The Ownership Solution

by Jeff Gates

The moral legitimacy of markets and democracies is based on the premise that they disperse power across a wide range of individuals, and thus benefit from the foresight, concern and common sense that reside uniquely in individuals and their communities. Unfortunately, today's "disconnected capitalism" is very far from this ideal model of dispersed control and constructive feedback. With so much finance capital concentrated in the hands of money managers (more than $12 trillion in 1996), money itself has become the measure of the public good, with capital markets operating as if on automatic pilot, guided solely by the maximization of financial returns.

What is worse, this detached form of free enterprise is combined with a global tendency to enrich the already-rich. Three decades ago, people living in the well-to-do countries were 30 times better off than those in countries where the world's poorest 20 percent live. This gap has since widened to 82 times and, according to the World Bank, is poised to widen further. As this rich-poor divide has widened, it is producing--according to the United Nations--a world "gargantuan in its excesses and grotesque in its human and economic inequalities." An example: the combined wealth of the world's richest 225 people is now equal to the combined annual income of the poorest 2.5 billion of the world's people (47 percent of the global population). The three richest people have assets that exceed the combined GDP of the 48 least developed countries.

The United States is, of course, not exempt from this tendency to inequality. While more American adults own stocks than at any time in history, 71 percent of households own no shares at all or hold less than $2,000 in any form, including stock mutual funds and popular 401(k) plans.1 Though the nation's net worth grew by $5 trillion from 1983 to 1989, NYU professor Ed Wolff found that 54 percent of that was claimed by the half million families who make up the top one-half of 1 percent of the US population. The net worth of the top one percent of households now exceeds that of the bottom 90 percent.

The story with income is similar. In 1996, the US Census Bureau reported record levels of inequality, with the top fifth of American households now claiming 48.2 percent of the nation's income while the bottom fifth gets by on just 3.6 percent. As with wealth, the trends are ominous. In 1973, the income of the top 20 percent of American families was 7.5 times that of the bottom 20 percent. By 1996, it was more than 13 times.

These trends led William McDonough, president of the Federal Reserve Bank of New York, to issue a strongly worded caution: "Issues of equity and social cohesion . . . affect the very temperament of the country. We are forced to face the question of whether we will be able to go forward together as a unified society with a confident outlook or as a society of diverse economic groups suspicious of both the future and each other."

Because these global and domestic trends fuel a system that simultaneously disconnects people from the economy and divides them from one another, we now face serious fiscal, political, social and environmental challenges. How can we respond constructively to these problems?

My answer begins with the fact that private property is an essential element of a private enterprise system. So the solution, I suggest, lies in ensuring that twenty-first century free enterprise draws on its core strength: using ownership itself as the means to reverse today's disconnectedness and division. In short, we must create more owners. Pursuit of this "ownership solution" presents us with three key challenges:

--How to make "capitalists" of those with little capital to invest;
--How to foster a broader distribution of wealth without forcibly redistributing already-owned wealth;
--How to evoke ownership patterns that include a stake by those most affected by commercial activity and those in the best position to affect it. Before presenting the essentials of this ownership solution, I first review four key problem areas whose resolution would be aided by a broader dispersion of personal ownership.

The Problems

Fiscal Unsustainability

In 1996, the US government paid out $839 billion in just three key income-support programs: Social Security, Medicare and civil service pensions. The bulk of these funds were paid to people who had accumulated insufficient assets to sustain themselves. This huge budget burden is our current fiscal reality, and that's well before the first of the nation's 76 million baby-boomers begin to retire.

These entitlement programs are now the third rail of American politics: touch them only at the risk of your political life. Yet without a system that enables Americans to accumulate significant economic assets, they will continue to use their political assets (their votes) to ensure some semblance of economic security. With a more broadly self-reliant populace, much of that fiscal capacity could instead be invested in infrastructure, education, research, health care, environmental restoration--or simply left in people's pockets.

As the world's "mentor" capitalist nation, the irony of this financial predicament is profound. Consider: at present, America's hugely regressive Social Security tax is the largest single tax paid by most taxpayers, accounting for 34 percent of this year's $1.7 trillion in federal tax receipts. Social Security is the only old-age pension for a majority of American workers in private industry. Most revealing of all, the present value of those anticipated payments now represent the most significant "wealth" for a majority of US households.

Thus, in the world's avowedly most capitalist economy, the most important asset for a majority of its citizens is an assurance that someone else will be taxed on their behalf. Adding insult to injury, that tax is on employment, the sole linkage that most Americans have to their capitalist economy.

Globalization exacerbates the problem by reducing the ability of governments to tax highly mobile capital, ensuring that a growing share of the tax burden is shifted to labor. Adding outrage to insult, Congressional discussion of income security is now focused on how best to finance Social Security rather than on the more obvious and more disturbing issue: Why, 63 years after its inception, are so many Americans still so reliant on it? Why do we still not have a capitalist system widely populated with capitalists?

Americans have yet to see an economically sustainable response to their precarious economic security. To date, the policy agenda has been a mind-numbing array of income-redistribution proposals, ignoring the need for policies that could connect them to income-producing assets, the only conceivable route to economic self-sufficiency in a private property economy. While unworkable ownership patterns are left largely intact, those who grow dependent on this "downstream" tinkering foster a fiscal inflexibility aptly characterized as "demosclerosis."

Constitutional Unsustainability

In the prologue to the Declaration of Independence, Thomas Jefferson altered John Locke's classic trilogy of "life, liberty and estates," or "life, liberty and property," to read "life, liberty and the pursuit of happiness." Perhaps there was something to Locke's original formulation. After all, the pursuit of happiness has material preconditions.

For example, a malnourished child is not enjoying a "right to the pursuit of happiness." Yet presently one in five American children live in poverty. Undereducated or poorly educated youth are not enjoying a "right to the pursuit of happiness" because they are denied access to the skills and the attitudes required to cope successfully with life in an increasingly globalized economy. Yet the GAO reports that a majority of the nation's 42 million public school students could not use computers (even if their schools could afford them) because of obsolete structures (half of the nation's 80,000 schools lack adequate electrical wiring while a third lack sufficient power). To force students into poor schools condemns them to a future of incapacity and poverty.

The constitutional mandate is clear: the government's duty is to actively advance the general welfare, and the general diffusion of the material basis for happiness is an indispensable component in ensuring the general diffusion of the right to the pursuit of happiness. The "pursuit of happiness" in a private property economy requires a government committed to broad-based property ownership as an essential material basis not only for happiness but also (per the Declaration) as a means to "provide for the general welfare, and secure the blessings of liberty to ourselves and our posterity." The power granted government to promote the general welfare suggests an affirmative duty to ensure that the nation's welfare-- including its material wealth--is diffused not partially but generally, thus remedying a system that harbors a socially corrosive and increasingly divisive gap between haves and have-nots.

