of a truly Catholic conception of anti-capitalism from the 1960s onward must be chalked up to a total failure of Catholic clergy and laity to articulate and understand the Social Doctrine of the Church, a Doctrine constituting – despite attempts to discredit the phrase – the third way that transcends the tyranny of both Market and State.

The rise of Socialist anti-capitalism among Catholics was a boon for the capitalists. Absent a robust Catholic Social Teaching, socialism tends to monopolize the anti-capitalist position, providing the opportunity for conservatives to dismiss it along with Socialism itself.

Re-enter Mr. Michael Novak, reformed socialist. When he left Socialism to embrace the free economy, he didn’t abandon his concern for the poor (who he claims are better served by capitalism) nor his attachment to democracy (which he revered even while a socialist). What he did reject was the notion – mistakenly attributed to Socialism – that a non-pluralist morality should govern economic life...the very notion at the heart of the Social Doctrine of the Church!

Whether or not Novak really ever believed the Church’s teaching that morality must direct the socio-economic order, the idea was certainly anathema to him by the time he became a die-hard free marketeer. By identifying that teaching with socialism, he smears a truth (that morality must regulate economics) with the errors of socialism (e.g., its tendency towards bureaucratization, hostility to private productive property, etc.). This sleight of hand constitutes the essence of Novak’s ignorance of the true third way and his apology for capitalism, and of his attack on Fanfani’s book.

The anti-capitalism equals socialism canard has become the standard reply of neo-cons and libertarians to the Catholic anti-capitalist position. There is little doubt that Novak’s efforts have done much both to convince American Catholics that capitalism is their only economic option, and to discredit the real Catholic answer to that contention.

Given this predisposition of many Catholics towards capitalism, we offer the following look at the essential strengths of the Catholic position, and the principal fallacies of its capitalist counterpart. And the Catholic tradition to which Fanfani was heir is further testimony to his fitness to represent that position – a fitness which his critics, like Novak, do not possess.

The approach Fanfani takes in his work is based upon propositions necessarily implied by his Catholicism. Today, sadly, such propositions are not self-evident to many Catholics. The popular grasp and understanding of the Faith has declined tremendously among Catholics over the last half century. Meanwhile, contemporary scholars, claiming to be Catholic, routinely argue from positions plainly opposed to the Faith. But Fanfani’s assumptions are Catholic; failure to grasp them would inhibit a real understanding of his work. And a Catholic critique of Fanfani’s conclusions which – like Novak’s – does not accept these premises, would be ipso facto invalid, for no Catholic can argue from a Catholic perspective while rejecting Catholic truths. These truths we now do well to reconsider.

1. Sin and Liberty. The Catholic conception of original sin is that human nature was wounded as a result of the sin of our first parents. The intellect was dimmed, the will weakened, and the passions incited to rebellion against reason. These effects give man a tendency to do evil, and a propensity to fail in his quest for truth. Neither means that man cannot do good nor know the truth; they do mean that it is exceedingly difficult to do so without sanctifying grace.

The Catholic notion of liberty is analogous: just as original sin deformed and weakened man’s nature, so actual sin is a deformed exercise of man’s liberty – it is in fact slavery to error and evil. Though man is able to sin through an exercise of what is called natural liberty (the psychological ability to choose freely between courses of action), sin is not something that he has a right to accomplish, because man is only morally free to choose the good and the true. In this freedom does man possess his liberty, the liberty of the glory of the children of God.

2. Law. Thus the law is designed not to safeguard every man’s right to do as he pleases, but rather to facilitate his practice of virtue. It exists to help man overcome his weakness and to compensate for the defect of his liberty. This applies not only to the natural law written in the hearts of men (which we moderns attempt to place solely within the individual conscience), but also to the visible, public laws of nations and states, which, where valid, are merely practical applications of the natural (or moral) law, itself a part of the Eternal Law of God. The purpose of human law is to lead men gradually to virtue (II, I, 96, Art. 2, ad 2) says St. Thomas, whose teaching is confirmed by Leo XIII in Libertas, §9.

