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UNIVERSITY OF COPENHAGEN DEPARTMENT OF ECONOMICS

MA-Dissertation

THE SOCIAL TEACHING OF THE ROMAN CATHOLIC CHURCH FROM A SOCIAL SCIENCE PERSPECTIVE

Advisor: Author: Submitted:

Professor Hector Estrup, dr. polit. Marianne Helene Tofte Andersen Groesmeyer May 2002


SUMMARY OF

The Social Teaching of the Roman Catholic Church from a Social Science Perspective MA-dissertation by Marianne H.T. Andersen Groesmeyer University of Copenhagen, Department of Economics, May 2002

This MA-dissertation consists of two main parts. The first part is an introduction to Catholic social teaching. The second part analyses central aspects of Catholic social economics. In both parts the focus is on the nature, principles and premises of Catholic social teaching and economics, but these are seen in relationship to conventional economics. The methodology is partly analytical (focussing on central concepts, premises and principles), partly historical (focussing on the social and political context and the development of the conceipts), partly comparative (focussing on differences and common ground between Catholic social economics and conventional economics)

The first part is divided into four chapters. Chapter 2 clarifies the nature of Catholic social teaching in its historical context. Chapter 3 presents a short analysis of the four papal encyclicals (published 1891, 1931, 1971 and 1991) which show the development of Catholic social teaching. Catholic social teaching began as a response to the social turmoil and misery caused by industrialization and liberalism in 19th century Europe. In their attempt to cope with these challenges, the popes drew on natural law theory and the revived scholasticism of Thomas Aquinas. Catholic social teaching has, however, developed continuously with the rise of new challenges in the 20th century: globalization, neo-colonialism and the north-south divide. In chapter 4 there is a systematic presentation of the philosophical premises of Catholic social teaching as they were defined and elaborated first on the basis of scholastic philosophy, and later influenced by personalism. From scholasticism, Catholic social teaching got a teleological angle (that is: a focus on the end or aim of life and hence also of economics) and the holistic view of man as both individual and social, both free to seek maximum profit and restrained by a moral conscience bound to the common good. Personalism added to this a deepened understanding of the integrity of the human person in the face of the dehumanizing tendencies of modern culture. Part one ends with an analysis of the concept of human nature in Catholic social teaching and conventional economics. Where Catholic social teaching proposes a holistic view of man as both individual and social, both body and soul, both free and morally responsible (Homo Socio-


Economicus), conventional economics operates with a reductionist view of man as either totally individualistic, profit-seeking and free (Homo Economicus) or totally socially determined and caught up in structural constraints (Homo Sovieticus). This difference stands at the center and root of disputes between Catholic social economics and conventional economics.

The second part deals with the development of Catholic social economics, that is the concrete and individual attempts to formulate an operational economic theory on the basis of Catholic social teaching. Chapter 6 establishes the personal and institutional context for the development of Catholic social economics, highlighting the role of a small group of German Jesuits around Heinrich Pesch at the turn of the 19th century and of a group of American Jesuits during the Second World War and the following decades. As a prelude to the treatment of recent developments in Catholic social economics it is necessary to double back and sketch the development of conventional economics from Adam Smith to present day welfare economics (chapter 7). This shows that, contrary to what is usually claimed, Smith did not separate economics from morals, or human individuality from human sociality. However, he was unable to integrate them because of his stoicist philosophy. A possible method of integrating these concepts could be personalist philosophy. Modern welfare economics has recently shown an increasing interest in the ethical aspects of economics. Chapter 8 discusses the question of values in science. The fact that Catholic social economics is explicitly value-based can no longer count as a scientifically disqualifying trait. All sciences operate with value-assumptions, whether explicit (as in Catholic social economics) or implicit (as in conventional economics). Chapter 9 introduces recent developments in Catholic social economics, first Heinrich Pesch's solidarist economics and then the attempts in the last decade to formulate a system of personalist economics (O'Boyle and others). Then follows a more detailed discussion (chapter 10) of the one of the key concepts, subsidiarity, and how it has been used in the growing European integration. The final chapter discusses another key concept, the common good. This concept as understood by Catholic social economists is viewed against the common good in the teaching of Adam Smith. It is analysed in respect to its origin and how it is used in the principle of the invisible hand. It is argued that there may be no contradiction between the different uses of the concept provided that if Adam Smith's two major works are read as a unified system and that his philosophical premises are made clear.

The concluding remarks make some conjectures about the furture of Catholic social economics.


CONTENTS Dedication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.1. The purpose of this MA-dissertation in economics. . . . . . . . . . . . . . . . . . . . . . . 8 1.2. Catholic social teaching and conventional economics. . . . . . . . . . . . . . . . . . . . 8 1.3. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.4. Sources and literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.5. Outline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Part I: An Introduction to Catholic Social Teaching on Economic Issues . . . . . . . . . . . . . . . 16 2. Catholic social teaching according to the magisterium . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.3. Catholic social teaching as the Church's best kept secret. . . . . . . . . . . . . . . . . 17 2.4. The nature of Catholic social teaching as expressed in documents. . . . . . . . . . 19 2.5. The first official formulation of Catholic social teaching. . . . . . . . . . . . . . . . . 20 2.6. Scholars’ different views of Catholic social teaching. . . . . . . . . . . . . . . . . . . . 21 2.7. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3. A short history of Catholic social teaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.2. The historical context of the first official formulation of Catholic social teaching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.3. The beginning of the Leonine preriod (1878 - 1959) . . . . . . . . . . . . . . . . . . . . 24 3.4. Pope Leo XIII and Rerum Novarum (1891) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.5. Pope Pius XI and Quadragesimo Anno (1931) . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.6. The post-Leonine period (1959 - ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 3.7. Pope Paul VI and Octagesima Adveniens (1971) . . . . . . . . . . . . . . . . . . . . . . . 33 3.8. Pope John Paul II and Centesimus Annus (1991) . . . . . . . . . . . . . . . . . . . . . . . 35 3.9. Contemporary influence on Catholic social teaching . . . . . . . . . . . . . . . . . . . . 37 3.10. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 4. The philosophical premises of Catholic social teaching . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.2. Scholasticism and Thomas Aquinas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.3. Teleology in Thomas Aquinas’ ethical system. . . . . . . . . . . . . . . . . . . . . . . . . 41 4.4. The concept of human nature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 4.5. The concept of State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.6. The concept of justice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 4.7. Contributive justice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 4.8. Commutative justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 4.9. Distributive justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 4.10. Just price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 4.11. Just wage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 4.12. The concept of private property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 4.13. The limits of scholasticism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 4.14. From scholasticism to personalism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 2


4.15. The rise of personalism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16. Maritain reconciled scholasticism with the modern age. . . . . . . . . . . . . . . . . 4.17. The nature of man in recent social teaching influenced by personalism. . . . . 4.18. The nature of private property and the proper role of the state. . . . . . . . . . . . 4.19. The view of man as person is fundamental to personalism. . . . . . . . . . . . . . . 4.20. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Different understanding of human nature and its relevance to economics . . . . . . . . . . . . 5.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. The influence of personlism on Catholic social economics . . . . . . . . . . . . . . . 5.3. Human nature in Catholic social teaching and conventional economics . . . . . 5.4. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50 51 52 53 53 54 55 55 55 56 59

Part II: Catholic Social Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 6. The economists behind the formulation of Catholic social economics. . . . . . . . . . . . . . . 6.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2. Matteo Liberato and Rerum Novarum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3. Heinrich Pesch, the founding father of Catholic social economics. . . . . . . . . . 6.4. Pesch’s response to the condition of the workers and Rerum Novarum. . . . . . 6.5. Pesch’s influence on the formulation of the second social encyclical. . . . . . . . 6.6. Pesch linked Catholic social teaching and Catholic social economics. . . . . . . 6.7. Catholic social teaching is brought from Germany to the United States. . . . . . 6.8. Renewed interest in Catholic social teaching and economics. . . . . . . . . . . . . . 6.9. Catholic social teaching and its relationship to ideologies. . . . . . . . . . . . . . . . 6.10. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Conventional economics and Catholic social economics . . . . . . . . . . . . . . . . . . . . . . . . . 7.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2. Catholic social economics began with Rerum Novarum. . . . . . . . . . . . . . . . . . 7.3. Adam Smith the founding father of conventional economics. . . . . . . . . . . . . . 7.4. Smith’s journey to Europe and ‘The Wealth of Nations’. . . . . . . . . . . . . . . . . 7.5. The philosophical foundations of conventional economics and Catholic social economics are equally valid points of departures. . . . . . . . . . . . . . . . . . . . 7.6. Other significant scholars: John Stuart Mill. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7. Development of welfare economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. Recent trends in social economics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.9. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Normative vs. value-free science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2. Catholic social economics versus conventional economics . . . . . . . . . . . . . . . 8.3. The goal of the economy is central to Catholic social economics. . . . . . . . . . . 8.4. Catholic social economics is both positivistic and normative. . . . . . . . . . . . . . 8.5. The relationship between ethics and Catholic social economics. . . . . . . . . . . . 8.6. Ethical issues are no longer dismissed in conventional economics. . . . . . . . . . 8.7. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Solidarist and personalist economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2. Solidarist economics and Catholic social teaching . . . . . . . . . . . . . . . . . . . . . . 3

60 60 61 61 63 64 64 65 67 68 69 71 71 72 73 74 76 76 77 78 79 81 81 81 82 83 84 85 86 87 87 87


9.3. The origin of the principle of solidarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 9.4. Pesch’s definition of solidarism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 9.5. Pesch’s solidaristic system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 9.6. The nature of the principle of solidarism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 9.7. The development of solidarist economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 9.8. Peschian solidarity vs. liberalism and Marxism . . . . . . . . . . . . . . . . . . . . . . . . 94 9.9. Solidarity in modern society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 9.10. Personalist economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.11. Personalist economics focuses on human nature . . . . . . . . . . . . . . . . . . . . . . 97 9.12. The characteristic of personalist economics . . . . . . . . . . . . . . . . . . . . . . . . . . 97 9.13. The future of personalist econmics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 9.14. Catholic social economic vs. mainstream economics . . . . . . . . . . . . . . . . . . 100 9.15. Social Market Economy in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 9.16. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 10. Subsidiarity, a fundamental principle in Catholic social economics . . . . . . . . . . . . . . . 104 10.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 10.2. The principle of subsidiarity in Catholic social teaching and its definition . 104 10.3. Origins of the principle of subsidiarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 10.4. Subsidiarity in the policy-making of the European Market . . . . . . . . . . . . . 107 10.5. The principle of subsidiarity and European integration . . . . . . . . . . . . . . . . 108 10.6. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11. Common good, a fundamental principle in Catholic social teaching . . . . . . . . . . . . . . 110 11.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 11.2. The common good in Catholic social economics and conventional economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 11.3. The origin and nature of the common good in Catholic social teaching . . . 111 11.4. The philosophical origin of the common good in Catholic social economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.5. The nature of the Common good in Catholic social economics . . . . . . . . . . 115 11.6. Adam Smith’s principle of the invisible hand and Catholic social teaching 117 11.7. The world-view of Adam Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 11.8. Human nature according to Adam Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 11.9. The philosophical origin of Adam Smith’s principle of common good . . . . 123 11.10. Adam Smith’s principle of the Invisible Hand . . . . . . . . . . . . . . . . . . . . . . 125 11.11. Similarities and the differences between the common good as used by Adam Smith and by Catholic social economics . . . . . . . . . . . . . . . . . . . . . . . . . 128 11.12. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 12. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Articles and papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Magazines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encyclopaedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix

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135 135 140 144 145


DEDICATION

I want to dedicate this work to Fr. Leslie O. Dorn, S.J., (21.12.1914 - 16.12.2000) teacher and friend, who for many years was an inspiration in my life by his living example of the life of Christ. As priest and teacher he was an example to his students, whom he cared for deeply. He was a man committed to issues of justice and always spoke when the weak had no voice. He had great compassion for the poor and the weak and always believed in the good in people.

ACKNOW LEDGEMENTS

I owe a debt of gratitude to a group of people who encouraged and helped me in many ways in writing this MA - dissertation, in particular Fr. Leslie Dorn, S.J., who died in December, 2000, and to whom this work is dedicated. He had a great interest in the theme himself for many years, and was the first person to suggest the possibility of bringing the two academic fields together in Denmark. Through his Jesuit network, he put me in contact with many Jesuits in the academic world, who pointed me in the right direction. My thanks go also to the Prefect of the Vatican Library, Don Raffaele Farina, who helped to obtain the original papal texts and documentation; to Fr. Mulchay S.J of the University of San Francisco, with whom I corresponded for a brief time; a special thanks to Associate Professor Edward O’Boyle of the Louisiana Tech University, who not only assisted in getting hold of the necessary literature, but also was available to discuss questions concerning Catholic social teaching and supervising the work as it progressed. Thanks must also go to Associate Professor Axel Mossin of the University of Copenhagen, my supervisor in the early days of the MA dissertation, for his courage in accepting the title, for his genuine interest in the area and for the encouragement he gave me to continue; to Professor Hector Estrup, dr. polit. of the University of Copenhagen, who supervised the final stages of the MA - dissertation. Special thanks go in particular to my parents Kirsten and Erling, for their encouragement and support.

5


FOREWORD

The topic of this MA - dissertation in Economics at the University of Copenhagen is ‘The Social Teaching of the Roman Catholic Church from a Social Science Perspective’. While mainstream and heterodox economics are part of conventional academic teaching, Catholic social economics based on Catholic social teaching is generally not very well known in Denmark outside rather limited Catholic circles. In motivating the choice of theme and perspective I would argue three points. First, in the world of Catholic scholarship in central and southern Europe, not to mention the USA, Catholic social teaching plays a growing role. This is reflected in the fact that several universities and colleges offer courses in Catholic social teaching, one of these being Boston College, USA, where the Department of Economics in the fall of 1999 offered the courses ‘Economics and Catholic Social Teaching’ and ‘The Common Good’, and also universities such as John A. Ryan Institute for Catholic Social Thought, University of St. Thomas, USA, Fairfield University, USA and University of Notre Dame, USA offer courses on Catholic social teaching to students of economics. It is a subject which attracts attention also from the fields of mainstream economics. Catholic social teaching is even presented to pupils on secondary level in Catholic schools in England and the USA as part of their curriculum in order to awaken their awareness to the social and moral issues in today’s economic society. Furthermore, Catholic social teaching is relevant in order to fully appreciate the socioeconomic policies of various European countries in the European Union. In the German Federal Republic for example the CDU (‘Christian Democratic Union’), which has a strong Catholic element, was the dominating political force in the decades after the Second World War, and thus Catholic social teaching contributed to the establishment of the ‘Soziale Marktwirtschaft’ (‘Social Market Economy’). Increasing European integration makes this all the more important, since many of the present political leaders of southern European countries in particular, where the Catholic Church has been influential for centuries, have attended Catholic colleges and universities. Their consciousness has thus been formed and marked by Catholic social thought. Since Catholic social teaching has elements of economic principles as 6


well as political philosophy, it offers an alternative understanding of the relationship between economic theory and economic policy, and will also be relevant in regard to the compatibility of Southern and Northern European socio-economic policies. Last but not least Catholic social teaching is a topic which by its nature is interdisciplinary because it is a composite of economic science with strong traits of philosophy and theology. Of course every economic theory, at least implicitly, has a concept of what human nature is. In Catholic social teaching this element is of central importance and quite consciously cultivated, because it is the concept of human nature that determines the way the economic order is perceived. Catholic social teaching thus offers a critical perspective on conventional economics as I hope to demonstrate in this dissertation.

My own interest in Catholic social teaching was awakened a decade ago. In 1988 I received a PGCE degree form Newman College, a Catholic Teachers’ Training College, and in 1996 I received a BA (honours) in Divinity from Maryvale Institute in Birmingham, England, validated by the Pontifical University of Maynooth in Ireland. With my background in both economics and Catholic theology, interest for Roman Catholic social teaching was awakened within me and has grown over the years. I later became aware that the interdisciplinary dialogue between economists, sociologists and theologians that took place internationally was largely unknown in Scandinavia. Another contributing factor to my interest is the fact that the literature in the field of Catholic social teaching has almost been forgotten, since welfare economics became a distinct discipline. This literature provides a valuable contribution to the economic theories that are so widely accepted among mainstream economists, since it challenges the fundamental principles of these theories. This is because Catholic social teaching is based on principles distinct from those that have influenced economic theory since the late 19th century. Therefore, the moral and philosophical foundation of Catholic social teaching legitimate the work done in Catholic social economics. MARIANNE HELENE TOFTE ANDERSEN GROESMEYER JUNE 2002 7


1. I NTRODUCTION

1.1. The purpose of this MA-dissertation in economics. The purpose of this MA-dissertation is to present the moral and philosophical principles that have influenced the formulation of the official social teaching of the Roman Catholic Church. Secondly, the growth and formulation of Catholic social economics (solidarist and personalist economics) will be traced. Thirdly, the fundamental principles of Catholic social teaching and the principles upon which Catholic social economics rests, will be related to the fundamental principles of conventional economics and its development as found in the writings of Adam Smith. Finally, it will be argued that the fundamental principles of Catholic social teaching and economics have significance for conventional economics in the light of today's ethical challenges.

1.2. Catholic social teaching and conventional economics. Catholic social teaching is a distinct school of thought, since its philosophical premises are based on 19th century neo-scholasticism and 20th century personalism as formulated by Pope John Paul II. The philosophy of personalism confronts the growing anonymity of the individual as person caused by the development and extended use of electronic means of communication. Catholic social teaching is not a ‘third way’ between capitalism and socialism, but a response to the errors of these ideologies and it tends to be quite critical of both liberal and socialistic policies. Its creativity lies in its organic dynamism and openness to development, as can be seen in the modifications evident in the succeeding papal encyclicals. It therefore offers a different perspective from which to look at the current social debate. The fundamental principles of solidarity, subsidiarity and the common good, upon which Catholic social teaching rest, have been dynamically developed over time. These principles express a moral and philosophical vision of the ordering of an economic society, thereby advocating a just society, a society where the key elements are human dignity, freedom, and the common good. Conventional economics has not in a satisfactory way been able to respond fully to the ethical challenges modern society confronts it with. There is to day within any social science an awareness of how morality and ethics influence theory. Within economics it is acknowledge that man’s behaviour does influence economic affairs, and ethical issues are gradually finding a

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place. The social nature of man is no longer regarded as irrelevant and has given rise to renewed interest in social economics. The errors of liberalism and socialism as well as the estrangement of the man in this electronic age has made economists to look in new directions. Catholic social economics, grounded in Catholic social teaching, on the other hand, is based in the principle that the fundamental unit of the economy is the person, both individual and social. It is also normative in its approach and has as its centre human nature, and its ultimate goals are explicitly metaphysical and teleological. Economic activity is understood as a teleological process. Catholic social economics proposes a new way of thinking about economics and offers a set different philosophical premises from those used by conventional economics. The philosophical premises from social economics give a better way viewing the ethical perspective in economic affairs and contribute to an alternative view of the issues with which modern economic society is confronted.