Social Unsustainability

Today's fast-widening wealth and income gap is wreaking civil havoc. Fully a third of American men between the ages of twenty-five and thirty-four do not earn enough to keep a family of four out of poverty, with all that implies for the strains on marriage and the prospects for young families. This growing rift is also racial. The Census Bureau disclosed in 1991 that the meager median wealth of white households is seven times that of Hispanic households and ten times that of African-American households.

This ever widening gap has disturbing social and political implications. Two-tier societies are not fertile ground for robust democracies. Extreme economic disparities threaten open political systems, as the possession of great wealth by a few confers on their holders inordinate power, which they are typically tempted to use in ways that run counter to the general welfare. Nor is the gap confined to narrowly economic conditions. In Unhealthy Societies: The Afflictions of Inequality, Richard Wilkinson draws attention to the fact that societal factors have emerged as a key limiting component in the quality of life in developed societies. Documenting "the overwhelmingly social and political nature of population health," he found that "death rates from about 80 percent of the most important 80 or so causes of death are more common in blue-collar than white-collar workers."

The marketplace is fundamentally indifferent to this inequality and divisiveness. Retailers have adjusted to social polarization by turning to a "Tiffany/Kmart" marketing strategy, tailoring their products and pitches to two very different Americas. Saatchi & Saatchi Advertising Worldwide warns its clients of "a continuing erosion of our traditional mass market--the middle class," while Paine Webber Inc. cautions investors to "avoid companies that cater to the 'middle' of the consumer market." In 1997, both Kmart and Tiffany reported earning surges while the mid-scale chains such as J.C. Penney suffered. The Affluent Market Institute predicts that by 2005 America's millionaires will control 60 percent of the nation's purchasing dollars (sales of high-end luxury yachts are already at record levels).

This dual society means that separate and decidedly unequal markets are becoming the norm--for example, private banking for the well-to-do alongside record levels of check-cashing outlets (the United States now has 5500 check-cashing outlets, more than double the number in 1988). The Gap recently remodeled and expanded its upscale Banana Republic clothing stores, adding 68 new outlets since 1992. Meanwhile, it created a lower-end chain called Old Navy, opening more than 200 outlets since 1993 (compared with just 21 new middle-income Gap outlets).

Environmental Unsustainability

Americans relate to their environment largely through their wallets and through market signals. At present, those signals are incapable of guiding us toward environmental sustainability. Pricing alone--whether for products or for property (such as share prices)--cannot convey the complex information required for a sustainable future. And the combination of concentrated and disconnected capital ensures a decision-making process in which environmental effects are too distant in time or place to be incorporated as a value in a system that defers to the very limited information reflected in financial values (particularly net present value).

Environmental sustainability has local roots. Acid rain is not an abstraction; it begins with a specific facility in a specific location emitting identifiable toxins that travel in highly predictable patterns. Similarly, when solvents show up in an aquifer, it is because of a particular producer at a specific locale manufacturing explicit products for specific clients. Though we can often identify the immediate physical cause of environmental damage, little attention has been paid to identifying the underlying institutional cause, particularly the economic and social conditions that evoke, mask, condone or even reward such behavior.

One of the key challenges to sustainability is the notion that every environmental problem can be tackled by a technical or regulatory fix--cleaner refrigerants, a better smokestack scrubber, quicker clean-up and so forth. Though technical, regulatory, and after-the-fact remedies are all helpful, sustainability requires prevention: better to build a fence at the top of the cliff than station ambulances below.

For example, imagine an annual shareholders' meeting of an electric power company at which a question is raised about the potential effect on the community from the disposal of the utility's effluents. Imagine further that there is potential for long-term damage to the health of that community's children depending on the choice of waste-disposal method. There's nothing quite like a contingent of concerned, vocal, informed, and empowered parents showing up at a shareholders' meeting--as shareholders.

That change in context could change both the tone and content of the meeting, transforming what is typically an impersonal, financially oriented, technical discussion into a forum in which the full range of relevant considerations--emotional, nonfinancial, personal, and moral--come into play. Broadening the range of opinions presented (and feedback solicited) could result in a very different decision-making process, particularly where the environmental effects are local but uncertain or difficult to quantify. Corporate decision-making looks very different when your family is at stake, not just your financial return. By crafting the legal environment of free enterprise to ensure a component of up-close capitalists, we enhance the likelihood that we'll see the emergence of sound environmental decision-making in today's finance-dominated commercial environment.

Inclusive Capitalism

Crafting an ownership solution to these fiscal, political, social and environmental problems will require a mix of private and public leadership. To improve social equity and enhance intelligent, people-responsive feedback, we need a more broadly participatory capitalism. However, capitalism is presently engineered not to create capitalists but to finance capital. Until those two very different objectives are combined, free enterprise has no chance of becoming widely populated with capitalists. Currently, the corporate sector finances itself within a "closed system of finance" that's wired for highly exclusive ownership when what's needed is a financial and a policy environment that ensures a steady broadening of capital ownership.

To grasp fully the challenge facing those who prefer a more inclusive capitalism, it's essential to realize just how "the rich get richer." Everyone knows it happens; surprisingly few understand the quite simple mechanics of how. As a quick glance at Table 1 indicates, companies fund themselves in a way that is designed not to create more owners but to raise more capital for existing owners.

The second practical challenge is to address the role played by personal versus business saving. As the chart below indicates, business saving (i.e., internally generated funds) have long been the dominant form of national saving--and is steadily becoming more so. Yet business saving fuels the rich-get-richer "closed system of finance" (see Table 2).

One thing that's abundantly clear: individual stock purchases alone are inadequate for expanding ownership. We can't expect wage earners to buy their way into significant ownership from already stretched paychecks. If ever we hope to experience the benefits of a property system that favors more than a privileged few, we need not a "level playing field" but a field engineered to ensure that more players have a reasonable chance of making it onto the field. The intelligent reengineering of conventional financing techniques can steadily broaden ownership-based on the same financial principles that have proven so successful in concentrating ownership.

Planning for Participation

In Economic Policy for a Free Society, libertarian theorist Henry Simons argued that "the libertarian good society lies in the maximum dispersion of property compatible with effective production." How can we achieve that dispersion?

The ownership solution suggests an answer--or really, an hypothesis. Because we've never had an economic system engineered for inclusion, we can't know for certain what the results will be--whether inclusive firms will be better producers, better environmental stewards, or more socially responsible. We don't know whether an inclusive society will more cohesive, less violent, and more humane. We don't know for sure how much ownership engineering is too much--or too little. And it is not yet clear how quickly the need for government will shrink as we see a shrinkage in the need for income redistribution. To find out, we need to experiment.

But we need the right sorts of experiments, ones that are grounded in financial pragmatism. The widely popular employee stock ownership plan (ESOP) is one such experiment. Since 1975, the tax code has encouraged the use of ESOPs as an ownership-broadening technique of corporate finance. Where shares are acquired for employees on a debt-financed basis, ESOP-sponsor companies are allowed a tax deduction not only for interest expense but also for principal payments on the loan. That enables employees to acquire shares on a self-financed basis, paying for shares with the future earnings of the company rather than with the past savings from their labor.

