The Pendulum

The Pendulum: Towards an Economic Theory of the Catholic Society


Pedro Arroja (Ph.D., Economics)
Presented at the 7th Professional Seminar for
Church Communications Offices
Pontifical University of the Holy Cross
Rome, April 2010

1. Church Communication and Economics

Church Communication has been a crucial issue for Pope Benedict XVI for a long time. He has, on occasion, suggested that the Church may not have been effective in communicating its message. This is certainly the case in the area of Economics.

There is no Economic Theory of Catholicism, even though the Social Doctrine of the Church (SDC) provides a basis to build one, and some attempts have been made in the past (1). Economists are educated at universities in the political and economic theories of Liberalism and Socialism which are at the core of modern liberal democracies. Both of these currents of political economy have distinctly Protestant origins, Liberalism in the Scottish moral philosophers of the 18th century, Socialism in the German idealism of the 19th century. Among the 51 economists awarded the Noble Prize in Economics since its inception in 1969, there is not a single one from the predominantly Catholic countries of Southern Europe and Latin America. (2)

The purpose of this paper is to sketch a theory of the political economy of Catholicism. A comparison is also made between the socieconomy of a Catholic society with the socioeconomies of Socialist and Liberal societies, respectively.

The key idea emanating from Catholicism is equilibrium. Catholicism recognizes the same values as modern Liberalism and Socialism, but does not take them to extremes. It supports democracy, but not unlimited democracy; it recognizes the value of personal freedom, but not of unrestricted personal freedom; it preaches equality among men, but not absolute equality; it defends private property, but does not exclude public property. What distinguishes Catholicism from Socialism and Liberalism is that it combines these values in a delicate balance, acting as a sort of force of gravity which pushes the pendulum towards the equilibrium position.


2. Subsidiarity

The SDC is based on three fundamental theological pillars – subsidiarity, personalism and solidarity (3). Socialism shares one of these themes - solidarity - but not the other two. Liberalism shares two of them, but distorts both – Catholic personalism is transformed into Liberal individualism and Catholic subsidiarity is sometimes converted into Liberal minimality.

Liberalism defends a Minimal State, often referred to as a police-State, assigning it the minimal functions of external defence, justice, and homeland security. In contrast, Socialism defends the Welfare State which, together with the previous functions, combines a whole set of social, equalizing functions (social security, health, education, etc.).

Catholicism defends the Subsidiary State. The Subsidiary State is that which is called upon to perform the functions which the people within the community cannot fulfil using their own spontaneous arrangements. The Subsidiary State is compatible both with the Minimal State and the Welfare State, or with any other size of the state, depending on the traditions of each community.



3. Personalism

According to Catholic doctrine, man was created in the image of God, therefore man is, in the earthly order of things, the source, the subject and the ultimate end of all things (4). Socialism, which inverts this order of things and has man serving society, is a heresy of the personalistic doctrine of Catholicism. Modern Liberalism incurs yet another heresy as it replaces personalism by individualism, the idea that each man is a mere fragment of society and essentially equal to all other men.

Liberal individualism sees more similarities in men than differences, while Catholic personalism sees more differences than similarities. The distinction lies in the idea of human personality, the set of unique, distinctive and unrepeatable attributes of each human being. The modern return to the Greek view of man as an individual, rather than as a person, was the result of a change of attitude characteristic of modernity, which reached its peak in Kant. This attitude led to the development of modern science, but it also led to regard man as a mere fact of nature, sufficiently equal to all other men so that he could be massified and become a mere statistic (5).

Modern Economics, with its laws and empirical evidence based on the facts of reality (statistics), would never have been possible without this transformation. When man is seen as an individual, and no longer as a person with attributes that are distinctive, unique and unrepeatable – his personality – one of the immediate consequences is that human life is devalued. It is this same devaluation that is found in Socialism when it affirms the supremacy of the state over man.