1.3. Methodology. The methodology applied in the following is not supported by a single theory but guided by three strategies: Analytical, historical and comparative. As mentioned above Catholic social teaching is not very well known in Denmark. Furthermore Catholic social teaching operates with a number of philosophical concepts which are not part of mainstream economic theory. A certain amount of ‘translation’ and simple explanation is therefore necessary and I have therefore chosen to structure my presentation of Catholic social teaching around a number of central concepts which will be analysed and related to one another in order to show the organic structure of Catholic social teaching. This analytical strategy must, however, be supplemented with a historical dimension. Catholic social teaching is not found ready made in the Bible, but is basically a response to the economic and social conditions produced by modern, industrial society. This response started at a certain point in history in the late 19th century and has been gradually elaborated and developed until today. Although Catholic social teaching constitutes one tradition, it is a living tradition and any purely systematic analysis would harm the living reality. Not only Catholic social teaching needs to be contextualized. The slow development of Catholic social economics as well as the teaching of the founding father of conventional economics, Adam Smith, must be seen in a historical perspective. A historical dimension is therefore necessary, but so is a comparative perspective.

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Comparison is a privileged way of provoking insight because it makes us put new questions to the material and because it gives us a chance to measure relative advantages and drawbacks. In concrete terms this means that I will try to relate the fundamental principles of Catholic social teaching and conventional economics to each other in order to gain a deeper understanding of the differences, the common ground and the supplementary zones.

1.4. Sources and literature. The primary sources for any account of Catholic social teaching are the four central papal encyclicals dealing with the social teaching of the Catholic Church: Rerum Novarum (1891) (‘On the condition of the working classes’), Quadragesimo Anno (1931) (‘On reconstruction of the social order’), Octogesima Adveniens (1971) (‘On the occasion of the 80 th anniversary of the encyclical Rerum Novarum’), Centesimus Annus (1991) (‘The 100 th year’). The last three named encyclicals reveal the development and the dynamics of the fundamental principles of Catholic social teaching since Rerum Novarum. Many other official church documents deal with Catholic social teaching, but these four texts are the central core. Catholic social teaching is not only a matter of official, papal pronouncements. The impact and dynamic of Catholic social teaching depend on the lively and creative reception, discussion, critique and development which the papal teaching receives among theologians, philosophers and economists inside and outside the Catholic Church. Especially concerning the dialogue with mainstream economics, the writings of a number of German and North American Catholic scholars have been important. For these discussions I have mainly used the journal ‘Review of Social Economics’ which is the primary forum for contemporary discussion about Social Economics. But the work of the late Heinrich Pesch (Germany), the founding father of Catholic social economics, and Edward O’Boyle (USA), who is a high- profile contemporary advocate of Catholic social economics and personalist economics, have also been of primary importance for my understanding and the analysis in this dissertation.

1.5. Outline. This MA-dissertation consists of two parts, each divided into chapters. Each part deals with significant aspects of Catholic social teaching from a social science perspective with some references to the field of economics.

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Part I (‘An Introduction to Catholic Social Teaching on Economic Issues’) gives the reader the necessary tools to fully appreciate and comprehend the contribution offered by Catholic social teaching to conventional economics with regard to ethical issues. Catholic social teaching should be seen in its historical and philosophical context. Chapter two (‘Catholic social teaching according to the magisterium’): Social teaching is about how people deal with social and economic issues in a responsible way. It is not unique to the Catholic church, but because of the way the Catholic church perceives itself, its social teaching is given a specific connotation. The social teaching of the Catholic church has developed from a coherent Catholic social doctrine which has been formulated on the basis of a long tradition going back to the Old Testament. The social teaching of the Catholic church in the form it took in the 19th century is opposed to liberalism and Marxism. It sees these isms as endangering the sacredness of man. Catholic social teaching comprises a true treasure in regard to moral teaching and ethics. It never claimed to be authoritative but has offered guidance and given a structure to deal with contemporary economic issues so that a more just economic society could be fostered, advocating human dignity and freedom. Scholars have interpreted the nature of Catholic social teaching differently and discussed whether or not it is a specific ideology. Catholic social teaching does not propose a specific economic system, rather it remains “neutral”, and during the last century many with no background in religion recognized its value. Chapter three (‘A short history of Catholic social teaching’): The official Catholic social teaching is unique and has been formulated as a result of historical events. Nineteenth century Germany became influential in the formulation of the first Catholic social encyclicals. The Catholic church had lost its influence on people and liberalism prevailed. Industry was flourishing and the workers and the poorer classes suffered. Social reforms were badly needed, as was a reconstruction of the social order. The church reacted to this and scholasticism was reintroduced in seminaries and Catholic universities and social movements started. Catholic scholars began to demand a just society and social reforms to alleviate the suffering of the workers. Bishop Wilhelm E. von Kettler (1811-1877) was a leading figure in the Catholic social movements. Before the formulation of the first social encyclical he and others had implicitly formulated a Catholic response to the social and economic turmoil. When it came to the exact formulation of the social encyclical Pope Leo XIII (1810-1903) and subsequent popes left the drafting of these to leading economists, sociologists and philosophers. It is therefore not

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surprising that these scholars used the pressing issues of the specific time in which they wrote in the encyclicals. The first social encyclical, Rerum Novarum (1891), dealt primarily with the worker question and responded to the appalling conditions under which they lived and worked. Issues such as a living wage, just price and the nature of man were at stake. The next social encyclical, Quadragesimo Anno (1931), was formulated as a reaction not only to the condition of the workers but also to the errors of liberalism and Marxism. In this encyclical one of the fundamental principles of Catholic social teaching was now explicitly formulated, the principle of subsidiarity. Catholic social teaching became more explicit and was inspired by a German economist’s solidaristic schema emphasising the fundamental principles, solidarity, subsidiarity and the common good. The world economy was collapsing and liberalism and socialism had failed to improve the condition of the workers. Workers needed to organize and Pope Pius XI (1922-1939) used the principle of subsidiarity to strengthen the quest of the workers for more just conditions. He referred to the teaching of Pope Leo XIII but re-interpreted it and used in with new social problems. Pope John XXIII (1958-1963) gave the social teaching a more biblical foundation and the previous rigid philosophical interpretations were dropped. It became more differentiated and dealt with more specific issues. The problems of the workers are still an issue for the Catholic Church, and capitalism still poses a problem. Pope Paul VI focussed on the problems of globalization and in Octogesima Adveniens (1971) he emphasised the need for the local Christian communities to contribute towards the establishment of a just social order. He was concerned with the increasing gap between rich and poor countries. Pope John Paul II changed Catholic social teaching radically by strongly emphasising the centrality of the person. In the encyclical Centisimus Annus he warned against reducing labour to mere instruments of production and against the increased consumerism. The principle of solidarity is central in his social teaching and an absolute necessity in promoting a just society with due respect for human nature. Chapter four (‘The philosophical premises of Catholic social teaching’): The teaching of Thomas Aquinas in respect to human nature, the state, private property, justice (forms of justice), wage and price permeates not only the first encyclical but also the subsequent encyclicals. Thomas Aquinas’ teaching was based on the principle of natural law. With the assumption of the principle of natural law the teaching becomes valid for all. It is assumed that all men have the ability to distinguish between right and wrong according to an innate moral law. The

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individualism of the 20 th century changed the philosophical premises, and Pope John Paul II introduced personalism, emphasising the person. Chapter five (‘Different understanding of human nature and its relevance to economics’): Man has a central place in Catholic social teaching and economics. Conventional economics tends to underestimate the centrality of man as unique and acting according to moral and ethical principles, in economic affairs. The one-dimensional nature of man as either Homo economicus or Homo sovieticus is the norm in conventional and heterodox economics. Catholic social economics is thus significantly different as, in line with the teaching of Thomas Aquinas and personalism, it is based on man’s two-dimensional nature as both an individual and a social being. Adopting this view of human nature makes it also necessary to analyse economic issues from both aspects. Part II (‘Catholic social economics’) shows the relevance of Catholic social teaching in the field of economics. Catholic social economics known as solidarist and personalist economics is based on Catholic social teaching. Chapter six (‘The economists behind the formulation of Catholic social teaching’): Catholic scholars not only contributed greatly to the specific formulation of the encyclicals, but they also attempted to translate Catholic social teaching into Catholic social economics. One German economist stood out as the founder of what was later to be called solidarist economics. He based his teaching on scholasticism and developed solidarism into a solidaristic system which characterized his economic theory. Between the two World Wars several members of his study group moved to American educational institutions where they laid the foundation for further development of Catholic social economics. Catholic social economics has borrowed elements from both liberalism and Marxism and changed these. Chapter seven (‘Conventional economics and Catholic social economics’): It is however not only Catholic social teaching which has inspired Catholic social economists. Tracing the development of welfare economics, it is possible to identify many similarities between what became known as new welfare economics and Catholic social economics. A secular branch of social economics originating in France has its roots in welfare economics. The difference between Catholic social economics and social economics is found in the underlying philosophical premises, which are more explicit in Catholic social economics where valuejudgments are included.

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Chapter eight (‘Normative vs. value-free science’): Catholic social economics differs from conventional economics by being normative. Conventional economists today no longer completely reject the contribution offered by a normative approach. The claim of economics to be a value-free science was rooted in the 19th century when economics was developed into a positivistic science using mathematical tools. Catholic social economics viewed the goal of the economy as important and this is not found within economics itself but in the fulfilment of the common good, the welfare of the individual and society at the same time. Chapter nine (‘Solidarist and personalist economics’): The principles of solidarity and solidarism were given new interpretations. Solidarist economics emerged from this and has recently evolved into personalist economics. Some Catholic social economists do not accept personalist economics but have adopted the principles of conventional economics with a large dose of Christian ethics added. Those scholars who work with personalist economics face the obstacle that mainstream economists do not distinguish between the term “person” and the term “individual” and hence a fundamental difference is overlooked. It is not easy to place solidarist economics within mainstream economics and scholars in mainstream economics tend to dismiss the contribution Catholic social economics makes to the field of economics. Chapter ten (‘Subsidiarity, a fundamental principle in Catholic social economics’): The principle of subsidiarity is a fundamental principle in Catholic social teaching and social economics. It is a new principle as it was first explicitly defined and used in the social encyclical Quadragesimo Anno. The principle is intrinsically linked with the principle of solidarity which has the guiding virtues of social justice and charity underlying it. According to the principle of subsidiarity, the state, firm etc. must be organised in such a way that decisions are made at the proper level. Through the German Christian Democrats the principle has found its way into the language of the European Union, and plays a significant role in European integration. Chapter eleven (‘Common good, a fundamental principle in Catholic social economics’): It is difficult to define precisely the principle of the common good, which goes as far back as Plato and the Stoics. What constitutes the common good has always been the subject of a discussion of the relation between the welfare or happiness of the individual and the state or society. The philosophical origin of the Catholic understanding of the principle differs from that used by Adam Smith when he suggested the principle of “the invisible hand”. In Adam Smith’s ‘The Wealth of Nations’ he stresses the individuality of man and in ‘The Theory of Moral Sentiments’

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he stresses the sociality of man. The view held by conventional economists is that ‘The Theory of Moral Sentiments’ is unimportant for his later work. This is disputed by some scholars who claim that ‘The Theory of Moral Sentiments’ has the fundamental doctrines later elaborated in ‘The Wealth of Nations’. Adam Smith emphasised that moral virtues are necessary to curtail man’s pursuit of self-interest. He assumed that man has moral virtues by nature. Economists who follow the teaching of Adam Smith argue that economics is not value-laden, but this is not true. Smith was primarily a philosopher and thought as such, but reasoned in another way in economics. ‘The Theory of Moral Sentiments’ and ‘The Wealth of Nations’ should be read as a unified system. His world view was not Christian but strongly influenced by Stoicism. Smith’s “invisible hand” is a benevolent creator and this deity has already given the world a specific amount of happiness, hence man cannot by his actions increase the total happiness in the world. The principle of the invisible hand means that if man pursues his self-interest then the common good is achieved. So the question is whether Smith’s principle of the common good is compatible with Catholic social economics. When the underlying philosophical premises of the principle of the common good in both Catholic social teaching and in the principle of the invisible hand are analysed, then the common good is two different things. Smith assumed that there was a moral constraint on the individual in pursuing self interest. The principle of the invisible hand as formulated and used by Adam Smith has often been misinterpreted and used as if seeking self-interest meant having no moral conscience or concern for others. Catholic social economists believe that the individualism favoured by Smith needs to be constrained by the principle of solidarity. Though the philosophical premises of Catholic social economics and conventional economics are different, they may be brought together and complement each other in the understanding of the common good if the “individual” is replaced by an individual who is constrained by morals. Conclusion: The critical perspective of Catholic social economics on conventional economics is necessary if we are to hope for a more just and humane society. It is doubtful whether Catholic social economics now known as personalist economics can become an independent discipline within economics in the way health economics etc. has. It is based on different philosophical premises and views economics more as a social philosophy, but there is no doubt that it will challenge the conventional way of understanding economic affairs and offer a different perspective on ethical issues which are becoming more and more pressing in economic thinking.

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__________________________________________________________________________ Part I: An Introduction to Catholic Social Teaching on Economic Issues __________________________________________________________________________ 2. C ATHOLIC SOCIAL TEACHING ACCORDING TO THE MAGISTERIUM 1 It is first necessary to establish what constitutes Catholic social teaching, and what makes it significant, if one is to appreciate the contribution it makes to conventional economics through its moral and philosophical principles. Therefore, this chapter defines Catholic social teaching and outlines the special nature of Catholic social teaching, which is a central feature of Catholic identity and Catholic social thought. It describes the origin and development of Catholic social teaching. It also presents different scholars’ interpretation of the special nature of Catholic social teaching. Further, this chapter argues that Catholic social teaching provides moral guidance and a structure to address issues in economic affairs.

2.1. Introduction. All Christian churches have a social teaching which is specific and reflects the theology and philosophy of the particular church, and this is also true of the Roman Catholic church. Social teaching explains how its members are to conduct themselves in society according to the moral and ethical principles of the specific Church. The Roman Catholic church has formulated a specific social teaching, which has been widely accepted by others, who otherwise do not recognize the authority of the Roman Catholic church. The principle of subsidiarity for example has found its way into the policy making of the European Union. Protestant churches have also formulated a social teaching, but it follows from their ecclesiastical structures that the teaching can in no way be binding upon the body of believers, since these churches unlike the Catholic church have no Magisterium. The development of Catholic social teaching is closely linked to a series of papal encyclicals. Catholic social teaching is not a matter of faith, but of morals and moral theology. Thus Pope John Paul II writes in the encyclical, Sollicitudo Rei Socialis (1987) (‘On the social concern’): “The

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The teaching authority which the P ope s exerc ise in an no n-definitive way, either by the p ublication of the ir encyclical letters, apostolic constitutions, etc. or by their explicit approval of doctrinal statements made by the Congregation for the Doctrine of the Faith.

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Church does not propose economic and political systems or programs, nor does she show preference for one or the other, provided that human dignity is properly respected and promoted ... The Church’s social doctrine is not a “third way” between liberal Capitalism and Marxist collectivism, nor even a possible alternative to other solutions less radically opposed to one another ... Its main aim is to interpret these realities (the complex realities of human existence), determining their conformity with or divergence from the lines of the Gospel teaching on man and his vocation.” 2

2.2. Different uses of the term Catholic social teaching. In the literature the term “Catholic social teaching” is often used synonymously for “Catholic social doctrine” and “Catholic social thought”. Consequently, the underlying principles become vague and unclear3. However, the following distinction is accepted by theologians: social teaching is the recommendation or rules on social issues found in the Old Testament, New Testament, the writings of the Fathers of the Church and further elaborated on in the history of theology. Of its nature it is dynamic as it responds to the main currents in historical thought. When principles of social teaching are developed systematically into a coherent body of teaching and clearly formulated by the Church in papal documents, these principles then become social doctrine4. Because of its origin, social doctrine will be more binding on the conscience of the individual Catholic and hence the Catholic economist, sociologist or theologian. Catholic thought is less precise and consists of a blend of social doctrine, teaching and ethics. The specifically formulated social teaching has given rise to the development of Catholic social economics or solidarist economics.

2.3. Catholic social teaching as the Church's best kept secret. The Catholic Church does not claim to be authoritative in matters that deal with purely economic principles, but addresses matters of morals and ethics in a non-authoritarian manner.

2

Sollicitudo Rei Socialis paragraph 41

3

Private e-mail discussion with Professor Rocco Buttiglino, 5th May, 1998

4

Doctrine: Teaching which speak authoritatively on specific situations, but which is considered neither revelatory nor unchangeable.

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However, the Church has always spoken out on issues of importance to the well-being of humanity, and since the time of Christ has in many ways challenged the established social and ethical thinking. During the industrial revolution in Europe in the 19 th century, pressing social issues called for the Church to speak out. Conditions for workers were appalling and this gave rise to a new social awareness in the Church which now addressed concrete social and economic problems in a more direct way. A social teaching was established, though it would take many years before it would become widely known and a concern for all Catholics. It was “The Church’s best kept secret� 5, and did not at first receive due interest among scholars in or outside the Church. In some countries, Catholic social guilds were established as well as Catholic worker colleges and organizations for apprentices and young workers, but somehow the teaching never reached those in authority and was never systematically put into practice. However, with the growing economic and social challenges facing the modern world in the 20 th century and the increased poverty among the third world countries, Catholic social teaching has become the subject of renewed interest. Several Catholic academic institutions, colleges, and universities now offer courses and programmes in social teaching to students of social science and economics. Several Catholic dioceses have committees responsible for developing Catholic social teaching in relation to issues such as personal debt, unemployment, race relations, business ethics, wealth creation and money. However, the social teaching of the Catholic Church does not in itself represent a specific economic theory, but on the basis of neo-scholasticism and personalism, it provides economists with moral guidance and a structure for dealing with contemporary economic issues and also challenges existing economic theories and ways of thinking. The teaching challenges the underlying assumptions of values in existing economic theory, which have not been properly recognized. Catholic social teaching is critical of contemporary solutions to social problems, and although it claims to be non-authoritative, it addresses openly our modern day problems in which human dignity and freedom are endangered. Catholic social teaching found its way into economics and sociology through the academic work of Jesuit scholars and was subsequently implemented in society through their ministry.