For example, through an ESOP, founders of a company have a tax-favored way to sell their shares (potentially deferring payment of capital gain tax), companies get a tax deduction for funding an employee benefit plan, and employees get ownership on a tax-deferred basis. In essence, employees gain access to today's "closed system of finance" to build a nest egg, often without having to lay out cash.

Some 11,000 American corporations now have ESOPs and similar employee ownership plans, covering almost eight million employees. Ninety percent of ESOPs are in unlisted companies though ESOPs are also popular in publicly traded firms. For instance, United Airlines is 55 percent employee-owned through an ESOP. But while broad-based employee stock options are becoming popular, ESOPs are growing quite slowly, with 1996 ESOP transactions totaling less than $1 billion in a year when the US economy saw almost $1,850 billion in total capital financing (capital expenditures plus mergers and acquisitions). To make employee ownership attractive, companies need additional encouragement--such as a preferred corporate income tax rate for maintaining a prescribed level of broad-based ownership.

Or ownership-broadening firms might receive more favorable depreciation rates. And a tax deduction might also be allowed for, say, half the proceeds realized on an estate's sale of stock to an ESOP, thus encouraging today's well-to-do to ensure that part of their shares end up in the hands of the company's natural owners--the employees. The ESOP notion could also be expanded through a "RESOP"-related enterprise stock ownership plan--to create an ownership stake for those employed by firms (including micro-enterprise suppliers or distributors) related to an ESOP- sponsoring firm.

Cash Flows, Ownership Grows

As an ownership-engineering rule of thumb, remember: where the cash flows, ownership grows. That rule can be used to make owners not only of employees--as with ESOPs-but also of customers and even the general public. For example, CSOPs (customer stock ownership plans) could be implemented in investor-owned power companies that are financially reengineered so that their customers own a portion of their shares. As investment bankers know, practically any revenue stream can be used to "owner-ize" income-producing assets over time. In the case of a power company, the company's value is based on its customers paying their bills. Without their patronage, the company's financial value as a going concern would quickly vanish. The goal of the CSOP is to craft a capital structure that will capture some of that financial value for those whose patronage maintains that value.

Doubtless you pay two utility bills each month, power and water. Unless you're a rare exception, you don't own shares in those utilities. Yet each bill you pay includes a financial return for someone who does. You can live in a utility district for 100 years and still pay a return each month to someone who may live thousands of miles away. Why not, over time, localize a component of that ownership so that you pay some portion of that return to yourself? That's a CSOP.

Similar self-financing techniques can be used to create individual ownership based on geography or citizenship. Thus, consider GSOCs--general stock ownership corporations. They would "owner-ize" natural resources like mining deposits or drilling rights on public lands. A GSOC could, for instance, retain a royalty interest in an oil field, while a more traditional company, say with a combination ESOP/RESOP, is awarded extraction rights. Some shares (or warrants) could be allocated to fund local education or infrastructure.

In the only version of this concept thus far enacted into federal law, legislation was passed in 1978 enabling a for-profit GSOC that would have allowed Alaskan citizens to acquire British Petroleum's stake in the TransAlaska Pipeline Service Corp. A self-financing element would have paid the acquisition costs from future dividends. But the plan, championed by Senator Mike Gravel of Alaska, was never implemented, for local political reasons. Alaskan voters did, however, establish the Alaska Permanent Fund Corp., funded with lease payments and royalty income from the state's oil fields. Since 1977, it has paid out over $5.8 billion to 500,000 Alaskan residents from a principal now exceeding $20 billion.

Politics

Mechanisms like these are easily crafted. What's required is the public will to put them to use. That might be kick-started with an opinion poll, asking people if they'd like Congress to enact policies that create more capitalists. It was just such a poll--asking whether Congress should enact policies fostering full employment--that brought political credibility to the Employment Act of 1946. That act established the President's Council of Economic Advisers, requiring that it publish an annual report appraising the condition of the US economy--with the glaring exception of any requirement to appraise the condition of the nation's ownership. The 1946 act could be amended, creating a new Cabinet-level Department of Capital Ownership (similar to the job-oriented Department of Labor) that, working with the council, could include in each year's Economic Report of the President a survey of current ownership patterns and an appraisal of progress toward expanded capital ownership. What gets measured gets managed.

Similar use could be made of ownership impact reports, analogous to the environmental-impact assessmentsrequired by government agencies. For instance, government contracts could require an ownership impact analysis, identifying both the short-term and long-term effect on ownership patterns. Imagine if we'd had such a requirement when Eisenhower approved contracts for building the interstate highway system. Or during Reagan's $1 trillion defense build-up. Or to identify the ownership impact of his 1981 tax bill providing $872 billion in deficit-financed supply-side investment incentives. Similar reporting could accompany the granting of broadcast licenses, the opening of timber or oil resources to extraction, the granting of loan guarantees, or the provision of export/import assistance.

Taking that one step further, the government's purchasing power, for items ranging from aircraft carriers to airline tickets, could be directed to corporations with certifiably broad-based ownership. The value of these firms is often largely dependent on taxpayer-funded purchases. Taxpayers would realize far more value for their money if contract awards enhanced the economic self-sufficiency of a broad rather than a narrow base of their fellow taxpayers. Any government contract -- federal, state or local -- could likewise be limited to companies with broad-based ownership.

Through non-invasive ownership engineering, a shared capitalism can gradually replace today's exclusive, detached, divisive, and socially corrosive ownership patterns. This shift requires a mix of policy and private-sector initiatives focused on a steady broadening of ownership because only such a mix will, in time, change the current concentration. While full employment can remain a centerpiece of economic policy, it must be complemented by an ownership participation policy.

Oddly enough, this could fill the gaping policy void in either the Republican or the Democratic Party. That's because an ownership solution offers a unique political hybrid--lending itself to populist rhetoric while practical prescriptions are typically rock-ribbed conservative and appealingly progressive.

Toward a Connected Capitalism

Ironically, those most disadvantaged by today's neoclassical model and the fast-emerging impact of globalization may find their best philosophical ally in Adam Smith, who cautioned two centuries ago about the abuses likely to accompany excesses of economic liberty: "Those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments."

Both Smith and Thomas Jefferson were forceful advocates for systems of widely distributed control; both markets and democracies trace their origins to the concept of genuinely self-designed systems. Achievement of that still-elusive goal awaits an institutional environment engineered to incorporate the aspirations and ideas of those whose lives are affected by the commercial forces that surround them. We are only at the beginning stages of understanding how to foster such a system. At the very least, however, we must think more broadly, more deeply, and more creatively about how property--as an intrinsic element of free enterprise--can itself be engineered to ensure a more broadly shared prosperity.

1See James M. Poterba and Andrew A. Samwick, Stock Ownership Patterns, Stock Market Fluctuations, and Consumption (Washington DC: Brookings Institution, 1995), pp 295-357, 368-72.

Boston Review

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Communism and Woman

by Msgr. Fulton J. Sheen

The sixth in a series of addresses entitled LIGHT YOUR LAMPS delivered in the Catholic Hour on March 2, 1947, by Rt. Rev. Msgr. Fulton J. Sheen of the Catholic University of America, produced by the National Council of Catholic Men in cooperation with the National Broadcasting Company. After the series has been concluded on the radio, it will be made available in a pamphlet.