It is easy to forget, in a world where nations can obliterate their neighbors in the name of modern liberty, that true freedom is not a free for all but the ability to choose freely the good.

The true liberty of human society does not consist in every man doing what he pleases...but rather in this, that through the injunctions of the civil law all may more easily conform to the prescriptions of the eternal law.

4. The third way. As a Catholic, Fanfani knew that the choice of economic systems is not limited to one between socialism and capitalism. There is a real alternative, built upon the Catholic sense of Liberty, Law, and man’s last End, in which (1) landed property is well distributed; (2) workers and employers are organized into guilds or corporations on the basis of economic function; and (3) these salutary institutions of economic life are protected by the sanction of the law. In the Italy of Fanfani’s time this alternative was referred to as Corporatism, but it dovetailed with what was being discussed elsewhere in Europe as Distributism, Solidarism, and the Guild System. It was socio-economic reality just before Fanfani’s mentor, Toniolo, began his career; it remained for Catholic thinkers an ideal to which to aspire. This alternative of the Catholic third way is, in Fanfani’s writing, an historical and theoretical reality, serving both as a reply to the charge that a critic of capitalism must be a socialist, and as an incarnation of Catholic economic principles, through which they can be visualized and understood.

As an alternative to the two ism’s, Catholic corporatism was espoused by the chief thinkers who preceded Fanfani. La Tour du Pin, in his 1907 Towards a Christian Social Order defended the corporate structure as the alternative to individualistic capitalism. And Toniolo argued on the model of the Italian middle age guilds...that corporativism represented a ‘third way’ between liberalism and socialism, a position vindicated by Quadragesimo Anno, which directed that those twin rocks of shipwreck (§46) be avoided by establishing guilds of Industries and Professions, and towards which it called for every possible effort (§87) to be made.

As a result, there were limited but real successes, prior to World War II, practically vindicating the corporatist vision not only in the Portugal of Salazar and the Austria of Dollfuss, but in almost every country in Europe, in which large numbers of Catholics were actively campaigning for a Catholic social order: Drawing their inspiration from...encyclicals...from the late nineteenth century, [Catholics] from countries as diverse as Austria, Italy, Spain, Portugal, Poland and Lithuania sought to found political movements which, by defining themselves as against both liberal democracy and modern totalitarianisms, advocated a third way of strong central government combined with a devolved structure of guilds and corporations. It was in the early 1930s that this current...reached its peak. The regimes of Salazar in Portugal and of Dollfuss in Austria drew much of their inspiration from these ideas and in turn served as an example which other movements sought to emulate (emphasis ours).

For Fanfani, the reality of the guilds was a living symbol of an organization of economic life according to Catholic principles. Though today liberal economists eager to apologize for capitalism ignore or ridicule the guilds, the best of Catholic historians, such as the Belgian Godefroid Kurth (1847–1916), defend them as one of the numerous necessary means...adopted to prevent that unbridled competition through which some become unduly rich by exploiting their fellowmen, and reducing multitudes of them to misery. Fanfani understood that in the guilds was found the evidence of Catholic principles at work in the economic order: If European history knew a pre-capitalistic age, it is in that age that we must seek for a trend of public life and private activity in harmony with the social principles of Catholicism...when Catholic ethics have been a prevailing influence in public life, the result has been for various institutions and laws to co-ordinate the activity of private individuals in non-capitalistic orders (emphasis ours) (p. 118).

Chief among these institutions were the guilds, in actuality and in the vision of Fanfani and scholars before him. Without the alternative to socialism and capitalism that the guilds (and the Catholic thought inspiring them) represent, modern scholars can only argue about the desirability of socialism or capitalism. To approach Fanfani without understanding that there exists an alternative radically different from these two modern isms is to miss the essence of his thesis. Even worse, to offer a critique of Fanfani’s vision, without understanding the Catholic ideal, is to respond only to a convenient socialist construct disingenuously presented as the only alternative to the domination of men by impersonal market forces. Only in understanding what the Catholic vision argues for can one have a full appreciation of what it argues against, and why.