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McHugh, F. (1991): A Century of Catholic Social Teaching. Priest & People, Vol. 5, No. 5, pp. 173 - 177

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2.4. The nature of Catholic social teaching as expressed in documents.Catholic social teaching is found in documents such as encyclicals 6, apostolic letters 7, other papal writings 8, and apostolic constitutions 9 which are not to be seen as economic treatises but are to be regarded fundamentally as moral documents. When the Church addresses economic issues it does so in its capacity of teacher on matters of faith and morals. This is stated very clearly by Pope Pius XI in the encyclical Quadragesimo Anno, “We must lay down the principle, long since clearly established by Pope Leo XIII, that it is Our right and Our duty to deal authoritatively with social and economic problems”. He went on to say that the Church does not have the professional competence to deal with economic principles. He stated, however, that to the extent social order and economic life in society fall under moral law, it is the right and the duty of the Church to speak on behalf of the poor and defenceless in the light of the Gospel. The relationship between moral law and economic science is further clearly stated “for though economic life and moral conduct are guided each by its own principle in its own sphere, it is false to maintain that the two orders are so dissociated and so alien to each other that the former in no way depends on the latter”10. This is important to bear in mind when discussing the nature of Catholic social economics later. The underlying right for the Church to teach on these matters, arises from the conviction that it has a right and a duty to teach the moral implications of economics. This viewpoint is also echoed by the present pope, Pope John Paul II, in the encyclical, Sollicitudo Rei Socialis, where he explicitly formulates the nature of the social doctrine of the Church not as a “third way”, but,“the accurate formulation of the results of a careful reflection on the complex realities of human existence, in society and in the international order, in the light of faith and of the Church’s tradition.” 11. 6

A f or m a l p a st o ra l l e tt e r w r it t en b y th e P o p e fo r th e u n i ve r sa l C h u r c h an d a d d re s se d t o b i s ho p s an d o r d in a ri e s i n c om m u n i o n w i th t h e H o l y S e e . T h e y p er ta i n p e r s e to t h e P o p e ’s e xe r ci s e o f his ord inary mag isterium . The y apply so me aspect o f Christ’s teac hing to the so cial and ethical p roble ms o f the day. T hou gh the y are not in them selves an fallible pro nou ncem ents an d their teaching m ay be subject to chan ge, Catholics are nevertheless o bliged to assent to their do ctrinal and moral con tent. (Catholic Enc yclopedia)

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Executive acts issued either by thePope himself or by one of the congregations. They are used to announce the canonization of saint, to appoint a bishop, to create a new cardinal, to erect a new dioeces, and many similar acts. (Catholic Encyclopedia) 8

Homilies, opening addresses, talks, etc.

A most solemn docum ent issued by the pope in his own nam e. It may deal with either doctrinal or disciplinary matters, but only with the most weighty questions. (Catholic Encyclopedia) 9

10

Quadragesimo Anno paragraph 41

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Sollicitudo Rei Socialis pargraph 41

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2.5. The first official formulation of Catholic social teaching. The beginning of the social teaching of the Church is the promulgation of the encyclical, Rerum Novarum, (‘On the condition of the Working Class’), by Pope Leo XIII on 15 th May 1891. This is a view held by most scholars, for example Richard Camp12, a scholar to whom references within this field are often made, writes, “the pre-Leonine period popes (before 1878) had little to contribute to a Catholic doctrine of social reform” a view that has been held for the last 30 years, although Michael Schuck 13, pointed out that important earlier papal writings which have contributed to the formulation of Catholic social teaching will be missed if one does not include the encyclicals from l740. Despite this it has generally been accepted that social teaching as a distinct form of teaching started with Rerum Novarum14. Therefore, it is generally agreed that Rerum Novarum is the “Magna Carta 15 on which all Christian activities in social matters ought to be based” 16. Catholic social teaching has developed as a consequence of specific historical events. It has developed and changed over time according to the economic, sociological and historical challenges with which society and man have been confronted. The encyclical, Rerum Novarum, marks a transition in the social teaching of the Church and is still today a point of reference for all later elaboration of Catholic social teaching.

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Richard Camp (1969): The Papal Ideology of Social Reform - a study in Historical Development 1878-1967, Leiden, pp . 7 13

Michael J. Schuck (1991): That they be one: The Social teaching of the Papal Encyclicals 1740-1989, Georgetown University Press. Schuck (1991) was awarded his doctorate for “The context and Coherence of Roman Catho lic Enc yclical T eaching”, W ashington D C. He have studied both history and po litical science. 14

Coleman, J. and Baum, G . (199 1): Editorial: A Tradition to Celeba rte, Critize and b ring Fo rward , pp. vii-xi, in Coleman, J. and Baum, G. (eds), Rerum Novarum - One Hundred Years of Catholic Social Teaching, Concilium, No . 5 15

Magna C arta is a point of reference to all further elaboration of here Catholic social teaching.

16

Quadregessimo Anno paragraph 39

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2.6. Scholars’ different views of Catholic social teaching. Different scholars have contributed with different definitions and understanding of Catholic social teaching according to their ideological and political orientation. Gregory Baum 17 gives the following interpretation of Catholic social teaching as, “a developing intellectual tradition, guided by its own proper inspiration, that is at present making interesting contributions to the public debate”. It is an interpretation not unanimously shared, as Baum himself points out in his article. The more traditional interpretation is to read and understand the encyclicals in the historical context in which they were written. Coleman 18 describes social teaching as being a distinctive and original social ideology. It is rooted in a distinct social location, such as the workers’ condition during the industrial revolution in Europe. Various social movements arose, which in turn led to the Church’s involvement in politics. Richard L. Camp19 offers again a different understanding and explains how events and personalities have influenced the development of the social teaching. Time and place have a significant role in the formulation of social teaching. Juan Luis Segundo20 interprets social teaching as an ideology and claims that the encyclicals lack an effective methodology for implementing it. This lack of methodology is evident from reading of the encyclicals. However, the Church herself insists that Catholic social teaching is not an ideology. The Church’s social teaching has to be adapted to the needs of the times with the participation of bishops, and has several distinct phases in its development which can be seen in a consecutive reading of the social encyclicals, where there are noticeable shifts in the understanding of the fundamental principles underlying the social teaching. There is a general tendency in more popular Catholic commentaries on the social teaching to see it as a unity. This, however, is not the case. This is pointed out in Camp’s work, where he sheds light on the different interpretations of the fundamental principles

Baum, G. (1991): The Originality if Catholic Social Teaching, pp. 55 in Coleman, J. and Baum, G. (eds), Rerum Novarum - One Hundred Y ears of Catholic Social Teaching, Concilium, No. 5 17

Coleman, John (1991): Neither Liberal Nor Socialist, pp. 25-42 in Coleman, J. (ed).: One Hundred Years of Catholic Social Thought, Celebration and C hallenge, Orbis Books 18

Richard Camp (1969): The Papal Ideology of Social Reform - a study in Historical Development 1878-1967, Leiden, pp. 12 19

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Segundo, Juan Luis (1982): Faith and Ideologies, Maryknoll, pp. 27

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2.7. Summary. To summarise, this chapter argues that •

the Catholic church offers moral guidance and a structure to deal with issues in economics. Catholic social teaching is distinct. It integrates elements from liberalism and M arxism which are used and interpreted in new ways. It is emphasized that it does not constitute a “third way” between liberalism and Marxism

the encyclical Rerum Novarum marks the beginning of an official Catholic social teaching, but Catholic social teaching goes further back than Rerum Novarum.

scholars have different interpretations of what constitutes Catholic social teaching. Some interpret it from a historical perspective and some from an ideological perspective. However, to make it universal it must be given a dynamic and relative interpretation.

.

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3. A SHORT HISTORY OF CATHOLIC SOCIAL TEACHING. The formulation of Catholic social teaching is a product of specific historical and sociological events in society. The previous chapter identified what constitutes Catholic social teaching and how scholars interpret it. It now needs to be addressed in a historical setting. Therefore to understand its significance in relation to the ethical challenges facing conventional economics today, Catholic social teaching has to be contextualized..This chapter outlines the social and economic problems to which the major social encyclicals responded. It argues that certain historical events are more significant than others in the formulation of Catholic social teaching, which was mainly influenced by the political and religious scene in Germany. Finally, major fundamental principles will be discussed.

3.1. Introduction. There is within the Roman Catholic Church a coherent corpus of writings and teachings in respect to social issues as stated in chapter 2. Since the Catholic social teaching is not a matter of faith it is not binding for the faithful. Catholic economists and politicians and others are committed to form their conscience according to the social teaching as expressed in the encyclicals because of the claimed authenticity. The social teaching of the Church will naturally be a significant element in the academic thinking and reasoning within Catholic academic circles. Deeply rooted in scripture and the Christian tradition, the Catholic church responded to the social and economic problems confronting society. The purpose of the encyclicals has always been to present an interpretation of human existence rooted in scripture. This interpretation is superior to and critical of the interpretation offered by liberalism and socialism in Catholic social teaching of the period c.1878-1931. The social teaching expressed in the four major social encyclicals from Pope Leo XIII to Pope John Paul II reveals an evolutionary change in both attitude and methodology. The social teaching is divided into two periods. The teaching of the first period, called the Leonine period (1878 -1958) was rooted in neoscholasticism and the natural law principle, and responded to the errors of liberalism and socialism. The teaching of the second period, called the Post-Leonine period (1959-), breaks in many ways with the teaching from the previous period, as it becomes more differentiated and covers many areas of the economic sphere. The major principle of Catholic social teaching is the principle of human dignity and freedom. 23


3.2. The historical context of the first official formulation of Catholic social teaching. The period leading up to the formulation of Rerum Novarum by Pope Leo XIII expressed an increasing social awareness within the Church. In his social teaching Pope Leo XIII brought together the reformist ideas of socially concerned Catholics during the 19th century. During the previous centuries Feudalism had ended, and the social structures in society began to change. The Enlightenment changed the thinking of philosophers. The prevailing view in society was that the gods or fate were no longer responsible for human destiny, but the rights and obligations of man had to be evaluated in the light of reason rather than of divine revelation21. The new way of philosophical thinking became the accepted foundation for the development of science and humanities. The Industrial Revolution caused a major change in society and a drastic change in the demographic structure. The peasant population remained more or less stable, and the city population increased fivefold. Two new groups emerged, employers and employees. The workers lived and worked under inhuman conditions, and became more and more marginalised. The gap between rich and poor increased disturbingly. In the late 19th century the Church also faced the challenges of modernism. The Church had lost influence in the political world and the mutual relationship between the laity and the church had been weakened. This situation also influenced the academic world, and the importance of the philosophy of Thomas Aquinas (1224-1274) faded. With the new political order of Europe, the Church had almost lost its temporal powers. A conflict arose between the Catholic church and the secular states as the states claimed that the workless religious holidays and individual almsgiving were harmful to the economic stability of the state. To regain influence the Catholic church saw the necessity of renewing Catholic theology and addressing urgent social problems.

3.3. The beginning of the Leonine period (1878 - 1959). In 1870 at the First Vatican Council the Catholic Church, in order to re-affirm its stand on traditional values and its authority, formulated the doctrine of papal infallibility22 in matters of faith and morals. This gave rise to serious tension between the Catholic Church and the secular 21

Fox, Edward (1991): The Emergence of the Modern European World, Blackwell, pp. 27

22

Papa l infallibility: “The Rom an Po ntiff, when he speaks ex cathe dra, that is, when he discharges his office as pastor and teacher of all Christians, and, in virtue of his supreme apostolic authority, defines a doctrine concerning faith or m orals that is to be held by the unive rsal church, through the divine assistance pro mised him in St. Peter, exercises that infallibility with which the divine Redeemer willed to endow his church� . The New Dictionary of Theology: Komonchak, Collins, M. and Lane, D. Dublin: Gill and Macmillan, 1992

24


and political society. Following the new doctrinal formulation Catholic social movements developed throughout Europe, initiated by the intellectual Bishop of Mainz, Bishop Wilhelm E. von Kettler (1811-1877). The Catholic social movements had formulated a code of ethics in respect to pressing social issues. This code was later adopted by the Catholic Church in the papal encyclicals. Bishop Wilhem E. von Kettler was a prominent figure in Germany and contributed greatly to the attempt to solve the question of the workers. He had been elected to the Parliament in Frankfurt in 1848 and wrote widely about the conditions and poverty of the workers. His best known work is ‘Die Arbeiterfrage und das Christentdum’ from 1864. He was in opposition to liberalism and the free market and was also against the social democrats. Socialism was still utopia, and he saw that the only remedy to the inequality between rich and poor was that the rich should share with the poor. In 1879 Pope Leo XIII in 1879 recommended that scholasticism should be the only philosophy and theology taught in seminaries and Catholic universities and colleges23. In this atmosphere the official social teaching of the Catholic church was formulated starting with Rerum Novarum.

3.4. Pope Leo XIII and Rerum Novarum (1891). The beginning of the official Catholic social teaching was a consequence of specific historical events and offered a solution to the “social question”, which had already taken form within German Catholicism. The initiatives taken by Bishop Wilhelm E. von Kettler in regard to the “social question”, the disputes and class struggles that had taken place in society and in the Church24 had a major impact on the concrete formulation of Rerum Novarum. It was the concern for the workers and the poor which led to criticism of the political and economic system. The Catholic church contributed to this criticism by insisting on the human rights of the person. Therefore Catholic social teaching defended private property and demanded a just wage and improved working conditions. Pope Leo XIII promulgated Rerum Novarum in 1891. The encyclical was based on the ideas already presented by Bishop Wilhelm E. von Kettler. Pope Leo XIII saw society as an organic

23

Aeterni Patris (‘On the Re storatio n of Christian P hilosop hy’)

24

Schäfers, M . (199 1): Rerum No varum - The Result of Christian Social M ovements ‘From Below’, in Concilium, ed. Coleman, J. and Baum, G: No. 5, pp. 3 -17

25


unity, where cooperation and shared values were of importance. However, the encyclical also emphasised the needed respect for authority and was based on neo-scholastic philosophical premises. Moreover, Rerum Novarum also marked a change in attitude towards the workers. The Catholic Church called for social justice in contrast to the perceived traditional ecclesiastical alignment with the ruling class in society. A genuine concern for the workers was voiced “In this case we clearly see, and on this there is real agreement, that some opportune remedy must be found quickly for the misery and wretchedness pressing so unjustly on the majority of the working class”25. Pope Leo XIII did not see the solution to the problem as a class struggle, as it was according to Marxism. Instead Pope Leo XIII defended the division between the wealthy and the working poor and regarded this division as necessary in order “to maintain the balance of the body politic” hence “each needs the other: Capital cannot do without labour, nor labour without capital. Mutual agreements result in the beauty of good order”26. This he saw secured through religion. The structure on which society was based was feudal relations with a dominant class. People in society had their status and responsibility as a consequence of interpersonal relationships which had to be exercised with responsibility and to the benefit of the whole of society and of each member of the community, the common good. The Catholic church saw society as hierarchical, paternalistic and structured as an organic society27. Following from this Pope Leo XIII wrote: “Among the many and grave duties of rulers who would do their best for the people, ... is to act - with strict justice which is called by the Schoolmen28 distributive justice - towards each and every class alike”29. Therefore those who were responsible for the distribution of wealth should do this with fairness so that benefits and burdens were shared equally but with special concern for the poor. Without defining the principle of subsidiarity explicitly the principle was incorporated into Rerum Novarum. Another pressing issue as well as the appalling conditions of the workers was the question of determining the just wage and the

25

Rerum No varum paragraph 2

26

Rerum Novarum paragraph 15

27

Organic social theory in the Roman Catholic sense frequently compares society to the human body. That is, as the org anism of the body has prio rity over individual limbs, so the needs of the co mmunity have prio rity over its individual membe rs. Catholic organic social theory p laces em phasis on the temporal welfare o f the com munity as a whole, as well as the d ominance of the spiritual ove r the temporal. 28

The neo-scholastics

29

Rerum Novarum paragraph 27

26


living wage. “Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages...(hence) wages ought not to be insufficient to support a frugal and well-behaved wage earner”30. According to the principle of a just wage (see chapter 4) founded on the principles of natural law and commutative justice, the worker can expect to receive equitable compensation for the work he does. The poorer classes tended to exploited economically by the ruling classes. The living wage that Pope Leo XIII wrote about is the wage that “is sufficient to enable him comfortably to support himself, his wife, and his children ... to put some savings (away by cutting down expenses) and thus (still) secure a modest income”31. On the basis of Thomas Aquinas’ understanding of the relationship between the state and man, Pope Leo XIII described the social characteristics of man, a natural tendency to form associations; “men establish relations in common with one another in the setting up of a commonwealth ... a private society is (thus) one which is formed for the purpose of carrying out private objects ... although (private societies) exist within the State, and are severally part of the State, (they) cannot be prohibited by the State”32. Private property was also defended by Pope Leo XIII., particularly for the workers who suffered under the demands of liberal capitalism and the free market. In Rerum Novarum Pope Leo XIII argued that the reason for man to engage in remunerative labour is to earn money, so that he can obtain property of his own33. According to the principle of natural law it is his right by nature to possess his own property. Neither socialism nor liberalism could ensure a social market economy with a more just distribution of wealth, and the Pope therefore saw the need to apply the principle of distributive justice based on neo-scholasticism. Reflecting the Church conception of human nature and of human society in its economic, political, social, cultural and religious expression, the following principles could be formulated34: •

the right of man to work

the right of individuals to own property

30

Rerum Novarum paragraph 34

31

Rerum Novarum paragraph 35

32

Rerum Novarum parapgraph 37 and 38

33

Rerum N ovarum paragraph 4

34

Gavin, J. (1997 ): Catholic So cial teaching: 18 91-1 975 , Promotio Iustitiae, N o. 66 , February, pp. 6

27


the right of workers to join associations and union

the right of a family head to be paid a just family wage for work done

the right of citizens to resist oppression by lawful means

the duty of citizens to obey lawful authorities

the duty of mothers to care for their children

the duty of governments to work for the common good of all citizens

the obligation of governments and of the rich and powerful to help workers and the poor