The proudest boast of Communism is that it has finally emancipated the woman. Marx writes: "Differences of age and sex have no longer any distinctive social validity. All are instruments of labor." The key word here is instrument which reduces a human being to the dignity of a monkey wrench. The assumption was that woman was free as soon as she became available for production. One of the paradoxes of our irrational world is that woman today is glorified when she produces an Atomic Bomb, but not when she can produce life. It is like praising violinists for producing sewer pipes instead of melodies.

At the very beginning of the Communist Revolution in Russia a decree was passed declaring that all women between the ages of seventeen and thirty-two became the property of the State, and that the rights of husbands were abolished. (Novaia Zhizn, No. 54, 1918 p. 2.) In keeping with the idea that liberation means working in a factory rather than in a home, we read in a Soviet book published in 1935: "Women's labor has become one of the main sources from which industry could draw fresh supplies of workers. During the earlier years of the first Five Year Plan, there were about six million housewives in the towns. All the local Communist organizations received orders to call up these reserves and attach them to production." (Shaburova, Woman is a Great Power, 1935 edition, p. 32) The women refused to accept what the Communists called "the emancipation for women from depressing domestic atmosphere" but they were ultimately forced into "emancipation" and began working in mines, sewers, and in the manipulation of pneumatic drills. A few years ago twenty-three percent of the miners were women. The Soviet poets composed ballads for the women to sing as they were "released from socially unprofitable and exhausting domestic toil." (Shaburova, Ibid, p. 36)

"Formerly women only knew how to cook soup and porridge,
Now they go to the foundry — At the foundry it is nicer." (Ibid, p. 38)

This idea of the emancipation of women through industrialization is not altogether a Communist idea, but like many others has been derived from Western bourgeois capitalistic civilization which thought of the liberation of woman in terms of equality with men. The only difference is that the Communist merely carried the idea to its logical extreme, and if it scandalizes us now it is because our bourgeois world never understood the full implication of its error.

The two basic errors of both Communism and a capitalistic liberal civilization on this subject were: 1) Women were never emancipated until modern times. Religion particularly kept them in servitude; 2) Equality means the right of a woman to do a man's work.

First, it is not true that women began to be emancipated in modern times and in direct proportion to the decline of religion. The fact is that woman's subjection began in the seventeenth century with the break-up of Christendom and took on a positive form at the time of the Industrial Revolution. Under the Christian civilization women enjoyed rights, privileges, honors and dignities which have since been swallowed up by the machine age.

In eighty-five Guilds in England during the Middle Ages, seventy-two had women members on an equal basis with men in such professions as barbers and sailors. They were probably just as outspoken as men because one of the rules of the Guilds was that "the sistern as well as the brethren" may not engage in disorderly or contumacious debates. In Paris there were fifteen guilds reserved exclusively for women, while eighty of the Parisian guilds were mixed. Nothing is more erroneous historically than the belief that it was our modern age which recognized women in the professions. The records of these Christian times reveal the names of thousands upon thousands of women who influenced society and whose names are now enrolled in the catalogue of saints, Catherine of Sienna alone leaving eleven large volumes of her writings. Up until the seventeenth century in England, women functioned in business perhaps even more than today. In fact, so many were in business that it was provided by law that the husband should not be responsible for her debts. Between 1553 and 1640 ten percent of the publishing in England was done by women. Because the homes did their own weaving, cooking and laundry it has been estimated that women in pre-industrial days were producing half the goods required by society. In the Middle Ages women were as well educated as men and it was not until the seventeenth century that women were barred from education. Then at the time of the Industrial Revolution all the activities and freedom of women were curtailed as the machine took over the business of production and men moved into the factory. Then came a loss of legal rights by women which reached its fulness in Blackstone who pronounced woman's "civil death" in law.

As these disabilities continued woman felt the loss of her freedom, and rightly so, because she felt she had been hurt by man who robbed her of her legal rights, and she fell into the error of believing that she ought to proclaim herself the equal of man, forgetful that a certain superiority was already hers because of her functional difference from man. Equality then came to mean negatively, the destruction of all privileges enjoyed by specific persons or classes, and positively, as absolute and unconditioned sex equality with all men. These ideas were incorporated into the first resolution for sex equality passed in Seneca Falls, New York in 1848: "Resolved that woman is man's equal, was intended to be so by the Creator,1 and the highest good of the race demands that she be recognized as such."

This brings us to the second error in the bourgeois-capitalistic theory of women, namely, the failure to make distinction between mathematical and proportional equality. Mathematical equality implies exactness of remuneration; for example, two men who work at the same job at the same factory should receive equal pay. Proportional equality means that each should receive his pay according to his function. In a family, for example, all children should be cared for by the parents, but it does not mean that because sixteen year old Mary gets an evening gown with an organdy trim the parents should give seventeen year old Johnnie the same thing. Women in seeking to regain some of the rights and privileges they had in Christian civilization thought of equality in mathematical terms or in terms of sex. Feeling themselves overcome by a monster called "man" they identified freedom and equality with the right to do a man's job. All the psychological, social and other advantages which were peculiar to women were ignored until the inanities of the bourgeois world reached their climax in Communism where a woman was emancipated the moment she went to work in a mine. The result has been that woman's imitation of man and her flight from motherhood has developed neuroses and psychoses which have reached alarming proportions.

The Christian civilization never stressed equality in a mathematical sense, but only in the proportional sense, for equality is wrong when it makes the woman a poor imitation of man. Once she became man's mathematical equal, he no longer stood when she came into a room, no longer gave her a seat in a bus, and no longer took off his hat in an elevator. The other day in a New York subway a man gave a woman his seat and she fainted. When she was revived she thanked him, and he fainted.

Modern woman has been made equal with man, but she has not been made happy. She has been emancipated from a clock and thereby no longer free to swing, or as a flower has been emancipated from its roots, only to wither and die. She has been cheapened in her search for mathematical equality in two ways: by becoming a victim to man by becoming only the instrument of his pleasure, ministering to his needs in a sterile exchange of egotism. A victim to the machine by subordinating the creative principle of life to the production of non-living things, which is the essence of Communism.

This is not a condemnation of a professional woman, because the important question is not whether a woman finds favor in the eyes of a man, but whether she can satisfy the basic instincts of womanhood. If it were the man that made a difference to a woman and all that wifehood and motherhood entail, then the least womanly of all women would be found in convents. The fact is, however, that nowhere else are more normal, and certainly more happy women to be found on this earth. One might add also, that nowhere else are there so many young women,2 for a peculiar quality about the spiritual life is that it keeps a woman young. Cosmetics, mud baths, sneezeless soaps are lacking, but they manage to keep young and unwrinkled because they are at peace.