4. Community

Solidarity, or the sense of community, is a central pillar of the SDC. Chesterton said that the idea of a Catholic Church is, in itself, sui generis in that it is the only Church that treats all men as being part of a community that embraces them all – a true universal community. (6). According to Catholic doctrine, man benefits from society and, in turn, he owes allegiance to society. Each man is encouraged to promote the common good, which is made up of all those goods which are for the benefit of all, such as peace. All men are brought together by a principle of unity, thus all of them are solidary. In this compromise between man and community, man ultimately prevails over the community. (7)

The family is the first human community. Starting from the family, the idea of community is then expanded, first to the so-called intermediate communities (8), then to the national and universal communities Personalism is a key element that unites the members of a community, which is seen as a web of interpersonal relations. Communities of larger order develop as an outgrowth of communities of lower order following a bottom up process.

This view of society contrasts with both Socialism and Liberalism. Under Socialism, the key community is the nation-state; the community is more important than the individual; society is built from above, according to a top down approach, using the state as an instrument; what brings together the members of the socialist community is common allegiance to the powers of the state. Liberalism places the individual above the community; it favours indiscriminately all spontaneous communities which promote the self-interest of the individual; what binds together the members of each community is mutual interest; societies develop as a free, spontaneous process of mutual adjustment between different kinds of communities, such as the family, the business firm, the nation.


5. Society

Socialism aims at maximimizing material equality among men, using the authority of the state as its chief instrument. Liberalism seeks to maximize personal happiness, freedom being its main instrument. Catholicism aims at maximizing human life (9) and charity is its key lever.

It is now possible to have a glance at the key institutions and social processes of a Catholic Society (CS) and compare them with those of the Socialist Society (SS) and the Liberal Society (LS), respectively.

Government. In the SS, government is the most important institution as it is through the coercive power of the state that socialism hopes to attain its goal of equality; politics pervades all sectors of society and is the key ingredient of social relations. The LS mimimizes the role of government and politics; exchange and contract are the hallmark of social relations. In the CS, spontaneous social institutions prevail over government which has a subsidiary role of regulator and arbiter in society; friendship is the characteristic of social relations.

Market. The SS society minimizes the role of the market which is seen as a source of social inequalities. The market is the key institution of the LS; it is through the unhampered interplay of man’s interests that each man can attain his own ends in life; the role of the market is maximized to the point of becoming global, i.e., impersonal (10). The CS also favours the market, but due to its personalism, it puts the emphasis on local markets where people know each other and have control over its outcomes (v.g., prices, production, employment).

Democracy. The SS favours universal democracy which is seen as the hallmark of equality and freedom. The LS also favours democracy which is regarded as the least evil of all political regimes, but it would like to see some limitations on the right of each man to vote (v.g., being a taxpayer or a property holder). The CS with its personalistic character favours limited or personal democracy where voters know each other and know the people they are supposed to vote.

Property. The SS favours public property, which is seen as a means to achieve its goal of equality. The LS favours private property which is viewed as a powerful means for man to achieve his own goals in life. The CS society also favours private property - which is regarded as constitutive of man’s personality -, but with an important restriction, namely, that it is also at the service of the common good; if this condition is not met, public property is favoured over private property.

Family. The SS does not favour the family; the state organizes society from above and provides a whole range of free services (v.g., health, education), and subsidies (v.g., unemployment, maternity, old age) which severely reduce the need for a family. The LS favours the family as a means of promotion of the individual and as long as it is in the interest of the individual to have one; once individual self-interest vanishes, divorce ensues. The CS puts the emphasis on the family as the main social institution; the family is both a protection-institution for the spouses and their children as well as a learning institution; it is in the family that man learns the values of freedom, authority, love, tradition, justice, temperance, etc.


Education. The chief educational institution in the SS is the state through a system of state-funded schools and universities; education has a political goal of conformity with the prevailing social order. The LS puts the educational emphasis on private institutions such as schools, universities, the family and the business firm; education has a practical bias and is seen as a means to prepare man for a professional carrier in business, or area of life. In the CS, the main educational institution is the family, followed by schools and universities; the main purpose of education is to prepare young people for adulthood.