3.5. Pope Pius XI and Quadragesimo Anno (1931). The fundamental principles, solidarity, subsidiarity and the common good were in the early days of Catholic social teaching not explicitly formulated, and it took another forty years before the social teaching was given an explicit formulation by Pope Pius XI in Quadragesimo Anno in 1931, taking principles from Heinrich Pesch’s solidaristic schema; the principle of subsidiarity, of solidarity and the twin virtues of social justice and charity. The problems of society challenged the Church again and with the collapsing world economy the Church saw the need to speak again. The effects of liberalism and socialism had caused social and economic turbulence in the 1920s and 30s which called for a new just social order in society. The reconstruction of the social order according to Pope Pius XI would only come if the government would promote the common good according to the Catholic understanding and if the principal laws of society followed the twin virtues of justice and charity. For the principle of the common good to exist the “just freedom of action...must be left both to individual citizens and to families, yet only on condition that the common good be preserved and wrong to any individual be abolished. The function of the rulers of the State is to watch over the community and its parts; but in protecting private individuals in their rights, chief consideration ought to be given to the weak and the poor”35. He re-interpreted and applied in a new way the Catholic social teaching which 40 years earlier had been formulated by Pope Leo XIII in the wake of the problems of the industrialisation. Applying a principle from the moral teaching36 within the 35

Quadragesimo Anno paragraph 25

36

“W here the ob ject of the human act is morally evil, no purpo se and intention of the agent, be it ever so goos, can permit the act. This understanding presupposes the exsitence of moral absolutes. Moral absolutes are prohibitions of actio ns which precisely on acco unt of their abject are considered abso lutely and intrinsically evil”

28


social teaching, he stated in the encyclical Divini Redemtoris (1937) (‘On Atheistic Communism’), that communism and socialism are intrinsically wrong. Liberalism and socialism had failed to improve the conditions of the workers. He saw that the living and working conditions of the workers could be improved by organizing the workers but he was also greatly concerned with the restrictions the state, the industry and finance capitalism imposed on the workers. Pope Pius XI recognized that a “truly Catholic science”37 had been formulated after Rerum Novarum had been promulgated. He had in mind the studies in economics done by Heinrich Pesch and his study group. Pope Pius XI now explicitly stated the nature, method and purpose of the social teaching of the Catholic church which he saw was found in the Gospel whose authority could not be questioned, “The Church insists, on the authority of the Gospel”38 . The purpose of the social teaching is “to direct by her (the Church) precepts the life and conduct of each and all”39. Before the economic depression of 1930s the social teaching of the Church had been shaped and the principle of subsidiarity was now defined explicitly. It was an anti-totalitarian principle, hence reacting to the Marxist movement, which was regarded as a threat because the state as the sole owner of property would become a totalitarian master, and also reacting to the oppression of liberal capitalism which jeopardised the rights of the wage-earner. According to the principle of subsidiarity, what could be decided on lower levels should be decided there and the higher levels of decision making should only intervene in order to ensure the common good. The principle of subsidiarity is expressed as “still, that most weighty principle, which cannot be set aside or changed, remains fixed and unshaken in social philosophy: Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them”40. Pope Pius XI used the principle to curb the excessive involvement

from Peschke, K. (1989): Christian Ethics, Vol. I, General Moral Theology, C. Goodlife Neale, pp. 264 37

Quadragesimo Anno paragraph 20

38

Quadragesimo Anno paragraph 18

39

Ibid. 18

40

Quadragesimo Anno paragraph 79

29


of the state in the affairs of labour, economics and welfare and indicated how, by applying the principle, conflicts between the classes could be removed and harmony between the state, trades, professions, labour and capital could be restored. The civil authorities, and those who were responsible for the distribution of wealth in society had to be fair in distributing the benefits and burdens to all members of society. It is “the duty of the rulers, however, (is) to protect the community and its various elements; and in protecting private rights, they must have special regards for the weak and the needy...the wage-earners, since they mostly belong to that class (the poorer classes), should be specially cared for and protected by the government”41. In respect to a just wage Pope Pius XI drew on the teaching of Pope Leo XIII. The just wage which a worker should receive should make it possible for him to support himself and his family. However, when determining the just wage then the financial situation of the firm had to be taken into consideration. The firm should not be ruined by the workers’ demand for excessive wages, and also the wage-rate should consider the common good thus the public welfare. Refuting the principle that the worth of labour equals the value of its production42, Pope Pius XI pointed to two aspects to be considered when determining the true value of human labour, the personal and social. This is in harmony with the two-fold nature of the principle of the common good and human nature following from the teaching of neo-scholasticism. He restated three things to be considered in regulating and determining the jus wage: •

the worker must be able to make a living for himself

the worker must be able to make a living for his family

the wage-rate must be regulated so as to fulfill the common good of society.

Hence a wage that is too high or too low will lead to unemployment and leave the worker without adequate means to ensure the necessities of life. If in the principle of social justice is applied when determining the wage-rate, then it will affect not only the particular wage but also the wage structure of the entire economy, which will again affect the prices of products. Pope Pius XI defined social justice as the rights and duties of a social group in relation to the common good. This definition of social justice differs from the commutative and distributive justice taught by Pope Leo XIII in his social teaching. Pope Pius XI used the principle of commutative justice differently from Pope Leo XIII. He wrote: “It belongs to what is called 41 42

Quadragesimo Anno paragraph 25 Schasching, J. (1995) paper pre pared for the Po ntifical Academy of Social S cience, 3rd of July

30


commutative justice, faithfully to respect private ownership, and not to encroach on the rights of another by exceeding the limits of one’s own right of property. The prohibition of wrong- ful use of one’s own possession, however, does not fall under this form of justice, but under certain other virtues, the obligations of which are “not enforced by courts of justice”“43. Commutative justice means to safeguard private property and the obligations which indivi- duals have freely contracted. If commutative justice does not exist between the two parties because of abuse of private property by one of the parties, then the contract will not be called just. Hence in Quadragesimo Anno Pope Pius XI wrote about the relationship between labour and capital which should also be regulated by commutative justice; “due consideration must be had for the double character, individual and social, of capital and labour, in order that the dangers of individualism and of collectivism be avoided. The mutual relations between capital and labour must be determined according to the laws of the strictest justice, called commutative justice, supported by Christian charity”44. With regard to the understanding of private ownership Pope Pius XI again developed Pope Leo XIIIs definition. Pope Leo XIII in Rerum Novarum stressed the function of private property that will give security and stability to the family which is the economic unit, and Pope Pius XI in Quadragesimo Anno connected private ownership with the certitude of human dignity “wealth therefore which is constantly being augmented by social and economic progress must be distributed amongst various individual and classes of society......unless the proletarians be placed in such circumstances that by skill and thrift they can acquire a certain modest ownership”45. Private property or ownership is thus a natural right of man and, as both Pope Leo XIII and Pope Pius XI note, will lead to an increase in production and be for the common good.

43

Quadragesimo Anno paragraph 47

44

Quadragesimo Anno paragraph 110

45

Quadragesimo Anno paragraph 57 - 63

31


3.6. The post-Leonine period (1959 - ). The second period marks a significant change in focus. Still deeply rooted in tradition, Catholic social teaching became more biblical in the expressions of its precepts and responsibilities. The previously rigid interpretation of the principle of natural law 46 is abandoned and it is now discussed whether or not it is possible to talk about moral absolutes. Catholic social teaching also becomes far more differentiated and involves many areas of the economic sphere. It is no longer “the worker question” which is in focus but also more specific issues. Issues such as agriculture, capital, worker solidarity and global economics as well as the exploitation of seasonal migrants, immigrants and agricultural workers, and the distribution of goods, are not included in Catholic social teaching. Catholic social teaching warns against unlimited competition, greed, usury, concentration of wealth, monopoly, absentee ownership and control of businesses by the state. However, the central issues in the encyclicals are still markets, property ownership, economic relations and the relationship between state and church as in the previous teaching. The popes continue to condemn injustice from the employer which affects the conditions of the workers, working hours, wages, female and child labour and the religious needs and associational rights of employees. The papal teaching of this period is now becoming wider and broader than the previous period, though the popes repeated the previous Catholic social teaching. The social teaching of the Catholic church has become important in the evangelization the modern world. Capitalist economic theory continues to have problems and the post-Leonine popes concentrate on two problems47. First, capitalism understands profit as the key motive for economic progress , this gives rise to an ethic which favours individual self-interest and will not necessarily lead to the common good, and second, it is understood that a socially optimal distribution of material goods is achieved when competition for profit is kept unrestrained. Michael Schuck points out two errors which these two problems entail. 46

The definition of the natural law is given in Gaudium et Spes §6 “D eep within his conscience man d iscovers a law which he has not laid upon himself but which he must obey...For man has in his heart a law inscribed by God. His dignity lies in observing this law and by it he will be judged (Rom, 2:15-16)”. The popes as we notice use the language of natural law in their social teaching. This law is understood as specific Christian it is an understanding that there are nonconventional, nonarbitrary moral standards which make possible genuine moral self-criticism for all men. The issue is then to try to establish whether or not there is a higher goal in Economics then profit and if profit maximization is possible taken a moral into consideration. Ed. Joseph A. Kom onchak: The New Dictionary of Theology, Gill and Macmillan, 1992, page 703-708. 47

.Michael J. Schuck (1991): That they Be One, The Social Teaching of the Papal Encyclicals 1740 - 1989, Gerorgetown, pp. 131

32


Unrestrained profit maximization assumes and promotes false notions of property ownership, economic justice and international trade

The capitalist concept of automatic justice through unrestrained competitions entails a false view of distribution, an inappropriate separation of economics and morality and a minimalist interpretation of state responsibility.

It was Pope John XXIII, despite his short pontificate, who led the Church into a new era and introduced major reforms which had a significant impact on the social teaching from then on. In his encyclical Mater et Magistra (1961) (‘Christianity and Social Progress’), he justified why social issues are of concern for the Church, “though the Church’s first care must be for souls, ....., she concerns herself too with the exigencies of man’s daily life, with his livelihood and education, and his general, temporal welfare and prosperity”48 and in the encyclical Pacem et Terris (1963) (‘Peace on Earth’) the importance of the social and economic rights of man are emphasised. These rights include the right to work and to a just wage. The divine law is referred to, as these rights are not just legal and political rights which man enjoys, but also include “peace on earth, which all men of every era have most eagerly yearned for, (which) can be firmly established only if the order laid down by God be dutifully observed”49. He stressed the importance of the principle of the common good in his teaching.

3.7. Pope Paul VI and Octogesima Adveniens (1971). Pope Paul VI continued what Pope John XXIII had begun. He addressed the new problems facing modern man. Issues such as property ownership, financial investment and the structural dimension of global injustice are discussed at length. He pointed to the possibility of establishing an order of justice and a renewal of the temporal order through mutual solidarity among the rich and the poor nations. In the encyclical Populorum Progressio (1967) (‘On the Development of Peoples’) he used the concept of solidarity frequently. He saw it as essential for human development and extends the use of it thus, “there can be no progress towards the complete development of man without the simultaneous development of all humanity in the

48

Mater et M agistra paragraph 3

49

Pacem in Te rris paragrapgh 1

33


spirit of solidarity”50. Pope Paul VI understood solidarity as a solidarity of action51. As human beings we are an integral part of the human race and not individuals who pursue our own selfinterest, hence we have an obligation towards the future generations. Human solidarity imposes on us a duty52 to strive towards the complete development of man. This duty has three aspects; first it entails “the aid that the rich nations must give to the developing countries”, second it consists of the social justice which must exist through fair trade relations between powerful and weak nations, and third it is a universal charity to bring about a more human world53. Like Heinrich Pesch he applied solidarity at different levels, thus he talks about universal solidarity and world solidarity, in comparison with Pesch who applied the principle at various levels in society. However Pope Paul VI, by linking solidarity with the idea of human development and using it as a synonym for peace, also led the social teaching into a new era. Later in the encyclical Octogesima Adveniens the importance of the local Christian communities in establishing a social just order is pointed out. The individual Christian is encouraged to apply the principles of the Gospel and take political action when it is appropriate in order to foster a new and just social order. He encouraged a renewed solidarity in education because he saw how liberalism had promoted economic efficiency and distorted human nature54. He wrote: “Legislation is necessary, but it is not sufficient for setting up true relationships of justice and equality...If, beyond legal rules, there is really no deeper feeling of respect for and service to others, then even equality before law can serve as an alibi for flagrant discrimination, continued exploitation and actual contempt. Without a renewed education in solidarity, an overemphasis on equality can give rise to individualism in which each one claims his own rights without wishing to be answerable for the common good.”55 Problems like urbanization, consumerism, demographic explosion, social communications and problems of the environment56 were no longer confined to one area, but were worldwide. The Catholic church adapted its social

50

Populorum Progressio paragraph 43

51

Populorum P rogressio paragraph 1

52

Populorum Progressio paragraph 17

53

Populorum Progressio paragraph 44

54

Octogesima Adveniens paragraph 35

55

Octogesima Adveniens paragraph 23

56

Carrier, Herve (1990): The Social Doctrine of the Church Revisited, Pontifical Council for Justice and Peace, Vatican City, chapter 16

34


teaching to this new situation which posed a new challenge. The Catholic church with its social teaching no longer just offered a solution to the problem, but instead offered guidelines for actions to be taken by Christian communities; “In the face of such widely varying situations it is difficult for us to utter a unified message and to put forward a solution which has universal validity. Such is not our ambition, nor is it our mission. It is up to Christian communities to analyse with objectivity the situations proper to their own country, to shed on it the light of the Gospel’s unalterable words and to draw principles of reflection, norms of judgement and directives for action from the social teaching of the Church”57. A major concern of Pope Paul VI was to establish a just political and economic international climate among the nations. For this to come about, he drew on the principle of subsidiarity.

3.8. Pope John Paul II and Centesimus Annus (1991). With Pope John Paul II the philosophical premises of the social teaching of the Catholic church were altered radically. Pope John Paul II thought about economic affairs mainly in terms of personalism and while he is faithful to the teaching of the earlier popes, he was inspired by personalism rather than neo-scholasticism and the human person was the centre of his teaching. The change in the philosophical premises was an obvious consequence of the development and extended use of electronic means of communication which had made the individual as a person more anonymous. With Pope John Paul II there is a stronger focus on the person and increasing emphasis on the dignity and role of human beings and the effects of prevailing economic activities and policies on the person. “....it is not possible to understand man on the basis of economics alone nor define him simply on the basis of class membership. Man is understood in a more complete way when he is situated within the sphere of culture through his language, history and the position he takes towards fundamental events of life such as birth, love, work and death. At the heart of every culture lies the attitude man takes toward the greatest mystery; the mystery of God”58. The social teaching of the Catholic church now has to be understood in this new light. Pope John Paul II (1978- ) in the opening address to the General Assembly of Latin American Bishops at Puebla, Mexico on 28. January, 1979 urged the bishops to deal with the issue of 57

Gaudium et Spes paragraph 10.

58

Centesimus Annus pararaph 24

35


private property “It is then that the Church’s teaching, which says that there is a “social mortgage” on all private property, takes on an urgent character. With respect to this teaching, the Church has a mission to carry out: she must adopt a position and offer orientations to the leaders of the peoples”. In the encyclical Laborem Exercens (1981) (‘On Human Work’) Pope John Paul II criticised again liberal capitalism and warned against collective socialism, an called for solidarity. The central focus in the encyclical is on the role of union activities. The demands of unions “cannot be turned into a kind of group or class “egoism”, although they can and should aim a correcting - with a view to the common good of the whole of society”59 and unions are not to “play politics” by using strikes for political purposes60. The priority of labour over capital is a principle which has always been taught by the Church as a central principle for the just society. There is always the danger that human labour may be reduced to mere instruments of production. The workers’ struggle for justice is a dynamic element in modern society and there is an increased need for solidarity between rich and poor61. It is especially in Laborem Excercens that Pope John Paul II deals with the principle of solidarity which he describes as directed towards co-operation and harmony. He writes: “We must consequently continue to study the situation of the worker. There is a need for solidarity movements among and with the workers. The church is firmly committed to this cause, in fidelity to Christ , and to be truly the “church of the poor”62. In his teaching Pope John Paul II emphasises different aspects of the principle of solidarity and claims that it is to be understood ontologically and historically. An ontological understanding of the principle means that human solidarity is given by God in the sense that God is creating and redeeming the human species, hence when formulating a social teaching one has to focus on human nature. Pope John Paul II wrote: ”Solidarity helps us to see the “other”-whether a person, people or nation - not just as some kind of instrument, with a work capacity and physical strength to be exploited at low cost and then discarded when no longer useful, but as our “neighbour”, a “helper”, to be made a share on a par with ourselves in the banquet of life to which all are equally invited by God”63. The

59

Laborem Exercens paragraph 97

60

Laborem Excercens paragraph 98

61

Laborem Excercens paragraph 52-57

62

Laborem E xcercens paragraph 8

63

Sollicitude Rei Socialis paragraph 39

36


encyclical Sollicitude Rei Socialis elaborates the teaching of Pope Paul VI’s Populorum Progressio. The classical dispute with regard to capitalist and socialist economic theory is taken up again. “The Church’s social doctrine adopts a critical attitude towards both liberal capitalism and Marxist collectivism64”. The encyclical Centesimus Annus was promulgated on the centenary of Rerum Novarum, and at the time of the collapse of the communist regime in Eastern Europe. Marxism has failed65 as it has not respected the rights of labour, and consequently destroyed solidarity. Pope John Paul II responds to the trend of the rise of rightwing ideologies and an increased emphasis on free-market tendencies. In his encyclical he warned against the risk of consumerism and the risk of an individualistic mentality among people, and he emphasised the importance of a renewed solidarity, hence “to overcome today’s individualistic mentality, a concrete commitment to solidarity and charity is needed, beginning in the family”66

3.9. Contemporary influence on Catholic social teaching. As argued in the previous chapter, Catholic social teaching is distinct and different from liberalism and Marxism. It has insisted that social reforms demand a moral conversion on all levels of society. Though economic life and moral conduct are each guided by their own principles, they do depend on each other. Elements of liberalism influenced the pre-Leonine period and later elements borrowed from the Marxist tradition are found, for example the preferential option for the poor, which is increasingly emphasised in recent Catholic social teaching. The Church has opened up for dialogue with social science and economics in an effort to achieve a better economic and social order. What it has to offer is “principles of reflection, norms of judgement and directives for action”67. The comprehensive changes in society since the time of Quadragesimo Anno have greatly changed the social teaching as it is presented in the social encyclicals.