What makes the difference in woman is not therefore a man, but whether a certain God-given qualities which are specifically hers are given adequate and full expression. These qualities are principally, devotion, sacrifice and love. They need not necessarily be expressed in a family, nor even in a convent. They can find an outlet in the social world, in the care of the sick, the poor, the ignorant —in a word— in the seven corporal works of mercy. It is sometimes said that the professional woman is hard. This may in a few instances be true, but it is not because she is in a profession, but because she has alienated her profession from contact with human beings in a way to satisfy the deeper cravings of her heart. It may very well be that the revolt against morality, and the exaltation of sensuous pleasure as the purpose of life, are due to the loss of the spiritual fulfillment of existence. Having been frustrated and disillusioned, such souls first become bored, then cynical, and finally, suicidal. Wherein lies the solution? In a return to the Christian concept wherein stress is placed not on equality but equity.

Equality is law. It is mathematical, abstract, universal, indifferent to conditions, circumstances and differences. Equity is love, mercy, understanding, sympathy — consideration of details, appeals, and departures from the fixed rules of courts which law has not yet embraced. In particular, it is the a application of law to an individual person. It places its reliance on moral principles and is guided by an understanding of the motives of individual families which fall outside the scope of the rigors of law. In the old English law of Christian days the subjects in petitioning the court for extraordinary privileges, asked for them "for the love of God and in the way of charity." For that reason the heads of courts of equity were the clergy who drew their decisions from Canon Law. In vain did the civil lawyers with their exact prescriptions argue against their opinions. The iron ring outside a Cathedral door, which a pursued criminal might grasp, gave him what is known as the "right of sanctuary" and while giving him immunity from the prescriptions of civil law, made him subject to the more merciful law of the Church.

Applying this distinction to women, we are saying that equity rather than equality should be the basis of all the claims of women. It goes beyond equality by claiming superiority in certain aspects of life. Equity is the perfection of equality, not a substitute. It has the advantages of recognizing the specific difference between man and woman, which equality does not have. As a matter of fact, they are not equal in sex; they are quite unequal, and it is only because they are unequal that they complement one another. The violin and the bow are not equal. Each has a superiority of function. Man and woman are equal inasmuch as they have the same rights and liberties,3 the same final goal of life and both have been redeemed by the Blood of Our Divine Saviour — but they are different in function. It is that truth which solves the problem. One of the greatest of the Old Testament stories reveals this difference. While the Jews were under Persian captivity, Aman, the prime minister of King Assuerus, asked his master to slay the Jews because they obeyed the law of God rather than the Persian law. When the order went out that the Jews were to be massacred, Esther was asked to approach the wicked King and plead for her people. There was a law that no one should enter the King's presence under the penalty of death, unless the King extended his scepter as a permission to approach the throne. That was the law. But Esther said: "I will go in to the King, against the law, not being called, and expose myself to death and to danger." (Esther 4: 6) Esther fasted an prayed and then approached the throne. Would the scepter be lowered? The King held tout the golden scepter, and Esther drew near and kissed the top of it, and the King said to her: "What wilt thou, Queen Esther? What is thy request? (Esther 5:3)

This story has been interpreted through the Christian ages as meaning that God will reserve to Himself the reign of justice and law, but to Mary, His Mother will be given the reign of mercy. During the Christian ages, Our Blessed Mother bore a title which has been forgotten, but it is revived in two modern non-Catholic writers, Henry Adams and Mary R. Beard. Adams described the Lady of Equity in the Cathedral of Chartres. Stretching through the nave of the Church are two sets of priceless stained glass windows, the one given by Blanche of Castile, the other by Pierre de Dreux which seems to "carry across the very heart of the cathedral" a kind of civil war. Over the main altar however sits the Virgin Mary, the Lady of Equity, with the Holy Child on her knees, presiding over the courts, listening serenely to pleas for mercy in behalf of their sins. As Mary Beard beautifully put it: "The Virgin signified to the people moral, human or humane power, as against the stern mandates of God's law." And we might add, this is the woman's special glory — mercy, pity, understanding, intuition of human needs, call it anything you please. When women step down from the role of the Lady of Equity and her prototype Esther, and insist only on equality, they lose their greatest opportunity to change the world. Law has broken down today. Jurists no longer believe in a Divine Judge behind Law. Obligations are no longer sacred. Even peace is based upon the power of Three Nations rather than on the Justice of God. Shall women, in this day of the collapse of justice equate themselves with men in rigid exactness, or shall they rally to Equity, to mercy and love and give to a cruel and lawless world some something that equality cannot give? Whence shall come a devotion to causes, if women who are capable of greater devotion then men, insist on a cold equality? How shall wars be stopped and the taking of young life, if women, like men, trust only in law?

But if women, in the full consciousness of their creativeness say to the world: "It takes us twenty years to make a man, and we rebel against wars every generation snuffing out that manhood in war." Such an attitude would do more for the peace of the world than all the covenants and pacts that have no other basis than expediency and deceit. Did women but recognize the truth hidden in the Lady of Equity, love might be restored to homes and families. The reason there is little love now is because in the human order there is never any love between equals. There may be justice, but no affection. If man is the equal of woman, then she has rights, but what heart ever lived on rights. All love demands inequality or superiority. The lover is always on his knees, the beloved must always be on a pedestal. Whether it be man or woman, the one must always consider himself or herself as undeserving of the other. Even God humbled Himself in His Love to win man, saying He came not to be ministered unto, but to minister. And man, in his turn approaches that loving Saviour in Communion with the words: "Lord, I am not worthy."

Not then because women enter professions do some harden and become frustrated. Professional careers do not of themselves defeminize women, otherwise the Church would not have raised political women to sainthood, as was the case with St. Elizabeth and St. Clotilde. The cause of tragedy in woman today is that by stressing equality, they have lost those specifically feminine qualities which have given her superiority of function. These qualities are devotedness and creativeness. No woman is happy unless she has someone for whom she can sacrifice herself, not in a servile way but in the way of love. Added to the devotedness is her love of creativeness. A man is afraid of dying, but a woman is afraid of not living. Life to a man is personal; life to a woman is otherness. She thinks less in terms of perpetuation of self and more in terms of perpetuation of others — so much so that in devotedness she is willing to sacrifice herself for others. To the extent that a career gives no opportunity for either she becomes de-feminized. If these qualities cannot be given an outlet in a home and a family, they can nevertheless find other substitutions in works of charity, in the defense of virtuous living, in the defense of right as other Claudias when their political husbands as Pilates rely only on expediency, Then her work as a money earner becomes a prelude and a condition for the display of equity which is her greatest gory.