The position adopted by Fanfani’s critics who defend a so-called democratic capitalism is rooted in errors, both philosophical and historical. It can in no way recommend itself to Catholics as an alternative to Fanfani’s vision. The position is (1) wholly illogical and (2) based upon principles fundamentally opposed to the Truth. Furthermore, (3) what is claimed of capitalism as it is actually practiced has no resemblance to capitalism as it is actually practiced! Following is a brief look at each point.

(1) The very concept of democratic capitalism is sophistry, pure and simple. It fuses together two contradictory principles (one arguing for moral and cultural restraint upon economic life, and the other arguing for a total lack of it) which are then emphasized or downplayed in response to polemical necessities.

The notion’s chief apologist maintains in his so-called masterpiece (The Spirit of Democratic Capitalism) that economic institutions exist in a desirable tension (p. 171) with political and cultural institutions, effectively denying a premise (which he sneeringly dismisses as pre-modern residue (p. 263)) maintained by the greatest Catholic and classical philosophers (not to mention Popes!): that economic life is subject to morality, that political economy is subordinate to moral philosophy. For Novak the idea is anathema, for if implemented it would get in the way of unadulterated material and financial progress: [Economic] liberty is valued as the atmosphere most favorable to invention, creativity, and economic activism. To repress it is to invite stagnation (SDC, p. 352).

The idea that political and cultural institutions exist in a tension with the economic system allows Novak to claim that democratic capitalism both maximizes freedom and limits economic life by salutary controls. The clever assertion attempts to satisfy those who feel the need for a limit to economic life and those who want only the unrestricted ability to amass wealth. The problem is that an economic system properly and effectively controlled by moral and cultural concerns – like the kind imagined in Quadragesimo Anno – is not capitalism, for it strictly limits both individualism and the free market, fundamental aspects of capitalism which Novak admits are its philosophical bases.

The only measures that democratic capitalism implements of its own accord are those necessary to keep the system working. And the example Novak chooses to illustrate his point proves our point. He maintains that Roosevelt’s New Deal (!) instituted economic reforms that were not only consistent with democratic capitalism, they have become part of its substance (p. 253). But Roosevelt’s measures did nothing to rectify the essential disorders of capitalism (e.g., the concentration of wealth and productive property, the decay of craftsmanship, the triumph of mass production, the herding of people into cities and suburbs). They were mere palliatives to ensure the continued operation of a flawed system, effectively ushering in Belloc’s Servile State. Novak’s reference to a 1919 American Bishops’ document on social life, which he claims inspired some New Deal reforms, only perpetuates the illogic. For it actually recommended a religious, non-pluralist, non-liberal solution to the social question with a Distributist approach to private property, all of which Novak rejects, and which found no place in New Deal legislation he references. The limits to capitalism spontaneously developed by the moral, cultural, and political structure in which it is embedded are merely window-dressing, designed to beautify a system based upon the unrestricted right of property owners to employ their property to pursue ever more wealth; and it is only this window dressing which Novak endorses.

(2) At the root of democratic capitalism is a philosophical and historical vision totally at odds with Catholic truth, based rather upon modern liberalism for which historical progress is an emancipation from all constraint, intellectual or juridical, of Truth. Thus it is hardly surprising that the so-called reforms engendered spontaneously by democratic capitalism are necessarily superficial. For the capitalism Novak imagines is ideologically anchored to radically liberal principles; thus it can never reform itself out of existence. The liberal, anti-Catholic principles are central, and the alleged, self-generating reforms simply sugarcoat a philosophically and religiously repugnant pill.

(3) The structure of modern political economy requires that men participating in it adapt to its exigencies. This is Fanfani’s argument on the historical development of capitalism. It is the argument his critics fail to understand, but which they unintentionally concede by their preoccupation and obsession with freedom It is a commonsense argument proved from the nature of man and his history: that a social system founded upon a liberty conceived of as freedom from all restraint succeeds only in giving the vicious free rein to compel the virtuous to compete with them on their own, vicious terms. The liberty guaranteed by such a system is not the freedom to do good, but rather a liberty which institutionalizes Original Sin. Novak himself testifies to this truth, perhaps unwittingly, when he says that capitalism is the economic system best designed to meet the premises of original sin (SDC, p. 350).