64

Sollicitud e Rei Socialis paragraph 21

65

Centesimus Annus paragraph 23

66

Centisimus Annus paragraph 49

67

Ouadragesimo A nno paragraph 4

37


Rocco Buttiglione68, Professor at the International Academy of Philosophy in Liechtenstein and at the University of Teramo, a philosophical collaborator with Pope John Paul II and involved in the drafting of Centesimus Annus, sums up four points in his article which are significant for Pope John Paul II’s teaching. The emphasis is on the person and human freedom, and without freedom “...nothing good can be done...”69. Firstly, the word “capitalism” has often been interpreted differently by scholars. Secondly, he sees the market as a social institution and not as something natural. Thirdly, he focuses on a renewed awareness of solidarity among people, and points to the necessity of the welfare state but also warns against the limitations of it. And fourthly, he refers to consumerism which is the connection between market and culture where consumerisme presuppose the freedom of man. Professor J. Schashing70 from the Pontifical Academy of the Social Sciences, in his paper ‘Catholic Social Teaching and Labour, Work and Unemployment’, points out that the themes of work and employment remain the concern of the Church’s social teaching and that these themes have developed over time because the dynamics of the teaching and that the underlying principle of Catholic social teaching is the principle of human dignity. He emphasises the need for a close dialogue with the social sciences and to the intervention of a “culture of work” as a replacement for the class struggle. Pope John Paul II is concerned with interdisciplinary dialogue in regard to other areas of social science he refers to the fact that secular sciences today are more aware of the importance of ethical and religious values in reforms. In the post-Leonine period Catholic social teaching has adopted, transformed and integrated a number of radical and modern ideas. There is now a greater emphasis on society as organic, on cooperation, on shared values and on respect for authority71 If we are to construct a society based on the principles of the social teaching of the Roman Catholic Church then this society would be based on the following values72:

68

Crises, December 1992, Notre Dame Press, pp. 26

69

Buttilione, R. (19 91): B ehind Ce ntisimus Annus, in Crises, vol. 9, N o. July/August

70

Schasching, Johannes: Catholic Social Teaching on Labour, W ork and Emp loyment, paper presented at the Pontifical Academy of Social Science, March, 1996 71

Promotio Iustitiae, From Rerum Novarum to Decree 4, No. 66, February 1997

72

Promotio Iustitiae, From Rerum Novarum to Decree 4, No. 66, February 1997,

38

pp. 6


the person and its spiritual dignity, freedom and responsibility.

the family as the basic cell of society.

the sense of solidarity among citizens that inspires care for the common good of society and special attention for the poor.

the right to private ownership, to be reconciled with economic destination of all material things created for the benefit of all.

the principles of justice, equity and responsibility, applied to all partners of economic activity.

the value of work considered in its individual and social aspects, the worker being valued more than the product of his work.

the moral accountability of civil leaders whose authority is grounded on theological and philosophical foundations.

the search for universal brotherhood and peace through a just international order.

3.10. Summary. To summarize, this chapter discusses •

how significant historical events and social issues have influenced and formed the social teaching of the Catholic church. The social teaching cannot be understood separated from the historical context.

that it is important to compare the different popes’ interpretation of the fundamental principles of Catholic social teaching in order to realize the contribution the teaching can make to deal with the ethical challenges confronting society today and to which conventional economics may not have answer.

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4. THE PHILOSOPHICAL PREM ISES OF CATHOLIC SOCIAL TEACHING In order to discuss differences between Catholic social economics and conventional economics in Part II and make a foundational link between them, it is necessary to begin with a discussion of the philosophical premises for Catholic social teaching. The philosophical premises of Catholic social teaching may not be known to conventional economists and since these premises in a significant way underlie not only Catholic social teaching but also Catholic social economics, these need to be explained. This chapter examines the philosophical premises underlying Catholic social teaching and discusses how these premises have influenced Catholic social economics. The chapter argues that the philosophical principles of scholasticism and personalism have had a major influence on the philosophical principles reflected in the social teaching of the Catholic church.

4.1. Introduction. Within every science there is a set of underlying philosophical premises which will determine the norms, values and findings of the science. This is also true of conventional economics and Catholic social economics. Even the unspoken convention that value-judgment of man’s action as an economic agent has no place within economic science presumes an agreed-upon set of premises concerning the nature of man. Hence, man has always been a pivotal point in every philosophy from the ancient Greeks until today even though there have been different understandings of the nature of man. The secularization of society in the 19th century challenged the Catholic church, leading to a renewed interest in the teaching of Thomas Aquinas (1224-1274), thus giving rise to neoscholasticism. The neo-scholastic basis used by Pope Leo XIII in Catholic social teaching was later developed and modified by Pope John Paul II, who had been educated in Cracow where personalism was the leading philosophical school. He added his own interpretation of personalism to the philosophical premises of Catholic social teaching. The philosophical teaching of Thomas Aquinas and later personalism in the form Pope John Paul II gave it is significant in Catholic social teaching, hence it is important to know some of the background.

4.2. Scholasticism and Thomas Aquinas. In Catholic social teaching, justice is one of the central philosophical principles, which is also a theme in the teaching of Thomas Aquinas. In his Summa Theologiae he also addressed questions 40


of private property, just wage and price in the light of the individualistic tendencies advocated by the secular society. The following presentation is a summary of several sources73. References to Summa Theologiae are to the English translations edited and translated by Marcus Lefébure O.P. The 19th century neo-scholastic movement was based on a reworking of the Aristotelean philosophy of Thomas Aquinas. Thomas Aquinas is known for his two systematic treatises, Summa contra Gentiles and Summa Theologiae. Though he did not write specifically on politics, his political theory is an integral part of his whole philosophical system. His thinking here was based on the moral philosophy of Aristotle (384-322 BC), with the addition of a theological element. Aristotle saw the end of man as being in this world, hence the state could satisfy all the needs of man and a good life in full could be lived out in human society. Thomas Aquinas wrote at a time when Europe was undergoing several crises. Christianity was under attack from Islam, and university scholars were discussing the spiritual challenges to such disciplines as theology, philosophy, politics, law and medicine. Aristotle was well known in the Arabic world and his philosophy had an enormous influence on its spiritual thinking. The scholastic reconciliation of Aristotelean ethics with Christian moral theology is quite clear in Thomas Aquinas’ political philosophy. Thomas Aquinas argues that politics is not a system devoid of moral considerations but quite the contrary, politics implies moral responsibility on the part of the politician. It was essential for Thomas Aquinas as for other medieval philosophers to treat the relationship between the state and the church in their political theories.

4.3. Teleology in Thomas Aquinas’ ethical system. Thomas Aquinas first set forth basic ethical principles, then described how they relate to economic activity, economic institutions and economics in general. Economic activity is thus a

73

Main sources: Copleston, Frederick (1985): A History of Philosophy, Book one, Image Book, page 302-434 D’En treves, A. (eds) (19 81): Aq uinas, Selected P olitcal Writings, Barnes and Nob le Boo ks. Worland, S. (1967): Scholasticism and Welfare Economics, University of Notre Dame Press, 1967 Perregaard, Henrik Preben (2000): Økonomisk Teorihistorie - i et humanistisk perspektiv, Systime, 2000 Peschke, K. H . (199 3): Christian E thics 2, C . Goodliffe N eale Aquinas: Summa T heologiae ed. and translated by M arcus Lefébure (1975), Blackfriars

41


teleological74 process. The final cause or ultimate purpose of man is happiness, ultimately the Beatific Vision of God in His Essence. The practice of virtues and human fellowship help man attain the final end for which he was created by God75. Thus the keystone of Thomas Aquinas’ ethical system is the principle that human happiness consists ultimately in the perception of God. The central point of his political writings is the doctrine of natural law76. As a philosopher and a theologian, he was concerned with the basic moral principles and fundamental moral dimensions of economic activity rather than the practice of economics and politics. It is the interaction between individuals related to each other through a minimum of institutional linkages that is the focal point of economic enquiry. In this respect, his views are similar to those in classical economic thought and welfare economics where this interaction is the centre of focus. According to Thomas Aquinas, politics cannot then be discussed unless it is in a Christian moral setting.

4.4. The concept of human nature. Before Christianity the identity of Man to both Aristotle and Cicero was linked to the State, and the Greek “persona” had a different connotation from what we know in Christianity. Man was understood in relation to the political world. In contrast to this, Christianity regarded Man as a unique creature and formulated a world view assuming the principle of natural law. In Christianity, Man is an analogue, an image, of the triune God, who lives in community with himself. This understanding of Man marked and formed society, which was an organic structure. The nature of man according to Thomas Aquinas is significantly different from that of all other living creatures. Man was given authority over the other creatures. In the Creator’s order of things, Man was to live using ordinary means and to perfect himself in order to return to his Creator and see him face to face in the Beatific Vision. Human life is sacred because it is

74

Teleological comes from telos (Greek for end, aim). The first consistent system af telelogy was elaborated by Aristotle. To him, everything has its own pred istination and bears in itself an active purp oseful p rinciple, soul, entelec hy, and all purp oses in nature are sub ordinate to o ne sup reme goal. T he ma in idea of Aristo tle 's teleology were preserved in the teaching of Thomas A quinas. Hence teleology explains the past and in terms of future. It assumes that the mind is guided or governed by purposes, values, interests, “instinct”, as well as by “factual”, “objective” or logical evidence in its pursuit of truth.Not only man but also all antural phenomenaa are guuided by final purposes and have souls of a special task. Rosental, M. and Yudin, P. (eds.) (1967): A Dictionary of Philosop hy, Mo scow: Pro gress Pub lishers 75

Summa: IIaIIae, q. 108, art. 2, resp. (vol. 41, p.121)

76

Natural law: W ithin the foundations of the con science of all hum an be ings there are no nconventional, nonarbitrary moral standards which make possible genuine moral self-criticism, and true moral knowledge even for those who have not received the moral instruction of divine revelation.. Komonchack, J., Collins, M. and Lane , D.(eds) (1 992 ): The New D ictionary of T heology, Dublin: G ill and M acmillan Ltd.

42


ordained by God. Every human being has a natural right to a share of the produce of the earth as it is the only way in which he can fulfill the divine precept of sustaining life. Because Man has reason and free will, that is, a spiritual nature, Man is above all other creatures and they are subordinate to him. Since this divinely ordained order is between Man and earth, it follows then that Man can never be subordinate to another person’s pleasure. Even non-Christians hold respect for human life and the dignity of Man as essential values. Thus this unique nature of Man gives him rights and duties. Since Man by nature is a social and political being, living in society will modify and add to these rights and duties. Because of his nature, Man cannot live as an isolated individual. He needs the cooperation of his fellow men in order to provide for his basic needs. By use of his reason alone, Man cannot attain his true end, life’s ultimate end, the Beatific Vision. The foundation of Catholic social teaching is this reality that society is necessary so that Man can attain his proper end and the highest form of perfection and virtue. This in turn requires that he participates in political life and practises “virtutes politicae”.77 Man needs society and society needs the division of labour in order to function properly. Because society is natural to man so is government, and both are divinely ordered. For Thomas Aquinas the family is subordinate to the political community. The minimum requirement for a social existence was that the individual had the necessary material goods to sustain life. The more society can produce the necessities of life, the more perfect the society would be78.

4.5. The concept of State. The State is viewed as a natural institution prefigured in man’s nature. Since human nature is God’s creation then the State is willed by God. Thomas Aquinas adopts Aristotle’s view on the State as natural since it is founded on the nature of man. For Thomas Aquinas the State has a divine justification and authority because it was prefigured in human nature. The State is thus an institution in its own right, with an end and a sphere of its own. The State is a “perfect society”in which are found all the means necessary to attain its end, the common good of citizens.79 The goal of society is a good and virtuous life on earth. This may give rise to tension between the State and the individual citizen, because the goal of the individual is not merely the good life on

77

Summa: IaIIae q. 61, art. 5, resp. (Vol.23, p. 131)

78

Summa: IaIIae, q. 90, art. 3, ad 3 (Vol. 28, p. 15)

79

Summa: IIaIIae, q. 65, art 2, ad 2

43


this earth but ultimately the good life of heaven as well. This tension does not make the state sinful. Among other tasks, it is the duty of the State to ensure that its citizens can exercise their human rights in the economic sector and to ensure the values of individual freedom, private property, a stable currency and efficient public services are presupposed in the market economy80. Even in a world without sin it would be necessary to direct the common activities in society in order to ensure that the common good is achieved. And since not all are given the same gifts and talents, only those with special gifts should direct the State. Hence a government would be a necessary requirement in order to secure peace and to regulate life so that the common good could be attained81. It follows then that respect for and loyalty to those in government, and an active participation in the political life are realistic and well founded expectations. Thomas Aquinas adopts a middle way between Aristotle and Augustine in understanding the good life of the individual as the common good of society. An individual cannot consequently be good unless he lives a life directed to the common good, nor can the whole be ordered unless its parts be proportional to it82. He was primarily concerned with the common good and set up principles in order to control and govern the relationship of the individual in respect to the community. These principles were limited and formed by the individual’s relationship with God. This relationship was the ultimate end and the individual’s relationship to society was a natural and necessary means to reach the end. Because society is natural to man so is government, as Thomas Aquinas writes “man is by nature a social animal. Hence in the state of innocence men would have lived in society. But a common social life of many individuals could not exist, unless there was someone in control, to attend to the common good”83 The State has for Thomas Aquinas, as well as for Aristotle, a utilitarian function. Thomas Aquinas adopted from Augustine his notion of the common good in which all men are ordered to God, but contrary to Augustine, he did not see the profane and the sacred world as opposed to each other. He did, however, distinguish between the City of Jerusalem and the City of Babylon, but he did not see them as being at war with each other. The City of Jerusalem was understood by Thomas Aquinas as more excellent and divine. He does not, as Augustine, see the State as evil (see chapter 10). He thus used Augustine’s notion of the common good to refine the structure of the state as elaborated by 80

Cathecism of the Catholic Church, Geoffrey, Chapman (1994), paragraph 2431

81

Summa: Ia q. 96, art. 4, resp. (Vol. 13, p. 134)

82

Summa: IaIIae q. 92, art. ad 3 (Vol. 28, p. 43)

83

Summa: Ia q. 96, art. 4, resp. (Vol. 13, p.134)

44


Aristotle. “Nothing is good unless it is a likeness to and a participation in the highest good”, is his comment on Aristotle in Ethics, and in the Summa Theologiae he writes,“everything is therefore called good from the divine goodness, as from the first exemplary, effective and final principle of all goodness”84. For him, the State co-existed with the Church and exercised its own function85. The State has its roots in the social experience of man and is a product of a historical development. It is thus the highest expression of human fellowship, and conse-quently the community is the unit within which the individual attains his goal, life with God.

4.6. The concept of justice. According to Thomas Aquinas, it is necessary for the state to restrict and regulate the economic and social activity of man through laws and taxes. If society is to be peaceful and well-ordered so that man can live in harmony practising virtues, then society has to function according to the principle of justice. The purpose of the state is to restrict injustice and thus to make social life possible; the state is to govern the economic provisions enabling the good life for the individual in the community. The common good is thus the universal good shared by all who live with God. As Thomas Aquinas points out in Contra Gentiles “peace is the product of justice”86. Man cannot practise virtues if he does not have access to the necessities of life. The law of society is thus to ensure this through the principle of justice. Even if the law of society rules that an action is licit, the action may not necessarily be morally licit. Legal justice thus is to give society its due, i.e. what man in fairness owes to society. Justice is concerned with rights and duties and is closely linked to respect for human dignity. duties. Thomas Aquinas defines justice as “the habit whereby a person with a lasting and constant will renders to each his due.”87. He then divides particular justice into two forms88. Other forms of justice may be derived from general justice, hence particular justice.From particular justice which constitutes justice as a whole, commutative justice and distributive justice can be identified. “Particular justice is directed towards the private person, who may be compared to the community as a part to a whole. Now with a part we may note a twofold relationship. 84

Summa: Ia q. 6 art. 4 ad 1 (Vol. 2, p. 93)

85

De regimine principum 1,15

86

Contra G entiles: Lib . III, ch. 128. p ara. 6

87

Summa: IIaIIae, q. 58, art. 1, resp. (Vol. 37, p. 21)

88

Summa: IIaIIae, q. 61 passim: De partibus justitiae

45


First, that of one part to another, and this corresponds to the ordering of private persons among themselves. This is governed by commutative justice, which is engaged with their mutual dealings one with another. Second, that of the whole to a part, which goes with the bearing of the community on individual persons. This is governed by distributive justice which apportions proportionately to each his share from the common stock. And so there are two species of justice, namely commutative and distributive justice”89. See appendix II..

4.7. Contributive justice. Though Thomas Aquinas does not use the term contributive justice, the principle is used in Catholic social teaching and economics. According to Thomas Aquinas, man is bound to contribute to the common good in return for justice, and there may be actions which are legally licit but which do not contribute to the common good and are therefore morally illicit. Insofar as man derives benefits from the group he belongs to he has an obligation to maintain and support that group. It is therefore a necessary principle for the common good and is derived from Thomas Aquinas understanding of justice.

4.8. Commutative justice. Commutative justice concerns the individual members of society’s mutual dealings one with another.90 Commutative justice is the relationship between individuals, bearing in mind that individuals constitute the community. It involves specifically defined rights and duties between two individuals and regulates among many things buying and selling. Commutative justice requires equivalence between what is given and what is received, and thus “governs the exchange that may take place between two persons”91 to use Thomas Aquinas’ own words. In other words, commutative justice is therefore essential when dealing with the social problems of society. It is applied when determining such issues as the just price of goods and a just wage.

89

Summa: IIaIIae, q. 61, art.1, resp. (Vol 37, p. 89)

90

Ibid.

91

Summa: IIaIIae, q. 61, art. 3 (Vol 37, p. 95)

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4.9. Distributive justice. Distributive justice apportions proportionately to each individual his share from the common stock92. Distributive justice deals with the relationship between the individual as part of society and society, so that what belongs to society as common goods must be distributed in a just way and proportionately among members of society. Hence this is the obligation of the person who has responsibilities towards those who are subordinate. Thomas Aquinas does not give any directions for how this can be achieved in practice, but it is further developed in subsequent Catholic social teaching.

4.10. Just price. The just price is the price which is given for a thing without deceit or fraud. It does not exclude profit. Thomas Aquinas describes the just price as one in which there is equity between what is surrendered and what is received93. Thomas Aquinas did not believe that the price reached under total freedom (the free market) was necessarily a just price because there can be monopolistic, exploitative and fraudulent tendencies. Thomas Aquinas and the scholastics were clearly against monopoly and the teaching on a just price and wage can be seen as a reaction to the prevailing abuse from merchants and dealers who determined and controlled the prices according to private interests. The just price is central to scholastic economic thought as it is the determination of the price of goods taking into consideration moral values. Thomas Aquinas did not explicitly define the just price, as his teacher Albert the Great did, who regarded it more as the market price understood as the estimated worth of the goods at the time of sale on the market. In the 19th century, value was understood as the value determined by authority or an estimated value where a just wage to the worker, a reasonable price to the suppliers and a suitable profit for the seller had been taken into consideration.

92

93

Ibid. resp. Summa: IIaIIae, q. 77, art. 1, resp.