Justice. In the SS, justice is seen as equality and the judicial system is a tool to attain the equalizing goal of socialism; judicial decisions are biased in favour of the poor and the needy; compassion is the main trait of judicial decisions. In the LS, justice is fairness, reflecting the prevailing business culture that no one should be left empty-handed; impartiality is the chief characteristic of judicial decisions. In the CS, justice is retribution; the idea of justice is to make offenders pay a penalty for their offenses; authority is the key characteristic of judicial decisions.



6. The Economy

This key economic institutions and processes of a Catholic Society (CS) can now be analyzed and compared with those of the Socialist Society (SS) and the Liberal Society (LS).

Companies and business. The most important economic institution of the SS is the state or the state-owned company which in general is a large company; production is directed at an impersonal, national market. In the LS prevails the private company, from the small to the large, multinational corporation; production is made for an impersonal market. The prevailing company in the CS society is the family-firm, typically a small company; production is focused on the personal, local market place.

Industrial organization. State monopolies and oligopolies led by a state-owned company are the dominant form of industrial organization in a SS; the private, competitive sector of the economy is small and prevails in industries which are not politically important. In the LS, natural monopolies and oligopolies are also found but are led by private, usually large corporations; the competitive sector of the economy is vast and strong. The CS is the realm of competition among predominantly small family-businesses; large firms are rare as the risk of losing family control prevents the family-firm from growing too large.

Employment. In the SS, the state is the biggest employer either directly or through state-owned companies, and the typical employee is the civil servant; employees are assessed by their adherence to follow orders that come from the hierarchy; promotions are based on political loyalty and seniority. In the LS the greatest employers are large, private corporations; people are evaluated based on their productivity and promotions tend to be based on merit. In the CS, the largest employers are family-businesses; employees are evaluated on the basis of diligence and loyalty, with promotions usually following the growth of the family-firm.

Entrepreneurship. In the SS, entrepreneurship is discouraged; the most important sectors of the economy are dominated by the state or state-owned companies which prevent the entry of new companies; new companies are allowed in the residual, private sector, subject to licensing and detailed regulation. In the LS entrepreneurship is encouraged; this is the country where the most successful and richest businessmen are found; barriers to entry might be found in some sectors dominated by large corporations. The CS is the realm of the small, competitive family-firm; big companies are rare and so is market dominance; there are no significant barriers to start a new business and the required start-up capital is usually small.


Creativity. In the SS, the economy is arranged to serve the needs of an impersonal, national market through state bureaucracies which have no incentive to be creative. In the LS, creativity is stimulated by profit but the impersonal nature of the market puts limitations on the identification of consumer needs. The CS is a face-to-face economy where the producer often knows the consumer personally; the direct knowledge of consumer needs, and the profit incentive, give the Catholic society a considerable potential for economic creativity.

Flexibility. In the SS, changing economic conditions are met by the vagaries of state bureaucracies which are slow to react and have no incentive to adjust; this economy is prone to severe and prolonged misallocations of resources. In the LS there is a powerful profit-incentive to adjust to changing economic conditions but the impersonal character of the market makes it difficult for entrepeneurs and managers to identify the source and direction of change. In the CS producers and consumers live face-to-face in local markets, providing producers both with the knowledge and the profit-incentive to adjust rapidly to changing economic circumstances; misallocation of resources tends to be minimal and of short duration in this society.

Economic Policy. The SS favours economic policy as a means to direct the economy towards the end defined by the state; economic policy is conducted by the state at both the macro and micro levels. The LS rejects economic policy on the belief that government intervention in the economy always produces more harm than good. The CS favours the use of economic policy as a solution of last resort to protect the community; it should be used primarily at the local level of government and subsidiarily at the regional and state levels.