The performance of the modern capitalist system, a fruit of this disordered conception of liberty, today more than ever proves Fanfani’s point, that it is incompatible with a truly Catholic morality. It is not a hypothetical, disembodied capitalism which offends the Catholic conscience, but the one which is today actually practiced, notwithstanding claims that democratic capitalism does not live up to its social-Darwinist vision.

Modern capitalism as it is actually practiced, through its elimination of regulations protecting the small farmer and the small craftsman, has facilitated the concentration of productive property into corporate and industrial concerns which leave the mass of people owning only their ability to work in exchange for a wage. A mere 7% of Americans work for themselves, and only tenth of these do so on the land. In agriculture alone the example of Illinois in the U.S. Midwest is illustrative. Thanks to contract farming, vertical integration, and agribusiness consolidation, aided and abetted by government policies that pander to the parasitic inclinations of corporate greed, 300,000 family farms have been lost, and the percentage of Illinois families once living on the land has gone from 30 to less than 1. Small independent craftsmen and businesses have met similar fates in industries across the board.

Modern capitalism as it is actually practiced has caused the once dignified craftsman or tiller of the soil to abandon his privately-owned, productive property in the face of ruthless competition by more powerful concerns, and to settle for a wage exchanged for meaningless labor. Man the laborer is no longer the subject of economic activity, working out his salvation while practicing a vocation or trade important to the community and satisfying to the soul; he is instead a mere commodity.

Modern capitalism as it is actually practiced has subjected this property-less employee to the whims of unregulated market forces, forces which have seen close to 3 million jobs lost over the past year. Meanwhile, economic liberty is increasingly applied not only within Western nations but internationally as well. While small farms and family business are shut out by fast food chains, agri-business concerns, manufacturing conglomerations, and corporate mergers, the industrial bases of these countries – and their jobs with them – are being transferred to China, India and elsewhere, all in the name of reducing overhead and improving shareholder equity. Never mind Novak’s fantasy land where the business corporation is the strategically central institution of social justice; that modern corporation is necessarily more concerned with keeping an eye on the bottom line than keeping its workers out of the unemployment line.

Modern capitalism as it is actually practiced does nothing to restrict the corporate instinct to consider profits before people and money before men. Production is today simply and only a means of generating ever more token wealth. Novak provides the best example, indicating how democratic capitalism gives the citizens of a nation not what they need but whatever can be sold: ...massage parlors, pornography shops...prostitutes, pushers, punk rock... – you name it, democratic capitalism tolerates it and someone makes a living from it (SDC, p. 350). Modern capitalism as it is actually practiced does not stop with the mere sale of immoralities, trivialities, and luxuries. It rather bombards man’s poor, weak nature with a never-ending stream of spam, junk mail, glittering TV commercials, and newspaper and magazine advertisements, all in an effort to create a need for what is to be sold, regardless of whether it is moral or immoral, healthy or unhealthy, useful or useless. Such concerns are too esoteric for democratic capitalism, which in the name of liberty offers a free-for-all of license, turning a blind eye to right and wrong out of respect for the individual conscience. Modern capitalism as it is actually practiced leads, finally, to the disordered domination of money not only in the production and distribution of material goods but in the trading of factories, corporations, and money itself. The sale of whole enterprises to merger corporations, or of parts of firms through stock shares, has transformed productive companies, formed in principle to produce necessary goods in exchange for just remuneration, into laboratories for the ever more fanciful creation of artificial wealth. According to a recent financial newsletter – to note just one example – General Motors reported a 16.7% loss in its automotive division for the year’s first quarter, while its finance unit generated $700 million through mortgage operations. Meanwhile, there remain 3.93 million new cars sitting on various lots throughout the country, of which the big three automakers can hardly sell a fraction, in spite of offering cash-back incentives averaging over $3000 per vehicle. The result? The actual manufacture and sale of cars is simply a burden, offset by the automakers’ lending and financial operations. Some banks give away toasters to attract new customers, quipped the same newsletter; General Motors, apparently, gives away cars.