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4.11. Just wage. Thomas Aquinas does not deal with the question of just wages specifically. The just wage is in fact one form of the just price: the worker’s wage is the price he charges for his work. The just wage entails equity between the work surrendered and the wage received. The worker who demands more than this is greedy.94 The question of just wage is therefore part of commutative justice, not as part of distributive justice.95 The issue of just wage is also taken up in the social encyclicals. This is because there had been considerable legal regulation of wages since the Middle Ages, which points to a belief that the compensation of labour had to be regulated by law to fulfil justice since the poorer classes tended to be exploited economically.

4.12. The concept of private property. Thomas Aquinas emphasised the importance of private property to ensure a society characterised by peaceful coexistence and greater social order, and also increased productivity. In Summa he writes “individual ownership is necessary for human living on three grounds: Firstly, because each man is more careful in looking after what is in his own charge ... Secondly, because human affairs are conducted in a more orderly fashion when each man is charged with taking care of some particular thing himself ... Thirdly, because a more peaceful state is preserved when each man is contented with what is his own.96”. In Catholic social teaching, private property has always been seen as a natural right of man. Thomas Aquinas distinguished between man’s right to ownership and the institution of private property. He regarded the first as derived from natural law; man has a natural right to possess external things and all resources and creatures are destined to serve the needs of man. With regard to the natural resources they are to serve the whole human community and therefore external goods should be for the common use of all. Aristotle too pointed out that there was a need for private property and Thomas Aquinas sees wealth as a means where its function is to fulfill human needs. The right way in which man is to exercise his dominion over the rest of nature is through the institution of private property. The paradox is that private property as understood by Thomas Aquinas is essentially for private 94

Summa: IIaIIae, q. 118, art. 3, resp.

95

Summa: IIaIIae, q. 77 passim, and ibid. IIaIIae, q. 118, art. 3.

96

Summa: IIaIIae, q. 66, art. 2, resp.

48


purposes. The reason for private ownership is that it gives incentive for the person to be more productive and care for the property if it is his own. If this principle is applied in economics, it leads to more orderly business management and will also promote the division of labour and hence increase the responsibility of the owner.

4.13. The limits of scholasticism. Thomas Aquinas showed little concern for the social changes that took place in the society in which he lived. The same can be said of the scholastic theologians in general. European society changed from a feudal to an urban culture, but scholasticism did not address principles for dealing with this. Furthermore, scholasticism never offered any detailed analysis of how to reach equilibrium, thus no model was offered for how just prices and wages could be achieved. Eighteenth century thinkers tended to view society not as natural but as contractual, that is, a society is the forum in which contracts are made, the end of society is now self-interest and it is no longer governed by divine ordination.

4.14. From scholasticism to personalism. Pope Leo XIII and Pope Pius XI considered themselves neo-scholastic and the philosophical principles of Thomas Aquinas can be clearly recognized in both Rerum Novarum and Quadragesimo Anno. Neo-scholastic philosophy influenced and shaped the first social encyclicals and left its mark on subsequent encyclicals. The philosophical premises of Catholic social teaching have been modified by successive popes, and Pope John Paul II brought a significant shift in the Catholic social teaching with the introduction of the philosophy of personalism and this change will no doubt challenge the understanding of Catholic social teaching further and affect Catholic social economics. The most recent encyclicals accentuate philosophy as well as theology. Personalism came as a reaction to the growing self alienation of man in the wake of the Enlightenment which nurtured individualism and where human beings were reduced to things whose only value was instrumental. Conventional economists have adopted the philosophical premises of the post-Enlightenment period and emphasise individualism. Hence by modern means of communication, eg. the telephone, man becomes more aware of others and personhood is affirmed and man is recognized as a human being both body and soul. “Man is a communicating being. Communication brings the human person 49


himself not only to knowledge of things and other persons, but also to his own self-awareness. Although I myself am unique, and in a way closed in on myself...for no other man knows what it feels like to be this “I” that I am...nevertheless I become aware of myself only through communication with others”97. Personalism arose from the estrangement of man through increasing individualism, which no longer focussed on the freedom and dignity of man. Hence to leave human needs to be fulfilled by the market and the “invisible hand” misconstrues human nature and will not respect the equality and dignity which are every person’s right. Central to personalism is this view of human nature which influences the understanding of the fundamental principles of Catholic social teaching.

4.15. The rise of personalism. There is no consensus among scholars as to when personalism as an independent philosophy began. In opposition to determinism and reductionism in the 18th century greater emphasis was put on the person both in explaining reality and as the core unit of value. The person as an individual98 is stressed as a person who knows and is a subject. The person is a free, self conscious and moral agent, who through interactions with others constitutes society and the whole of reality. This is in contrast to the trend among philosophers where man is reduced to an object which can be seen in liberalism and materialism, Nazism and communism. In personalism man is both an individual and a social being, and both body and spirit, and there is always a “God”, who is good and who will not allow what has intrinsic value to cease existence. Hence it is a philosophical and theological approach which has roots in 19th century thought. Max Scheler (1874-1928), a phenomenologist and a Catholic scholar who developed the concept of solidarity in a Christian understanding, also advanced the persona- list tradition in Germany and later influenced the way of thinking of Pope John Paul II. 97

Ong, W . (1967): In the Human Grain: Techno logical Culture and Its Effect on M an, Literature, and Religion, New York: T he M acM illan Co mpa ny, pp. 1 98

The person as an individual: A view on human nature. The immediate sources of spiritual life lie in the individual alone, therefore a system of things, which places the individual above is superior to any other system. However, the individual appears to be incapable by himself of fully developing and consolidation such spiritual capacities as he posses. The separate individual tend to come into opposition and conflict with another and threaten the existence of all fellowship whatever. Encyclopedia of Religion and Ethics, (eds.) Hastings, J. (1914), Edinburg: T & T Clark, Vol. VIII, pp. 222. This is in contrast to the concept “person” instead of “individ ual”. Following E. O ’Bo yles by ad opting the co ncept “perso n” for m an and hence including the so ciality and the individuality is making a significant change as “individual” is one-dimensiona l.

50


4.16. Maritain reconciled scholasticism with the modern age. J. Maritain (1882-1973), one of the most respected Catholic philosophers in the 20th century, developed a philosophical personalism which would mark the later development of Catholic social teaching. Maritain did to Thomas Aquinas what Thomas Aquinas he had done to Aristotle. He based his philosophy on the teaching of Thomas Aquinas and in that way built a bridge between scholasticism and the modern age. He brought the teaching of Thomas Aquinas into an age of scepticism and science. In this way he called upon the Church to bring its theology and philosophy into contact with the problems of the present time. By distinguishing between individuality and personality as principles, he demonstrated that body and soul are combined and make up a single unified human being. It is a line of thought which can be traced back to the Greek world and the Christian doctrine of Trinity. Personalism as expressed by Maritain has greatly influenced the social teaching of the Roman Catholic Church. Maritain was honoured by Pope Paul VI, and clearly influenced the encyclical on economic justice Populorum Progressio. He was also held in high regard by Pope John Paul II whose social teaching is significantly formulated on the premises of personalism. “Personalism is not primarily a theory of the person or a practical science of the person. Its meaning is largely practical and ethical: it is concerned with the person as a subject and an object of activity, as subject of rights, etc.”.99 Thus, Pope John Paul II, influenced by the Catholic Marxist philosopher Emmanuel Mounier, saw humans as social beings and individuals, hence in Laborem Exercense he writes “a human being is a person, in the sense of a subjective being capable of acting in a planned and rational way, capable of deciding about himself and with a tendency to self-actualization”100. It is clearly expressed in his view that it is the person who is the centre of economic affairs and not the human individual and hence it is the person who should be the core of economics. It should be remembered that the personalism to which Pope John Paul II was exposed during his studies in Cracow in Poland proposes that in any issue where man is involved the principle concern

99

Wojtyla, K. (translated by T. Sandok) (1993): Person and Community, Selected Essays, Peter Lang, pp. 165

100

Laborem Exercens paragraph 23

51


has to be the person and not man as an object, a thing. “Man is an intellective and free nature that is expressed by conscience and, as a result, by his moral action and his research after truth and good”101, and the right relationship between people is when the relationship aims at the actualization of the other as a person, in this way another human being can be subjected to another person’s action and still be respected and experience equality and dignity. Central to his personalist understanding is his theory of love.102. Hence Pope John Paul II influenced by Husserl, Satre and others developed his own specific interpretation of personalism which he extends to Catholic social teaching giving rise to the formulation of personalist economics.

4.17. The nature of man in recent social teaching influenced by personalism. The person is central and lives in community with others and interacts with nature and other human beings in a responsible way. Man’s essence is given to him through nature, conscience and other people. Through working for a purpose and in an organized and rational way he obtains freedom and self-fulfilment. Therefore when man is viewed as a mere object whose work is a factor of production, he is no longer regarded as a person with body and soul and his personality is not given proper respect. The human person is endowed with an original personality which is characterised by man's need for self-fulfilment and the good of all men through his actions. In the social teaching of the Church, work is man’s principle means of self-fulfilment and a natural right for everybody. Work is thus both objective, producing an output and hence transformation of the world, and subjective as “these actions must all serve to realize his humanity, to fulfill the calling to be a person that is his by reason of his very humanity”103. This is completely consistent with the scholastic view of the nature of man and labour.

101

Buttiglione, R. (1982): Il pensiero de Karol Wojtyla, Jaca Book, Milano, 1982, pp. 243

102

Tond ini, G. (1998 ): Man and work acco rding to the social doctrine of the Church, particularly in the thought of John Paul II, pp. 1649 in International Journal of Social Economics, vol. 25, No. 11/12 103

Laborem Excercens paragraph 13

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4.18. The nature of private property and the proper role of the state. In consistency with the teaching of Thomas Aquinas, Pope John Paul II emphasises the right to private property as a natural right of man. Private property and capital goods are to fulfil the person’s needs and to ensure a minimum standard of living now and later but not at the cost of the common good. Pope John Paul II states “it is necessary to state once more the characteristic principle of Christian social doctrine: The goods of this world are originally meant for all. The right to private property is valid and necessary, but it does not nullify the value of this principle. Private property, is under a “social mortgage” which means that it has an intrinsically social function based upon and justified precisely by the principle of the universal destination of goods”104. With regard to the state, Pope John Paul II stresses the minimal role of the state to ensure the freedom of choice for man. It is not only for reasons of efficiency as conventional economists would argue, but in addition this concept of state opposes both totalitarianism and the “traditional dependence of the worker-proletarian in capitalism”105.

4.19. The view of man as person is fundamental to personalism. Personalism emerged at a time when the de-humanizing philosophies and programmes have been strengthened by the electronic age and means of communication. In his book, Crossing the Threshold of Hope, Pope John Paul II states why he sees it as essential to adopt the principle of personalism in the modern age. “The personalistic principle is an attempt to translate the commandment of love into the language of philosophical ethics. The person is a being for whom the only suitable dimension is love. We are just to a person if we love him. This is as true of God as it is of man. Love for a person excludes the possibility of treating him as an object of pleasure. This is a principle of Kantian ethics and constitutes his so-called second imperative. This imperative, however, is negative in character and does not exhaust the entire content of commandment of love. If Kant so strongly emphasized that the person cannot be treated as an object of pleasure, he did so to oppose Anglo-Saxon utilitarianism and from this point of view, he achieved his goal. Nevertheless, Kant did not fully interpret the commandment of love. In fact, the commandment of love is not limited to excluding all behaviour that reduces the person to a mere 104

Keating, M. and Keating, B. (1998 ): The crossroads bewteen John Paul II’s social vision and conservative economic thought, pp. 1797 in International Journal of Social Economics, vol. 25, No. 11/12 105

Ibid. pp. 1798

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object of pleasure. It requires more; it requires the affirmation of the person as a person.106. Thus personalism calls for charity107 and Pope John Paul II sums up his view of man’s relationship with society in this way “the person should be subordinate to society in all that is indispensable for the realization of the common good, but that the true common good never threatens the good of the person, even though it may demand considerable sacrifice of a person”108.

4.20. Summary. To summarise, this chapter argues that •

a way of strengthening the Catholic church with regard to its authority and values was to bring back a firm philosophical foundation in the Catholic church. Hence, scholasticism was revived and basing the social teaching on neo-scholasticism, pressing issues of the time were addressed and a solution offered to these.

the fundamental principles in official Catholic social teaching reflect unquestionably the philosophical teaching of Thomas Aquinas, therefore it is essential to understand how he understood the nature of man and justice. The two-fold dimension of man permeates the way everything else is understood together with the fact that the ultimate end of man is the Beatific Vision.

personlism gives more credence to the person in contrast to the individual. This interest in the person was born as a response to the Enlightenment and today’s renewed interest is a response to the estrangement of man.

according to the premises of personalism the person, and not the individual, must be in the centre of economic affairs, if a just and free society is to be established. Thus, to conventional economics this offers a new challenge to its fundamental principles and a shift of paradigm. Going from the script age which marked the rise and development of conventional economics to the new understanding of the individual as a person will bring in new values and possibilities essential to understand economic affairs in a modern context.

106

John Paul II (1994): Crossing the Threshold of Hope, New York: Alfred A. Knopf, pp. 204

107

Definition of charity accord ing to Q uadragesimo A nno p aragraph 137 “No w, in effecting this reform, charity “which is the bo nd of perfetio n” mu st always p lay a lead ing part.” 108

Wojtyla, K. (translated by T. Sandok): Person and Community, Selected Essays, Peter Lang 1993, pp. 174

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5. DIFFERENT UNDERSTANDING OF HUMAN NATURE AND ITS RELEVANCE TO ECONOMICS Man is central to economic affairs. The previous chapter elaborated on the underlying philosophical premises of Catholic social teaching, this chapter will draw attention to how man is understood and perceived within conventional economics and Catholic social economics. This chapter will argue that the different ways in which human nature is understood will affect the way economic affairs are looked upon. Conventional economics and heterodox economics (social economics) think about man as a one-dimensional nature in contrast to Catholic social economics where the two-dimensional nature of man is central and rooted in neo-scholastic and personalist philosophy. Differences and similarities will be pointed out and it will be argued that though the two ways of perceiving the nature of man may be different they complement each other and give a more comprehensive way of understanding man as an economic agent, within economic affairs.

5.1. Introduction. Understanding human nature is essential to the formulation of economics and this is true both of mainstream economics and Catholic social economics. Catholic social economics (solidarist economics and personalist economics) have evolved from Catholic social teaching, and taken on board the its underlying philosophical premises. Catholic social economics respects the sacred nature of man, his freedom and dignity, and offers a different way of looking at economic affairs. Conventional economics regards man in individualistic terms as a result of the Enlightenment which broke with the Christian world view. Society was viewed in a purely secular perspective without reference to the transcendence Christianity had naturally given it. Adam Smith described the new economic society as a “trading group in which everyone is a merchant� hence emphasising the one dimensional-nature of man, Homo Economicus.

5.2. The influence of personlism on Catholic social economics Personalism the new philosophical development in Catholic social teaching, has influenced Catholic social economics and moved it to a new era. Through the introduction of personlism with its strong emphasis on the centrality of the human person, solidarist economics which was previously identified with Catholic social economics, has now evolved into personalist economics. A foundational link can be made between conventional economics and Catholic social economics by using a common concept such as the common good and analysing it on the basis of each 55


tradition. This will be done in chapter 11. Conventional economics has individualism and utilitarianism as its philosophical premises. By adopting the premises of personalism, both conventional and Catholic social economics are brought together in a synthesis, in which they will not be in opposition to each other, and give a more holistic view of economic affairs. This may be done, as discussed later, by replacing the term “individual” with the term “person” in conventional economcis. The way one thinks about human nature in conjunction with economic affairs is crucial. The new social consensus that should be promoted in society and in economics is with the focus on person, that the core of the unit should be the human person. The personalist philosophy permeating Catholic social teaching today is thus guided by the principle of subsidiarity and emphasises the centrality of the person. It should be possible to create a more human world and rebuild the values and institutions that will constrain morally the increasing self-interest in the world, which endangers the freedom and dignity of man.

5.3. Human nature in Catholic social teaching and conventional economics With the philosophical premises in mind and focus on man as a unique being and the core unit in the social teaching, the question of human nature needs to be addressed. According to Catholic social teaching, humans are both individual and social beings and both body and soul. Man is different from all other living creatures, as expressed by Thomas Aquinas the “crown of creation”or as Pope Leo XIII expressed it “the soul bears the express image and likeness of God, and there resides in it that sovereignty through the medium of which man has been bidden to rule all creatures below him and to make all seas serve his interests’109. In contrast to this view is conventional economics originating in Adam Smith’s ‘The Wealth of Nations’ which is shaped by the individualism and utilitarianism of the Enlightenment. Here humans are strictly individual beings and are viewed strictly in terms of the body. In ‘The Theory of Moral Sentiments’ Smith talks about the sociality of man, but this has never really been accepted among conventional economists. Catholic social economics rejects the conventional view of human nature. In conventional economics we find Homo Economicus. Man, as Homo Economicus, is pure reason and by nature completely individual. He is self-made and self-determining and the most important goal to

109

Encyclicals of a Century. Derby, New York: Daughters of St. Paul (1942), pp. 39

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achieve is personal freedom. By seeking his self-interest freely, the good of society will be achieved. Man’s nature is one-dimensional emphasising individuality, he knows what he wants and he uses the market to achieve maximum satisfaction. He belongs to one else but himself and is totally free. Only the individual side of human nature is identified and humans are defined in terms of consumption. Hence man works for the sole purpose of securing income for the purpose of consumption. Though he is driven by self-interest he is also curtailed by pleasure and pain and seeks to maximize utility and pleasure and avoid pain. The utilitarian perspective was introduced by J. Bentham, and Smith rejected the view where Hedonisitc man is reduced to a physical object that operates on the sensate level. In contrast, according to personalism humans cannot be reduced to mere objects and though the body is essential, the soul ranks higher and may never be subordinate. The soul is the locus of the intellect and the free will, which makes humans different from all other living creatures. This is in contrast to the hedonistic conception of man where the body has priority. Thorsten Veblen110 states “ the hedonistic conception of man is that of a lightening calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He is neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before�. This view of man as Homo Economicus may be useful when dealing with models in economics and developing theories to explain economic behaviour, but it excludes automatically that man may have other motives for his behaviour in economic affairs. In heterodox economics111 Homo Sovieticus prevails. Man is viewed as entirely social and to him the highest principle is the common good. This is the other extreme and is found in socialism where individualism is completely removed. His nature is as one-dimensional as Homo Economicus. In Catholic social economics the nature of man is two-dimensional, both individual and social.