The level of any civilization is the level of its womanhood. This is because there is a basic difference between knowing and loving. In knowing something you bring it down to the level of your understanding. An abstract principle of physics can be understood by an ordinary mind only by examples. But in loving we always go up to meet the demand of the one loved. If you love music you have to submit to its laws and disciplines. When man loves woman, it follows the nobler the woman the nobler the love, the higher the demands by the woman, the more worthy a man must be. That is why a woman is the measure of the level of our civilization. It is for our age to decide whether woman shall claim equality in sex and the right to work at the same lathe, or whether she will claim equity and give to the world that which no man can give. In these pagan days when women want to be only equal with men, they have lost respect. In Christian days when men were strongest, woman was respected. As the author of Mont. St. Michel puts it: "The twelfth and thirteenth centuries were a period when men were at their strongest; never before or since have they shown equal energy in such varied directions, or such intelligence in the direction of their energy; yet these marvels of history — these Plantagenets; these Scholastic philosophers; these architects of Rheims and Amiens; these Innocents, and Robin Hoods, and Marco Polos; these crusaders who planted their enormous fortresses all over the Levant; these monks who made the wastes and barrens yield harvests — all, without apparent exception, bowed down before the woman. Explain it how you will! Men rushed like sheep to escape the butcher, and were driven to Mary; only too happy in finding protection and hope in a being who could understand the language they talked, and the excuses they had to offer . . . Society has invested in her care nearly its whole capital, spiritual, artistic, intellectual and economical, even to the bulk of its real and personal estate." As Abelard said of her: "After the Trinity you are our only hope . . . you are placed there as our advocate; all of us who fear the wrath of the Judge, fly to the Judge's mother who is logically compelled to intercede for us and stands in the place of a mother to the guilty." To the Lady of Equity once again modern women must look, as even those who have the Faith must see fulfilled in her those spiritual functions which no priest can perform; queen, mother and woman. Christianity does not ask the modern woman to be exclusively a Martha or a Mary; the choice is not between a professional career and contemplation, for the Church on the Feast of the Assumption of the Lady of Equity read the Gospel of Martha and Mary to symbolize that she combines both the speculative and the practical, the serving the Lord and the sitting at His Feet. If woman wants to be ever a revolutionist , then the Lady is her guide for she sang the most revolutionary song ever written — The Magnificat, the burden of which was the abolition of principalities and powers, and the exaltation of the humble. She breaks the shell of woman's isolation from the world and puts woman back into the wide ocean of humanity as she who is the Cosmopolitan Woman gives the Cosmopolitan Man, for which giving all generations shall call her blessed.

But she was the inspiration to womanhood, not because she claimed there was equality in sex, for peculiarly enough this was the one equality she ignored, but because of a transcendence in function which made her superior to a man inasmuch as she could encompass a man, as Isaias foretold. Great men we need like Paul with a two-edged sword to cut away the bonds that tie down the energies of the world, and men like Peter who will let the broad stroke of their challenge ring out on the shield of the world's hypocrisy, and great men like John who with a loud voice will arouse men from the sleek dream of unheroic repose. But we need woman still more; women like Mary of Cleophas who will raise sons to lift up white hosts to a Heavenly Father; women like Magdalen who will take hold of the tangled skeins of a seemingly wrecked and ruined life and weave out of them the beautiful tapestry of saintliness and holiness; and women, above all, like Mary, the Lady of Equity, who will leave the lights and glamours of the world for the shades and shadows of the Cross where saints are made. When women of this kind return to save a world with equity, then we shall toast them, we shall salute them not as the modern woman, once our superior now our equal, but as the Christian woman — closest to the Cross on Good Friday, and first at the tomb on Easter Morn.

God love you!

National Council of Catholic Men – Washington, D. C.

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Medieval and National Guilds

by Arthur Penty

Once it is realized that the Medieval Guilds were organizations that existed primarily for the maintenance of economic justice and equity, and that they broke down, not from any defect inherent in their constitution, but because they were never co- extensive with society, we begin to understand that one of the conditions of getting capitalism into subjection is to make Guild organization co-extensive with society. Yet when we suggest this approach, we are told that any such return to an old method of organization is impossible, inasmuch as the old form of Guild organization is not adapted to the circumstances of modern industry with its vast machinery and large organizations, and we are admonished by sundry critics to abandon our project of restoring the Medieval Guilds, and to work for the establishment of National Guilds, which they tell us are more adapted to the modern conditions.

Now, such advice sounds very plausible, so plausible, in fact, that to most people it must appear as if nothing but sheer personal perversity prevents us from accepting it. Yet this is not the case, since Medieval and National Guilds are not opposed ideas, as is popularly supposed, but complementary ones; while the success of the National Guild Movement in no way excludes or militates against a revival of Guilds of the Medieval type, as will become evident when the position is clearly understood. They are concerned with different things. National Guilds are concerned with the problem of the large modern industry, and it would tend towards the elucidation of the subject if they were called Industrial Guilds rather than National Guilds, which is a misnomer. The advocates of Medieval Guilds, on the contrary, are primarily interested in the crafts, small industries and agriculture, and they are as much concerned to discover how such activities may be restored to their former integrity as they are in bringing them under Guild control. Such being the case, the relative importance which we attach to these two branches of Guild activity depends entirely upon our opinion as to what will be the future of Industrialism. If it is believed, as National Guildsmen did believe, when their theory was first launched, that the future is entirely with the large industry, before whose advance the crafts must eventually disappear, then Medieval Guildsmen will appear as anachronisms. But if, on the contrary, we recognize, as Medieval Guildsmen all along have recognized, and as National Guildsmen have recently come to believe, that our industrial system is a thing altogether abnormal, carrying within itself the seeds of its own destruction, and is even now on the verge of collapse, then the subject begins to wear a different complexion. The Medieval Guildsman will no longer appear as an anachronism, but as a Futurist in the best sense of the word, inasmuch as he is not content to build his house on the sands of the seashore. Such a view of the fate of industrialism in general is not incompatible with the frank recognition of the fact that certain aspects of the system may survive, while, if we do not come to the conclusion that National Guilds have no validity in the future, we at any rate may recognize that in any normal society the area of their activities will be very much circumscribed.

But there is another path of approach. We may approach Medieval Guilds from the point of view of craft organization, or from the point of view of the moral and economic principles that they existed to uphold. If we look at them from the former point of view, their picturesqueness may interest us, though their possible application will appear circumscribed. But if we look at them from the point of view of the moral and economic principles they existed to uphold, we shall come to recognize them as the type and exemplar of all true institutions, inasmuch as they stood for something that has universal validity, and is in no way limited by the details of their organization. From this point of view, the issue between Medieval and National Guilds is not one of drawing a line of demarcation, of defining their respective spheres of influence, nor finally, between the rival claims of centralized and federated or local organization, but between two different conceptions of the purpose of a Guild. Thus the essence of the National Guild idea is the conception of the organization of industry on an entirely self-governing basis, without any admixture of private interests; while the essence of the Medieval Guild idea is that of a court of appeal, whose primary function is that of maintaining a discipline among the members of a particular industry. For remember, the Medieval Guilds did not seek to organize industry, but to control it. They did not seek to supplant the private individual producer by any system of co-operative production. On the contrary, they frankly accepted the principle of the private management of industry, and sought only to superimpose over each industry an organization to regulate it in the same way that professional societies enforce a discipline among their members to-day, with the difference that in addition to upholding a standard of professional conduct the Medieval Guilds were, at their best period, concerned to promote a certain measure of economic equality between their members, in the same way that Trade Unions are to-day. They insisted that all who engaged in any industry should conform to the regulations of the Guild, which fixed prices and rates of wages, regulated apprenticeship and enforced a standard of quality in production, preventing adulteration and bad workmanship, and ordered all other matters appertaining to the conduct of an industry and the personal welfare of its individual members.