Corruption. In the SS, politicians and managers of large, state-owned companies take decisions with the money of the anonymous mass of taxpayers who do not have sufficient means and information to control them; thus, the door is wide open for them to use this money for their own gain; corruption is a characteristic trait of the socialist society. In the LS, the same risk is present, but now with regard to large corporations, whose managers take decisions with other people’s money – the anonymous mass of shareholders. In the CS, corruption is minimized, as the family-firm prevails; this firm is usually run by its owner, and the owner is sufficiently close to his employees so as to prevent them from using the company’s resources for their own benefit.

Economic and financial crises. The LS is subject to economic and financial crises; all it takes is one or several large companies to go bankrupt for this to have devastating knock-on effects throughout the economy. In the SS, economic and financial crises can also occur, and their effects are even more widespread as the state is the largest employer and the biggest economic institution; in this society, crises are typically the result of the insolvency of the national state. In the CS there are no large economic institutions; the state is generally small, because of its subsidiary role, and even large family-companies can only reach a moderate dimension if they are to remain under family control; in this society, one or several family-firms may go bankrupt without any noticeable effects on the economy; the vast web of family-firms and personal relationships keeps this society insulated from the effects of serious economic and financial crises.


7. Summary and Conclusions

Church communication typically starts out with theology and then evolves to more mundane issues of morals, economics, law, politics, even science. Pope Benedict XVI has consistently argued that Catholicism is a rational doctrine and that there is no opposition between reason and faith. Faith and reason are complementary and faith is regarded as the end-limit of reason. This being so, one effective strategy for Church communication before certain audiences, such as academics, is to start out, not with theology, which is ultimately concerned with faith, but with the social sciences which claim to be the hallmark of reason. Catholic faith will then follow as a consequence and as a necessity of reason.

Modern Economics is from birth a Protestant science (Adam Smith, Scotland, 1776), and the two main competing broad schools of modern political economy also share a Protestant origin - Liberalism (Great Britain) and Socialism (Germany). There is no school of Economic thought which can claim to be distinctly Catholic. Yet, this does not appear to be the fault of the Church but of economists themselves. The SDC, within its broad principles, suggests a distinctive Catholic socioeconomy.

This paper sketches an economic theory of the Catholic society based on the SDC. The socioeconomic paradigm of Catholicism is confronted with the paradigms of Liberalism and Socialism, which together are at the base of modern, liberal democracies. The economic theory of the Catholic society is based on three pillars, personalism, community and subsidiarity and is aimed at maximizing human life.

The paper’s assessment is that a purely Catholic economy, in comparison with the purely Liberal and purely Socialist economies, is more competitive, more creative, and less corrupt; it promotes a closely-knit network of interpersonal relations which enhance job security and economic stability; it leads to a more flexible allocation of resources and less unemployment; it maximizes the probability of a worker becoming an entrepreneur; it is less exposed, and more resilient, to financial and economic crises and external shocks; etc. The purely Catholic economy is a sort of compromise or equilibrium between the excesses and the risks posed by both the purely Liberal and the purely Socialist economies.




Notes and References:
(1) Hilaire Belloc, The Servile State (1912); also E.F. Schumacher, Small is Beautiful (1973).
(2) Nobel Prize winners in Economics by country: USA (34), UK (8), Norway (2), Sweden (2), France, Germany, Israel, Netherlands, Russia.
(3) Michael Glazier and Monika K. Hellwig (eds.), The Modern Catholic Encyclopedia, Liturgical Press, Collegeville, Minnesota, 2004, p. 786.
(4) Cathecism: 1912; 1929.
(5) Joseph Ratzinger, Introduction to Christianity, Ignatius Press, S. Francisco, 2004, pp. 158-161.
(6) G.K. Chesterton, Por Qué Soy Catolico, Editorial Homo Legens, Madrid, 2009.
(7) Cathecism: 1880-81.
(8) Centesimus Annus: 49.
(9) Cathecism: Prologue
(10) By an impersonal social process or institution is meant a process in which persons do participate but where the final results of the process cannot be assigned to any single person. A national or global market and universal democracy are examples.