110

Veblen, T. (1919): The Place of Science in Modern Civilization, New York: Huebusch, pp. 73 - 74

111

Heterodox economics includes institutional economics, feminist economics, radical economics, enviromental econo mics, and hum anist econom ics

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Thus Homo Socio-Economicus is at the same time “an independent free being and a dependent social being”112. The two-dimensional nature of man is seen also in the fact that man has two types of material need the physical needs and the need for work, and the ultimate goal of the economy is to meet these needs. The need for work is not as mentioned above just to secure income, but following the line of thought expressed by Pope John Paul II, work is seen as a means of realizing the person’s potential as a human being. To both solidarist and personlist economics this twodimensional nature of man is essential and is founded on the teaching of Thomas Aquinas. Therefore any school of economics which misconstrues this duality of man is regarded as morally wrong. Though Pesch in his solidaristic system emphasised the importance of justice, the justice is not the final end of man because man’s final end is two-fold reflecting his social and individual nature: •

individual perfection in union with God

social perfection by means of a cooperative effort with other men in order to promote the welfare of the entire human community

Of the two, individual perfection is primary but depends intrinsically on social perfection. There is a tendency in conventional economics to reduce man to an object in today’s world and it was to this Pope John Paul II reacted, when in the encyclical Laborem Exercens he stated that everything contained in the concept of capital in the strict sense is only a collection of things. Man, as the subject of work, and independently of the work he does - man alone is a person113. Personalist economics tends then to see humans as not only social and individual beings but also as bodies and souls. In a consumption-based society where man is seen as hedonistic there is a risk of suppressing human freedom and dignity. To understand man’s behaviour as an economic agent then both need and want must be considered in understanding his behaviour as consumer. Therefore according to personalism more credence will be given to the quality of work and the community and lead to a more just society. According to personalist economics, then man as a person will be able to choose goods and services as to serve his self-interest as a consumer and is able to make intra-personal comparisons of wants and needs over time because of his rational behaviour. However due to his social nature,

112

Schuyler, J. (1953): “Heinrich Pesch, S.j.: 1854-1926", Social Theorists, edited by Mihanovich, C.Milwaukee, The Bruce Publishing Company, pp. 226 113

Laborem Exercens paragraph 22 - 27

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man will at the same time be able to choose goods and services as an individual restrained by the social environment to serve his own interest at some times and at other times the interests of society. He is able to make intra-personal comparisons at any point in time. Hence man is guided by morals also and because he has a free will and an intellect he makes rational choices. It is assumed that man has an innate moral law which will guide his behaviour and choices. The real difference between conventional, heterodox and Catholic social economics lies in the conception of human nature. Hence when the two-dimensional nature of man is accepted, it will be reflected in the way economic affairs are perceived. To exemplify the consequence of the two-dimensional nature of man, attention is drawn to some of Edward O’Boyle’s work on poverty. Any economic discussion needs then to address issues from a two-dimensional perspective, in the same way as man is viewed as both individual and social.

5.4. Summary. To summarise, this chapter suggests that •

by adopting the two-dimensional nature of man as both individual and social and both body and soul, then it is possible to formulate economics in such a way that the freedom and dignity of man is respected. Any other formulation based on the one-dimensional nature of man is incomplete and is to be regarded as morally wrong. A more just economic world would be possible if the centrality of man in economics is in focus by adopting personalism as the underlying philosophical premise and if the increasing selfinterest in the world is constrained.

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__________________________________________________________________________ PART II: CATHOLIC SOCIAL ECONOMICS __________________________________________________________________________ 6. THE ECONOM ISTS BEHIND THE FORM ULATION OF CATHOLIC SOCIAL ECONOMICS. At this point the fundamental precepts of Catholic social teaching have been discussed and a philosophical base has been laid, so that the relevance of Catholic social teaching to conventional economics can be established. First it is necessary to link Catholic social teaching to the dawn of Catholic social economics. Therefore, this chapter outlines the process from the official formulation of Catholic social teaching to the development of Catholic social economics. This process is made obvious by identifying two significant periods in the development of Catholic social economics and by establishing the position that the people who drafted the encyclicals and those who later formulated a specific Catholic social economics are the same, hence Catholic social teaching and economics are intertwined. In the context of other economists’ contributions to this development, the work of Heinrich Pesch is of special significance, because he founded what later became known as solidarist economics. This chapter also discusses the recent interest in Catholic social economics and the pressing issues in society highlighted by the social encyclicals and to which a future response is needed. Finally this chapter addresses the question of whether there is a new ideology.

6.1. Introduction. The development of a specific Catholic theory of social economics started with the social principles which were formulated in Rerum Novarum and subsequently developed and reinterpreted in later social encyclicals. This is primarily because the drafting and preparation of the social encyclicals were undertaken by Catholic economists and sociologists. These people were concerned with the pressing social issues which confronted society and they reacted to the failures of capitalism and the teaching of Karl Marx. It is therefore obvious that the encyclicals not only dealt with the social issues but also confronted the foundational principles on which the teaching of Karl Marx rested, and were opposed to the premises of capitalism and liberalism. Clearly, certain scholars have contributed significantly to the development of Catholic social economics which falls into two periods. The first period is from the late 19th century up to the 1930's, when a specific Catholic social 60


thought was established, and then from 1930's and onwards when the focus is changed to a more specific concern based on Catholic moral and philosophical principles on social issues in economics.

6.2. Matteo Liberato and Rerum Novarum. One of the first important names, during the first period of the development of Catholic social economics, is Matteo Liberato114 who drafted Rerum Novarum. He was a Jesuit and an Italian neoscholastic writer on economic ethics and had great knowledge of the workings of industrial economics, though he was not an economist and did not claim to be an expert in this field. In his work, he demonstrated that he was familiar with the work of the leading mainstream economists such as Adam Smith, Thomas Malthus, David Ricardo, Stuart Mills and others. He wrote frequently in the Jesuit periodical ‘Civilta Cattolica’ on a Catholic tradition of life in economic society, and shortly before drafting Rerum Novarum he wrote a series of articles which were published in English in ‘Principles of Political Economy’ (1891). He wrote his books to make economic science based on Catholic moral principles more accessible to the Catholic youth in Italy. He opposed liberalism and advocated “workmen’s association”.

6.3. Heinrich Pesch, the founding father of Catholic social economics. The founding father of Catholic social economics based on the principles of Catholic social teaching was, however, the German Jesuit economist Heinrich Pesch (1854-1926). Pesch, was a contemporary with Durkheim (1858-1917) in France, in Germany the sociologists Nietzsche (1844-1900), Kautskey (1854-1938), Simmel (1858-1918), Marx Weber (1864-1920), and in Italy with Pareto (1848-1923) and Mosca (1858-1941). He explicitly used the philosophical premises of scholasticism in his solidaristic system, which he developed. Applying the scholastic principles to modern economics he wrote a five-volume work ‘Lehrbuch der Nationalökonomie’. He was not only an economist but also the teacher of the later sociologist, Oswald von Nell-Breuning, who drafted the papal encyclical, Quadragesimo Anno. Pesch was a pupil of Adolph Wagner (18351917) and Othmar Spann (1878-1950). Spann rates his work as “the most comprehensive economic treatise in the German language. Schumpeter says that for scholarship the five-volume 114

Misner, P.(1991): The Predecessors of Rerum Novarum Within Catholicism, Review of Social Economy, pp. 444

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work has no superior. It was, however, the study-group that evolved around Pesch, which later explicitly formulated Catholic social economics or solidarist economics. This is today known as personalist economics, because of the influence personalism has had on Catholic social teaching. As Adam Smith is the founding father of conventional economics and heterodox economics, so is Heinrich Pesch the father of Catholic social economics. He had a substantial influence upon Catholic social philosophy and the social encyclicals. He was the first who attempted to construct a modern integrated economic theory based on neo-scholasticism, and proposed a new way of thinking about economic affairs beginning with a different set of premises from those held by Adam Smith. From 1872-75 Pesch studied law and political science at the University of Bonn where he met G. v. Hertling, a Catholic philosopher and later Imperial Chancellor, and the economist E. Nasse, cofounder and for several years president of the ‘Verien für Sozialpolitik’. During the Kulturkampf in Germany, Pesch went to England to study for four years. It was during this time that he became interested in the condition of Lancashire workmen and the social question which led him to dedicate his life to the study of social and economic principles. In the early 1890's Pesch was in Austria where he met the conservative sociologist and socialist Rudolph Meyer and with whom he disagreed about the labour theory of values. Pesch’s contact with Rudolph Meyer, who was in contact with Karl Marx and Engels, inspired him to focus on the economic foundations of the social question115. In 1901 he studied economics at the University of Berlin in the tradition of Kathedersozialisten116 under Adolph Wagner, who was his major professor, Gustav Schmoller, a leading German political economist, and Max Seering.

115

Mueller, F. (1941): Heinrich Pesch and His T heory of Christian Solidarism, Aquinas Papers: No. 7, The College of St. Thomas, pp. 9-11 116 Gustav Schmo ller formed the “Verien für Sozialp olitik (“So ciety for S ocial P olicy”, a group of largely conservative economists which supported a kind of coporatist state-industry-labour nexus. Liberals deplored their advocacy for state interventionism and came to label Gustav Smoller and the Historicsts as “Kathedrasozialisten” (o r “Socialists of the Chair”) - a jest they never entirely lived dow n.. From www.cepa.newschool.edu/het/profiles/schmoller.htm.

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6.4. Pesch’s response to the condition of the workers and Rerum Novarum. The Catholic Church was part of political life in Germany, France and Italy during the 19th century. The Church called for an improvement in the conditions for workers and called for a change in the social order. Heinrich Pesch responded to this call from the Papacy. It was thus his eager interest in finding a solution to the social problems of his time which led him to develop an economic theory. He could not see how an unregulated market economy would solve the problems of the working class, problems which he regarded as the social evils of a laissez-faire market economy. He spoke out against economic liberalism as expressed earlier by Adam Smith and was also in opposition to his contemporary, Karl Marx. Pesch’s solidaristic system, being a system of economics, rested on the three pillars; solidarity, production for need and selfregulation by groups. His solidaristic system was not a compromise between two ideologies but rather a new system between the ideology of individualism in unrestrained capitalist economies and of collectivism in socialist economies. He began publishing his ideas on the economic order after Rerum Novarum appeared in 1891. In 1896-99 he wrote a two-volume work ‘Liberalism, Socialism and Christian Social Order’ which is regarded as a socio-philosophical prolegomenon to his major economic treatise, ‘Lehrbuch der Nationalökonomie’, which he published over a period of twenty years beginning in 1905 and ending in 1926. Many regard volume five as a commentary on Rerum Novarum as there are many references to it, and a source book for the encyclical Quadragesimo Anno117. His work did not become widely known outside the Germanspeaking world as a consequence of the First World War and the later resistance to German academics by the English-speaking academic world subsequent to World War II. However, it seems that Pesch’s work has become the foundation of all further studies in this field to date. Despite that, his original work has not yet been translated into other languages. However, Rupert Erderer has a contract with The Edwin Mellen Press to publish his translation of the five volumes of the ‘Lehrbuch der Nationalökonomie’ in English in the near future. This will be a significant contribution to the History of Economics as Pesch’s work will be accessible to the Englishspeaking academic world.

117

Erderer, R. (1991): Heinrich Pesch. Solidarity, and Social Encyclicals, Review of Social Economy, pp. 596

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6.5. Pesch’s influence on the formulation of the second social encyclical. Pesch’s study group included Jesuits such as Oswald von Nell-Breuning and Gustav Gundlach, who both wrote major philosophical and sociological contributions on the social ordering of society and the reconstruction of social order. The drafting, sub silentio118, of the second major social encyclical, Quadragesimo Anno, was by Nell-Breuning119. Clearly influenced by Pesch’s teaching, Nell-Breuning introduced the principle of subsidiarity in Quadragesimo Anno, and published shortly after the promulgation an extended commentary ‘Reorganisation of Social Economy: The Social Encyclical Developed and Explained’. In his commentary he focused on the vocational order, a theme Dempsey later took up in his work ‘The Functional Economy: The Bases of Economic Organization’.

6.6. Pesch linked Catholic social teaching and Catholic social economics. Franz H. Mueller, Professor of Economics at the College of St. Thomas, St. Paul, Minnesota, was the first to bring Pesch’s name into the English-speaking academic world in his treatise on Heinrich Pesch and his theory of Christian Solidarism120. On the basis of the principle of subsidiarity and the two-fold nature of man, Pesch developed solidarism, which became a frame for a badly needed reconstructed economic order. Firmly based on the principle of subsidiarity, solidarity and on man being both a social and individual being, Catholic social economics began to take form. Mueller knew Pesch personally from 1920 until Pesch’s death in 1926. Pesch’s work became known to the world in 1952 when Richard E. Mulcahy, Jesuit and Economist from the University of San Francisco, published his work on Pesch and provided a complete listing of the writings of Pesch. Mulcahy, with whom I have had some personal correspondence, discovered the works of Pesch “on a rainy afternoon in the basement of the public library in MünchenGladbach”121. Mulcahy had not met Pesch personally, but did meet two of Pesch’s disciples: Gustav Gundlach of the Gregorian University in Rome and Oswald von Nell-Breuning of Sankt Georgen in Frankfurt. Mulcahy summarizes the nature of economic science according to Pesch as follows:

118

Sub silentio: In silence; without formal notice being taken. O’Boyle, E. (1998): Contributions of German and American Jesuits to Economics: The last 100 years, paper prese nted at Santa Clara University, M ay, pp 2- 8 120 Mueller, F. (1941): Heinrich Pesch and His T heory of Christian Solidarism, Aquinas Papers: No. 7, The College of St. Thomas 121 Mulcahy, R. (1952): The Economics of Heinrich Pesch, New York: Henry Holt and Company, pp. 20-21 119

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Economics is a social science, a summary of general truths of which we are certain.

The economy has a goal to be attained: providing for the material needs of the people.

In economics a teleological approach is required.

The formal object of economic science is the goal of the economy.

The principle of the economy is a subordinate criterion.

Economic theory relies on social philosophy and ethics.

Economics is a practical science.

Economics is also a normative science.

In a personal letter I wrote to Mulcahy on the question of the significance of Pesch’s teaching he replied, “I think Heinrich Pesch has some influence. Oswald von Nell-Bruening, who studied under Pesch, wrote the draft of encyclical Quadragesimo Anno, and so in Catholic circles Pesch’s ideas are still alive“122. The principle of subsidiarity which is defined explicitly in Qudragesimo Anno is clearly influenced by Pesch as traces of the principle can be found in his writings. The principle of solidarity which originated from Pesch, and later became the grounds for solidarist economics, is stressed as important by Pope John Paul II in the encyclical Sollicitudo Rei Socialis. The principles of solidarism and subsidiarity left a permanent mark on the development of the social teaching of the Roman Catholic Church and also gave rise to the development of a different way of viewing economic affairs.

6.7. Catholic social teaching is brought from Germany to the United States. There was hardly any participation from Catholic economists in social science associations in the second period of the development of Catholic social economics. The 1930's marked the beginning of the second period of Catholic social economics when members of Pesch’ study group moved to American educational institutions. Three other Jesuit economists, Bernard Dempsey, Thomas Divine and Leo Brown, studied for Ph.D. degrees at the London School of Economics and Harvard University as there were very few opportunities at Catholic Universities. In the USA in 1934, the Jesuit Provincials initiated a program outlining the steps that needed to be taken to respond to Pope Pius XI’s call for “social action”. One step was implementing the instruction of students in Catholic schools and colleges in Catholic social teaching. Catholic academics, such as sociologists and economists with at times different 122

Private correspondence with R. Mulcahy, Jesuit Community, University of San Francisco, August 9, 1997

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ideologies, gave allegiance to the Catholic social principles as expressed in the social encyclicals. Dempsey entered Harvard’s graduate school in 1934, where he wrote his doctoral thesis on the Catholic church’s teaching on interest and usury. His objective was to demonstrate that the position of the Catholic church on the interest and usury were not only valid, but also that modern economists found it difficult to understand123. His doctoral advisor was Joseph A. Schumpeter. Schumpeter, in his book ‘History of Economic Analysis’, commended Dempsey because he expounded the teaching of scholastic economists in a clear way. Dempsey was strongly influenced by Pesch’s solidaristic system, which later became known as solidarist economics. Divine gained his Ph.D. from the London School of Economics, and unlike Dempsey he represented the other current of social thought characterized as conventional economics strongly emphasising policy based on a Christian ethical foundation. When he returned to Marquette University he saw an immediate need for an association of Catholic economists. Delegates from twelve Catholic universities (seven of these were Jesuit) met124, and in 1942, on the initiative of the three economists, Dempsey, Brown, who had specialized in labour management relations, and Divine, the Catholic Economics Association was established in which both currents of Catholic social economics were represented.. The Association was chartered with 136 regular members and 38 student members. The organizing committee of the newly-founded Association was in agreement that, while economics was primarily regarded as a positivistic science among mainstream economists, it was also largely a normative science. Its main usefulness was as a means of promoting the “economic” common good and social justice, according to the social principles expressed in the papal encyclicals. They found that there was a need for research and writing in the neglected field of relationships between economic and other values. The first president of the Association was Divine, who was elected on December 17, 1942. He was also first editor of the official publication ‘The Review of Social Economy’, a position he held until 1959. It was, not surprisingly, Divine’s views on economics that became predominant in the Association, and Pesch’s solidarism had to give way to a strand of social 123

Schumpeter, Jospeh (1954): History of Economic Analysis, London: George Allen and Unwin Ltd, pp. 94, 96, 104 124 Gruenberg, Gladys W. (1991): The American Jesuit Contribution to Social Action and Social Order after Rerum Novarum, Review of Social Economy, pp. 537

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economics more in line with mainstream economics, albeit preserving the fundamental principles of social teaching.

6.8. Renewed interest in Catholic social teaching and economics. From the 1940's until the Second Vatican Council (Vatican II) (1962-1965), there was a period where little developed in Catholic social economics. The economists primarily focussed on welfare economics and other specific fields within conventional economics. With Vatican II, there was a renewed interest and a shift in Catholic social teaching. In 1970, the Catholic Economics Association changed its name to the Association for Social Economics. It was no longer confined to Catholic scholars, but all economists of good will were invited “to assist in the formulation of economic policies consistent with a concern for ethical values in a pluralistic economy and demands of personal dignity”. In the 1990's economists such as Mary Hobgood, sociologists such as Professor Margareth Archer and Professor Michael Schuck, and theologians, such as Rodgers Charles all wrote at length about social teaching and its implications for society and economic life. Michael Schuck wrote his doctoral thesis, ‘The Context and Coherence of Roman Catholic Encyclical Social Teaching’ in 1989, followed by ‘That they all may be one’, in which there was a thorough description of social teaching from Rerum Novarum to date. In 1998, Charles published the two-volume ‘Christian Witness and Teaching’, which is the most comprehensive description of Catholic social teaching from the New Testament era to the present date, from the perspectives of theology and sociology. In the last 10 years there has been a renewed interest among economists for Catholic social economics and hence for Catholic social teaching, and the implications it will have for conventional thinking about economics. When English translation of Pesch’s is available, it will challenge the fundamental principles of conventional economics and offer a new way of understanding economics. Not all scholars will agree with the importance of the contribution Pesch can make and may argue that the work of Pesch is only of historical interest125.