Now, what is there to stand in the way of the application of such principles to-day? Though the circumstances of modern industry differ from the circumstances of Medieval industry, yet there is no technical difficulty that stands in the way of the establishment of such control over industry, for the principles to be applied are finally nothing more than the enforcement of moral standards. The only difference between their application under the Medieval Guilds and under our supposed modern Guilds, which aim at the same purpose, would be that, whereas the former exercised control over employers and workers engaged in small workshops owned by small masters, the latter would exercise control over employers and workers engaged in large and small factories and workshops owned by private individuals, limited liability companies and self-governing groups of workers. To make such control effective, it would be necessary to depart from the rules of the Medieval Guilds to the extent that authority would be vested in the whole body of members-- employers and workers--instead of being exclusively in the hands of the masters, as was the case in the Middle Ages. For the typical employer to-day is not a master of his craft, who is jealous of its honour, as was the Medieval employer, but a financier, who is only interested in the profit and loss account, and therefore could not be trusted with final authority. This consideration enforces the conclusion that if any standards of honesty and fair dealing are to be upheld, prices fixed, machinery and other matters necessary to the proper conduct of industry to be regulated, the final authority would have to be vested in the trade as a whole, for only those who suffer from the growth of abuses can be relied on to take measures to suppress them.

In support of this contention, that the obstacle in the path of a restoration of Guilds of the Medieval type is moral rather than technical, attention should be directed to the activities of the Industrial Council of the Building Industry, better known as the Building Trades Parliament, since there are invaluable lessons to be learnt from its experience. This body, which consists of representatives of all Building Trade Employers Federations, and the Trade Unions of England and Scotland, and whose deliberations are watched with close attention by economic students all over the world, had its origin in an attempt to bring disputes in the building trades to an end by removing the causes of suspicion and distrust existing between the employers and the workers. The employers objected to any increase of wages apart from an increase of output, to which the workers in their turn objected. Subsequent negotiations revealed the fact that there were four main factors tending towards a restriction of output. They were (a) Fear of unemployment; (b) Expressed disinclination of many of the operatives to make unrestricted profit for private employers; (c) Lack of interest in the industry evidenced by operatives owing to their non-participation in control; (d) Inefficiency, both managerial and operative.

These obstacles revealed themselves as the crux of the whole difficulty, and frankly facing the situation, the joint committee of employers and operatives set themselves the task of finding ways and means of overcoming them by the promotion of what they rather aptly termed "the team spirit in industry." It resulted in a proposal to organize the Building Industry on a basis of public service. After working for four years on the problem, Majority and Minority Reports were submitted by members of the Management and Costs Committee to the Council at a Conference held in London on November 11 and 12, 1921. The former, which is our immediate concern, divided its proposals into three parts. The first was a scheme with proposals for the regularization of demand, the decasualization of labour, unemployment and holiday pay, superannuation and a minimum system of accountancy and costing. It was recommended for immediate inclusion in the working agreements between the affiliated association of Employers and Trade Unions, without prejudice to the further consideration and discussion of the great question of industrial control, which lies at the centre of the problem of efficient service, and with which the second and third part of the Report deals.

In respect of industrial control, the second part of the Report advanced the proposal that employers and operatives should submit themselves to the control of an organization that would, on the one hand, retain the principle of private management of industry, and on the other hand eliminate entirely the element of profit-making from industry. The means by which this end was to be attained was by guaranteeing salaries to owners, managers, and managing staffs, commensurate with their ability, while allowing a regular rate of interest for the hire of capital, which should be not less favourable than the prevailing rate yielded by debentures in other industries, and by guaranteeing to the operatives standard rates of pay that would ensure a real and satisfactory standard of comfort. The last part of the Majority Report advanced a proposal which was frankly admitted to be an ideal. It was for the organization of a National Guild of Builders, a complete scheme of democratic control, based upon the whole of the personnel of the National Federation of Building Trade Operatives, and other approved organizations of building trade workers, whether administrative, technical, clerical or operative, much on the lines of the Building Guilds.

The Minority Report, which represented the views of a majority of the employers, objected to these proposals for two reasons. Firstly because, as they said, the proposed scheme was a system of which the world has no recorded experience of its having been successfully applied, and therefore they preferred to stand by the present system, because it had persisted in all ages and all countries, and was therefore to be considered as normal; and secondly, because the scheme involved a change in the motive of industry, which they contended was impossible, inasmuch as only the love of gain was capable of supplying a sufficient incentive to industrial undertakings, and therefore industry would suffer demoralization if this motive were removed.

It can occasion no surprise that opposition was forthcoming. Ideas so revolutionary can only become really practical after the lapse of time, after a long propaganda has been undertaken on their behalf, when they have become common property and familiarity brings consent. Hence it was that at the Conference already referred to, a resolution was carried which threw the responsibility for the main decision on the national adherent bodies, while the Management and Costs Committee was asked further to consider and report on the less controversial details. To make a long story short, the matter has been shelved, and it is likely to remain so for an indefinite period, for there can be no doubt as to the fundamental character of the opposition. It first found expression in the debate on the Interim Report (August, 1919), at which I was present, and it was certainly a most instructive debate. It was not a debate between employers and operatives as such, but between two rival conceptions of industry--production for service versus production for gain. The operatives, with a minority of employers on the one side, fighting a majority of employers on the other. The latter group maintained that the only incentive to industrial efficiency is love of gain, and that all classes of the community will be best served by maintaining unhampered our present competitive system of enterprise and industry. The other group as obstinately maintained that the real incentive is the joy of service, and not the love of gain--the creative impulse, not the possessive one. The debate, having taken this turn, was no longer concerned with the details of the scheme. It became a debate on morals, in which appeals were made to the authority of Christianity and Ruskin. I never realized before how far the influence of Ruskin had penetrated. Everybody, employers and operatives alike, appeared to be familiar with his teachings, and he was accepted apparently by both sides as a final court of appeal, though how it came about that employers, who maintained that only the motive of gain could be a sufficient stimulus to industrial efficiency, reconciled their ideas with Ruskin and Christianity is a mystery I will not attempt to explain.

Now, what bearing has all this on the issue of Medieval and National Guilds? Just this: that when representatives of employers and operatives began to consider practical ways and means of organizing a great industry for public service, unhampered by a priori theories of class antagonism, they instinctively proceed along Medieval lines as the line of least resistance, since, apart from the proposal to form a National Guild of Builders on the lines of the Building Guild, which was included in the report as an ideal rather than as a practical measure, the Report is Medieval through and through, inasmuch as the practical proposals advanced frankly accept the principle of the private management of industry, while seeking to superimpose over such private businesses an organization that would regulate it so as to eliminate entirely the motive of profit-making. This is all the more remarkable because the original source of inspiration was more a product of the National Guild than the Medieval Guild propaganda, as is evidenced by the fact in the Majority Report the National Guild, rather than the Medieval Guild, was postulated as an ideal.