Nevertheless, all is not rosy with the new economy. In addition to job losses, the export of the manufacturing base overseas, and a near total extinction of the family farm and rural life, the financial system itself is near breakdown, thanks to inventive tricks played by corporate leaders and investment bureaucrats with various financial instruments and new modes of corporate governance. Last year 186 publicly traded companies filed for bankruptcy, in a staggering $368 billion of debt; WorldCom, Inc., alone contributed $109 billion to the figure, following an accounting scandal with irregularities of $9 billion. Experts say it is not surprising to see mammoth bankruptcies and deceptive accounting go hand in hand, remarked an understated wire report from last year.

Returning to the automotive example, the health of even the reliable corporations is ultimately a fiction. Many constitute a mini-Servile State, expected to care for retired employees all the way to the grave; the resultant obligations eventually liquidate the companies’ remaining financial strength. At some point, the great sucking sound of pension and health-care liabilities just overwhelms your ability to raise capital or invest in new plants and equipment, said the CEO of the Bethlehem Steel Corp, commenting on the news that General Motors’s pension and retirement obligation is $76.8 billion, as against an annual income of $3.9 billion. According to a Wall Street Journal report of last year, 360 of the top 500 companies face similar situations, with assets to cover only 79% of pension liabilities. With all of this against the backdrop of a world market of over $142 trillion (!) of financial derivatives (which veteran investor Warren Buffett called financial ‘weapons of mass destruction’ based upon their totally unknown impact on world finances), what is it exactly about Fanfani’s characterization of capitalism that is unfair or unreflective of capitalism as it is actually practiced? In light of the historical and theoretical facts detailed by Fanfani, as well as those of today, can it be true, as Novak claims, that markets as free as possible from governmental and religious command best serve the common good (SDC, p. 79)?

The answer, of course, is a categorical no. The modern economic landscape serves not the common good but a very particular good: that of those who can profit from the unrestricted employment of wealth in the generation of more and more of it.

That such a system must be maintained by effective propaganda and an elaborate apologia is not surprising, for its inauguration also required a campaign of ideological persuasion and political action. The breakdown of the Guild System and the destruction of widely distributed Property was hardly the natural triumph of progress and enlightenment. No, it was rather the result of concerted efforts to create a politico-economic system fully in harmony with the needs of capitalism (p. 97), as Fanfani says in his book.

Thus we see yet another aspect of his far-ranging vision, since similar efforts to preserve that system continue today unabated. Accompanying the legislation hostile to well-distributed property, and the even more hostile nature of the economic system itself, is a propaganda effort of incredible proportions, sponsored in part by the think tank of which Novak has been a part for 25 years, and whose board of trustees reads like a Who’s Who of Fortune 500 CEOs.

An apologia for the free market is to be expected from oil men, manufacturing giants, and the masters of debt. But for a Catholic to support their party line – by hiding the race to amass wealth, which is fostered by modern economics, behind clever theories and contrived social systems – is nothing less than a betrayal. For one cannot serve both Catholic Truth and capitalist lies anymore than one can serve both God and Mammon. Fanfani to his credit served the Truth, and in fidelity to that Truth he passed his judgment upon capitalism, which judgment we now commend to his modern readers. It was a judgment he was eminently qualified to make, and a judgment he made with logic, with integrity, and, most importantly, with Faith.

Twenty years ago Fanfani’s book was published with an Introduction impugning that judgment. We offer the book again with the hope that the credentials of its author and the logic of its thesis will be afforded due and accurate appreciation, and with the prayer that it will contribute to a renewal of true Catholic study, scholarship, and action in opposition to the evils of unbridled materialism and the unlimited desire for wealth.

One thing at least is certain. No one will henceforth be able to claim that the position of the Church towards capitalism is inadequately explained, insufficiently defended, or essentially unknown. Scholars claiming that Catholics have no qualms with capitalism must first confront and then refute this masterful work. To be taken seriously, they will have to be able to answer in the affirmative, Have you read and understood Fanfani?

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