This, I feel, was a pity; not only because the great monuments of Gothic architecture were produced by the Medieval Guilds, but because a frank acceptation of the Medieval Guilds as an ideal would have given the reformers a perfectly consistent position, inasmuch as Parts I and II of the Report, which were recommended for immediate adoption, were defensible as steps towards the restoration of Medieval Guilds, but not as steps towards a National Guild, which appears in the Report as an anti-climax. By maintaining a consistent position, they could have put up a much stronger defence against the opposition. For the majority of employers could not then have opposed the scheme on the grounds that it proposed to establish over the building trades a system of organization of which the world has no recorded experience of its having been successfully applied. The great monuments of Medieval architecture could have been cited as proving the contrary, and these, it could have been urged, were just as much the counterpart of the economic order, that obtained under the Medieval Guilds, as the chaotic architecture of to-day is the counterpart of the economic chaos that follows economic individualism.

And there is another lesson that we may learn from the experience of the Building Trades Parliament. It is that behind the problem of organization there is to be found the problem of morals, for men take sides ultimately on moral issues. Economic theories may be the occasion that divides them. But it is the moral issue that finally divides men, for, as we saw, the difference of opinion over the practicability of the proposals of the Building Trades Parliament resolved itself finally into a question of morals: the question as to whether any other motive but that of gain could ever promote industrial efficiency. And here again it is to be observed that a frank acceptance of the Medieval Guilds as an ideal would have strengthened the hands of the reformers, for the issue would no longer have been one of opinion, but of fact.

The moral issue, then, is fundamental. It not only separates those who uphold the present competitive order of society from those who demand the reorganization of society on some corporate or communal basis, but it also underlies the division of opinion among reformers themselves. The scheme of the Building Trades Parliament developed along the lines it did because it was based upon the assumption that the goodwill necessary to put it into operation would be forthcoming. But when such hopes were disappointed, and it became evident that the scheme would not be acceptable to a majority of the employers, a new development took place. The Manchester section of the Operatives Federation seized the opportunity that the housing shortage provided, by setting up a Building Guild Committee, and made an offer to the City Council (Feb., 1920), to build two thousand houses. This action led to the organization of Building Guilds in various parts of the country, of which upwards of a hundred are nowadays (Dec., 1921) in existence, and which we must now proceed to consider.

Now, this new development did not proceed along the lines of the Medieval Guild, but of the National Guild, and this followed naturally from the fact that, as a result of the refusal of the employers to co-operate, their organization had to be based upon the personnel of the local Federations of Building Trade Operatives rather than upon the building industry as a whole. In providing an answer to the contention of the majority employers of the Building Trades Parliament, that only the motive of gain can supply a motive power to industry, the Building Guilds have more than justified their existence, for they have demonstrated beyond a shadow of doubt that an organization in which the workers participate in control promotes efficiency by securing their loyalty and goodwill. But there is no reason to suppose that they will be any more successful than the Building Trades Parliament in effecting the guildization of the building trades as a whole, for their position is precarious in the extreme. They came into existence to execute the Housing schemes of various municipalities, and it is possible that with their completion they may disappear, for there is no denying they are very much at the mercy of circumstances. They are at the mercy of the Government's housing policy, and they may be strangled by the Anti-Waste campaign, while, as it so happens that financial and industrial activities have in every direction reached a deadlock--and a deadlock that will remain until the facts underlying it are frankly faced--the prospects of getting hold of a sufficient quantity of private work to enable them to carry on is doubtful.

If, then, there is no prospect of the Building Guilds being able to effect the guildization of the building trades, there is still less of this principle being able to effect the guildization of our industrial activities as a whole, for no other large industry is as fortunately placed as the building industry for embarking on such an experiment. The Building Guilds were possible because of circumstances peculiar to the building trades. There was, in the first place, the housing shortage, which provided the immediate opportunity. There were labour-controlled municipal councils that were in a position to give them work, while there was the further consideration that the element of fixed capital, so important in other large industries, is, in the building trades, unimportant compared with the charges connected with each particular job, material and labour entailing almost the whole costs in the building. These circumstances made the principle of industrial self- government a fairly simple proposition for the building trade operatives, but it obviously supplies no more precedent for the guildization of other large industries where immense fixed capital is required, and where the market cannot be localized, than the municipal gas and water of Collectivists provided a basis for the nationalization of all industry.

Nevertheless, the influence of the Building Guilds is not going to be ephemeral. If they provide no precedent for the guildization of other large industries, they do apparently for small industries, for a whole crop of small Guilds are coming into existence. There is a Furnishing Guild, a Clothiers Guild, and an Agricultural Guild already in existence; while news reaches us of a Dairy Guild, a Blacksmith's and Farrier's Guild, a Fruit Grower's Guild, a Packing Case Guild and a Commercial Vehicle Maker's Guild that are in process of formation.

Whether any of these Guilds will be able to establish themselves permanently is extremely doubtful, for they are being launched amid adverse economic conditions. Should they fail, as they may, it can be safely predicted that their failure will be followed by some disillusionment of many who are nowadays so hopeful, while it is a certainty that the failure will be used by opponents to discredit the Guild Movement. But Medievalists must attempt to assess these experiments at their true valuation. Their failure will not discourage them, for they have always been somewhat sceptical about National Guild policy. They have always maintained that our industrial system was not a thing of permanence and stability, and doubted the possibility of successfully superimposing Guilds over its activities. So while I should welcome the success of these experiments as removing an obstacle from our path, yet such success is not guaranteed, for behind the economic problem is the problem of men and machines, and the unwillingness of reformers to face this fact places us at the mercy of forces we cannot control.

Whatever may eventually prove to be the fate of these Guilds their organization has been more than justified, for they have cleared up for us many issues, while providing us with invaluable data that will pave the way towards a more intelligent discussion of the subject. But even if they should survive the present economic crisis, it would be a mistake to expect that any national system of Guilds could follow a mere extension of their activities. For one insuperable obstacle stands in the way of any such development--the tendency for all such activities to become choked by a multiplicity of committees. To guard against this evil, such self-governing bodies must be local and small. The units of their organization must be as small as is consonant with the function they are required to perform. And if for such purposes as those of finance and the buying of material a larger unit is found desirable, then the larger unit must consist of federated groups, while the functions of such federated groups should be limited to those that can be performed properly in no other way. Hence any national organization must be.independent of such bodies. The National Guild will be of the Medieval type on the lines foreshadowed by the Report of the Building Trades Parliament; because seeking to regulate industry rather than to organize it, the issues with which it would have to deal would be few. Such an organization would not suffer from too great a multiplicity of committees. Under the control of such national organizations of the Medieval Guild type, Guilds of the Building Guild type would find a place side by side with privately conducted businesses.

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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?

The Directors IHS Press May 5, 2003 Feast of Pope St. Pius V
http://www.ihspress.com/

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