125

Private e-mail from M ichael Schuck 11th April, 1997

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6.9. Catholic social teaching and its relationship to ideologies. The commitment to social teaching in the encyclicals was taken on board by some Catholic economists, who integrated the principles into their academic work, and looked at the consequences these new principles would have for issues in economic life. Economists have also been confronted with questions such as what is the exact nature of social teaching - is it socialist, liberal, capitalist or a new way? From time to time Catholic social teaching has been accused of having socialist and liberal tendencies. An example of this is liberation theology, which saw the light of day in Latin America as a response to the repression of small farmers and the need of land reforms. Catholic social teaching differs from the premises found in socialism and capitalism. These two world views are based on purely economic concepts of the human being and misconstrue human nature as one-dimensional. Catholic social teaching, however, is not directly opposed to capitalism and socialism but to the philosophical premises upon which those economic systems rest. Individualism is the premise of capitalism which is in contrast to socialism where the premise is collectivism. The premises of Catholic social teaching are scholastic, and since Pope John Paul II, personalistic. The elements borrowed from the other ‘isms’ are transformed in a distinct way when applied to social economics, but social teaching is not a “third way” between capitalism and Marxism. In Sollicitudo Rei Socialis, Pope John Paul II writes “The Church’s social doctrine is not a “third way” between liberal capitalism and Marxist collectivism, nor even a possible alternative to other solutions less radically opposed to one another: Rather, it constitutes a category of its own. Nor is it an ideology, but rather the accurate formulation of the results of a careful reflection on the complex realities of human existence, in society and in the international order, in the light of faith and of the Church’s tradition. Its main aim is to interpret these realities, determining their conformity with or divergence from the lines of the Gospel teaching on man and his vocation, a vocation which is at once earthly and transcendent; its aim is thus to guide Christian behaviour. It therefore belongs to the field not of ideology, but of theology and particularly of moral theology”126. Catholic social economics rests firmly on the premises that the basic unit of the economy, and therefore the logical place to begin thinking about economic affairs, is the person. By this is meant the person as perceived in personalism,

126

Sollicitudo Rei Socialis paragraph 41

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in contrast to how person is perceived in capitalism and socialism. The two words, ‘person’ and ‘individual’, are often used interchangeably, without awareness of the underlying philosophical premises. Personalism was adopted by Pope John Paul II in his social teaching and gave rise to the development of personalist economics. This was a logical extension of solidaristic economics. Some have questioned whether Catholic social teaching and solidarism are ideologies. However, it is not possible to talk about a specific Catholic ideology in the traditional understanding of ideology. In my opinion Catholic social teaching is a coherent, developing ideology, but the term ideology must be understood in a broad way and in a historical context. Scholars have formulated a set of guidelines, a “Catholic social ideology”, in order to evaluate economic theories. One of these scholars is Philip Land, who was a member of the Vatican Commission on Justice and Peace and was involved in the drafting of the encyclical Mater et Magistra. He has formulated nine statements with regard to the economy127: •

the economy is for the people.

the economy is for being, not having.

the economic system ought to be needs-based.

the economy is an act of stewardship.

the economy must be a participatory society.

there must be fair sharing.

the system must permit self-reliance.

the economy must be ecologically sustainable.

the economy must be productive.

6.10. Summary. To summarize, this chapter proposes that •

it is evident that the foundation for Catholic social economics is Catholic social teaching. Economists and sociologists were inspired by the thoughts expressed in the social encyclicals and reflected on the consequences these would have for analysis and for describing economic activity in society.

127

Coleman, J. (19 91): Neither Liberal no r Soc ialist, The Originality of Catholic Social Te aching , pp. 39 in Coleman, J (ed): One Hundred Years of Catholic Social Thought, Celebration and Challenge, Orbis Book

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Catholic social teaching has borrowed elements from different economic ideologies and systems but it has not developed an ideology of its own. It has merely pointed out that all economic conduct in society must be governed by moral and ethical rules in order to achieve the supreme goal of economy, which is the common good, and that this world and the activities in it are subordinate to the world to come in which “the Creator is the end and object of the whole economic order”128.

a broader group of economists with a wide range of ideological backgrounds are now included in the field of Catholic social economics. They do not necessarily have Catholic roots, but are willing to address ethical issues in economics and adopt a normative view of economics.

the social teaching of the encyclicals has advanced the development of a specific Catholic theory of social economics. The principles from Catholic social teaching are applied, though they may be reinterpreted.

128

Quadragesimo Anno paragraph 42

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7. CONVENTIONAL ECONOMICS AND CATHOLIC SOCIAL ECONOMICS Catholic social teaching was formulated as a result of specific historical events in the 19th century and adopted neo-scholasticism as its philosophical foundation. The social teaching opposed the prevailing isms (liberalism and Marxism) which misconstrued human nature. The principles of Catholic social teaching found their way into economics and developed into a significant branch of social economics parallel to mainstream economics. The issues that were addressed by mainstream economists were also addressed by Catholic social economists. Adam Smith the founding father of conventional economics was also a product of his time. Mainstream economists whose work is based on the teaching of Adam Smith have worked with much the same questions as Catholic social economists without having the same philosophical tools. This chapter argues that a specific Catholic social economics founded on Catholic social teaching can be identified. It discusses how this can be related to conventional economics. This chapter also discusses the establishment of conventional economics in relation to Adam Smith’s major work, which ought to be read as a unified system of thought. It outlines the development of welfare economics from which Catholic social economics has been shaped further. It is pointed out that ethical issues have become of increasing interest among economists who try to accommodate these in their theories.

7.1. Introduction. The social teaching of the Catholic Church does not propose a specific school of economic theory. According to its philosophical foundations, more credence is given to social concern and community-building aspects of human activity. Catholic economists are more concerned with the ethical and welfare aspects of economic affairs as the scholastic and personalist traditions advocate an approach focussing on human nature, and accordingly dismiss the positivistic approach of conventional economists. Catholic social teaching has influenced the advancement of Catholic social economics, focussing on the same subject matter as welfare economics, and it is obvious there are fundamental economic principles underlying the social teaching of the Catholic church. A specific Catholic theory of social economics called solidarist economics can be identified, which has now developed into personalist economics. Catholic social economics reflect the social doctrine expressed in the social encyclicals, and facts and values are difficult to separate. In contrast to this, in conventional economics, facts and values

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are routinely separated because it is based on individualism and utilitarianism and adopts a positivistic approach. Therefore this paper suggests a method of viewing economic affairs where the focus is on human nature by looking at the philosophical foundation of both Catholic social economics and conventional economics. Tracing the development of conventional economics from its origin in Adam Smith’s ‘The Wealth of Nations’ and ‘The Theory of Moral Sentiments’, it becomes obvious how and when Catholic social economics began to take form as a challenge to the prevailing way of thinking about economic affairs.

7.2. Catholic social economics began with Rerum Novarum. Since Rerum Novarum, there have been indications in the encyclicals on how one ought to view economic affairs. Quadragemsimo Anno implicitly gave an indication of Catholic social economics. In Quadragesimo Anno, the Pope wrote: “For then only will the economic and social order be soundly established and attain its ends, when it offers to all and each, all those goods which the wealth and resources of nature, technique, and the social organization of economic affairs can give. These goods should be sufficient both to supply all necessities and reasonable comforts, and to uplift men to that higher standard of life which provided it be used with prudence, is not only of no hindrance, but is of singular help, to virtue”129. In this quotation, it is evident that the papal encyclical has some explicit parallels to welfare economics. The purpose of any economic activity is to achieve the goal of the economy under the given constraints in such a way that both the individual and community gain maximum benefit. This includes the meeting of material human needs both in terms of the needs which are specific to individual human beings and the needs which are common to all. The central concern of welfare economics is precisely this question of how to achieve the goal of the economy subject to constraints130. Economics as an independent discipline emerged during the period of industrialization at a time when the philosophical trend was towards a greater emphasis on the individual and the common good which was then based on private good. The peri- od in Europe in which the social teaching of the Catholic church was born and which gave rise to the later development of Catholic social economics was thus significant in many ways.

129

Quadragesimo Anno paragraph 75 Worland, S. (1964): Welfare Economics and Equity: Welfare Economics: Some Observations, Review of Social Economy, pp. 25 130

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7.3. Adam Smith the founding father of conventional economics. Adam Smith (1723-90) is regarded as the founding father of both conventional economics and heterodox economics. Smith accentuates economics as a study of things and advocated a positivistic description of the mechanisms of economics. In contrast Pesch and his like-minded regarded social economics more as a moral science or social philosophy where the focus is on human beings as the subjects of economics. Therefore the two have significantly different approaches to economics, which is important to bear in mind. Smith, born in Kirkcaldy, Scotland, began his academic career as a student at Glasgow University with the intention of becoming a minister of the church. This was however ruled out as a result of his sceptical mind and sympathy for the philosopher David Hume. In Glasgow he studied under Professor Hutchison who had a profound influence on Smith. However, he rejected Hutchison somewhat opposing view of ethical judgment. Hutchison thus did not ascribe the ability to see right and wrong to reason, but to a moral sense which was a specific emotional reaction. Smith rejected this doctrine and in ‘The Theory of Moral Sentiments’ (1759) he described the natural sentiments of man which would support a natural order of harmony. If man was left to himself to pursue his own interests without any intervention, he would without knowing it promote the common good. Smith wrote ‘The Theory of Moral Sentiments’ while he was professor of Moral Philosophy upon his return to Scotland in 1746. In this work, he emphasised that justice and moral virtues are necessary to curtail man’s pursuit of self-interest. Among conventional economists today, there seems to be a consensus that this major work from this period in his life has little distinction as a contribution to philosophy, though a few scholars have argued that this is not the case. ‘The Theory of Moral Sentiments’ and ‘The Wealth of Nations’ (1776), which Smith wrote later, should not be seen as two independent works. The former is not just an intellectual treatise with little significance in itself and neither is it just a forerunner to the major work ‘The Wealth of Nations’131. “In the Theory of Moral Sentiments are to be found the fundamental doctrines of the Wealth of Nations...and the famous work Wealth of Nations cannot be properly understood without some knowledge of the Theory of Moral Sentiments”132.

131

Andrew Den nis has in his thesis pointed to man y interesting and significant points. Denis, And rew (2 001 ): Collective an d Ind ividual Rationality: Som e Ep isode s in the H istory of E conomic Thought. PhD thesis. City University, London. 132 Macfie, A. (1961): Adam Smith’s Theory of Moral Sentiments, Scottish Journal of Political economy vol. 8, pp. 112

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7.4. Smith’s journey to Europe and ‘The Wealth of Nations’. A few years before he retired Smith travelled in France (1764-66). During this period he saw the abuses of the guilds and how the mercantilist orders acted almost as minor states. They let economic affairs be governed by laws, which restricted and hindered the dynamics of free market forces to achieve economic surplus, and hence were a threat to the natural order. In 1766-76 he completed his famous treatise ‘The Wealth of Nations’, which brought into a coherent system thoughts and arguments that had floated around in academic circles. With ‘The Wealth of Nations’ he tied ends together, and at the same time it was a philosophy of history tracing stages of social development through time and culminating in “commercial civilization”. This treatise is the origin of subsequent inquiries into the nature and dynamics of economics as an independent academic discipline separated from philosophy. On the basis of his view of a human nature and behaviour, Adam Smith constructed a theory of how markets work. The mercantilist orders were seen as having a different agenda from the people and constituted a threat to free competition of the market which benefited the public, hence the common good. They were only interested in increasing their own benefit with subsequent tax burdens on the public. “The interest of the dealers ... is always in some respect different from, and even opposite to that of the public. To widen the markets and to narrow competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow competition must always be against it, and can serve only the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens”133. Free competition was an essential provision to hinder the abuse of the lower classes. The mercantilist orders had gained too much control and appeared as an independent class. Smith warned against the forming of associations in ‘The Wealth of Nations’ and saw these as merely providing a breeding ground for “ a conspiracy against the public, or in some contrivance to raise the prices”. Hence though the state cannot hinder people from the same trade from meeting or rather forming associations then “it ought to do nothing to facilitate such assemblies; much less to render them necessary”134. In personalist economics on the other hand it is assumed that humans do not turn

133

Smith, Ada m: The W ealth of Nations, ed ited by Cannan Ed win, Chicago : The U niversity of Chicago P ress, 1976, pp. 278 134 Smith, Ada m: The W ealth of Nations, ed ited by Cannan Ed win, Chicago : The U niversity of Chicago P ress, 1976, pp. 144

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to conspiracy and therefore institutional restrictions are not seen as a negative thing. However, according to Smith institutional restrictions were unhealthy for the economy and here he opposed the traditions for governmental and parochial control. Smith emphasized the importance of the natural order and held the view that economic affairs were governed by natural laws which in reality were beyond the direct control of man. From this stance he challenged the laws made to govern economic affairs and favoured the unrestricted development of the free market. To him the goal of society was economic growth which would led to increasing human happiness, though this sense of happiness was a delusion. However if man sensed he could increase happiness then he would work harder. Work and production are an end in itself and man would seek to maximize these though it would exceed what would be necessary for daily living. Economic growth and free competition would enhance each other and hence benefit all classes in society. A major point of focus for Smith and economists of his time was the surplus of exports over imports and therefore any factors influencing this surplus would become the subject of analysis. Wealth to Smith meant material well-being which was reached through economic growth. The division of labour was central to Smith’s teaching. It was through this division that the greatest improvements in the productive powers of industry occur. This was a new and interesting point he made as most would argue that advances in productivity were a consequence of the introduction of machinery and other technology. As Smith said “The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgement with which it is any where directed, or applied, seem to have been the effects of the division of labour”135. This division of labour which was natural could then be traced back to another natural sentiment, the propensity to exchange, as he wrote “this division of labour, from which so many advantages are derived, is not originally the effects of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is a necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another”136. The government should not interfere in the market but leave it to man to follow his natural propensities which would then lead to the increase in economic growth and the common good as a result of “the invisible hand”.

135

Smith, Ada m: The W ealth of Nations, ed ited by Cannan Ed win, Chicago : The U niversity of Chicago P ress, 197 6, pp . 7 136 Smith, Ada m: The W ealth of Nations, ed ited by Cannan Ed win, Chicago : The U niversity of Chicago P ress, 1976, pp. 17

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7.5. The philosophical foundations of conventional economics and Catholic social economics are equally valid points of departures. ‘The Wealth of Nations’ provided a comprehensive and integrated view of the economic process. Adam Smith’s philosophical foundation is different from that in Catholic social economics. When discussing the principle of the invisible hand and its relation to the principle of the common good as perceived in Catholic social teaching, it is important to bear in mind that Smith’s philosophical thought can be traced back to Stoicism. Since Catholic social teaching and economics can be traced back to Plato and Aristotle it will naturally mean that Smith’s conventional economics and Catholic social economics come from two different, sometimes opposing, philosophical foundations each with its own premises, and both equally valid. However though they may be opposed, the two may complement each other and may bring justice and equality into economic affairs.

7.6. Other significant scholars: John Stuart Mill. John Stuart Mill (1806-1873) gave a new and different definition of some of the classical terms in economics137.. He gave rise to the development of classical political economy and stressed the importance of the role of the state in the economic life of society. He was open to social changes but did not explicitly formulate how the order of society ought to be, as socialism did later. He was an expert on methodology138, building a system of logic, and engaged in the ongoing debate over the assumed superiority of one of two modes of explanation. For Mill, an economic fact was explained only if it was derivable from the desire for wealth. In this he assumed that a human person was merely a being who desired to posses wealth. It was the relationship between individual economic facts that political economy attempted to explain. Daniel Finn points out in his article that the mode of explanation for this relationship was induction or deduction. As political economy was based on a philoso- phical tradition, the mode would be deduction, whereas later in mainstream economics the inductive mode would predominate. In the 20th century there has been a shift towards empiricism, which includes both modes of explanation. The social issues that needed to be addressed at the

137

Barber, W. (1967): A History of Economic Thought, Penguin Books, pp. 97 Finn, D. R. (1987): When are Economic Explanations Persuasive? A View from Social Economics, Review of Social Economy, pp.1 138

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beginning of the industrial transformation in Europe were the problems of production and distribution. The growing marginalisation of the poor and the increasing gap between rich and poor changed the focus in economics. The questions now were how a more efficient allocation and utilization of resources were to be achieved given marginal utility and marginal productivity of the production factors.

7.7. Development of welfare economics. Two strands of welfare economics developed139. One strand, the new welfare economics, followed the teaching of Leon Walras (1834-1910). It assumed a perfect competitive market and that marginal utility and productivity would move towards equality in general equilibrium. Pareto (1848-1923) understood the social optimum within a Walrasian equilibrium. Rooted in this extreme theoretical formalism, new welfare economics developed, with writing of such people as N. Kaldor, J. R. Hicks, Tibor Scitovsky, P. Samuelson and others. Scitovsky makes an interesting distinction between theoretical and practical welfare economics, though he does not formalize it. Theoretical welfare economics focuses on the basic conditions of the most efficient use of available resources in relation to given preferences, whereas practical welfare economics is associated with cost-benefit analysis based on value-judgement. It is from this strand that Catholic social economics developed. The second strand is the teaching of Marshall (1842-1924), who assumed free competition in the market, but his main analytical concern was the efficient allocation of resources. In contrast to Walras, Marshall focussed on the individual markets and not the general equilibrium. Marshall, a Cambridge economist, introduced a more human emphasis to classical economy, because he saw that economics dealt with the resources necessary for human well-being. Marshall used Dupuit’s consumer surplus or rent to give welfare economics an analytical tool140. Arthur Pigou (1877-1959) formalized Marshall’s teaching and developed welfare economic analysis as a distinct branch, though the basis in pure theory could be ascribed to Marshall. To Pigou, the problems that needed to be focussed on were how to achieve economic efficiency. He pointed out the criteria whereby economic policies could be judged according to the contributions they made to social welfare. In the Anglo-American

139 140

Zebot, C. (1968): The Roots of Welfare Economics: A Review Article, Review of Social Economy, pp. 168 Schumpeter, J. (1954): History of Economic Analysis, George Allen and Unwin Ltd., pp. 1070

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world, Pigou became the founding father of welfare economics and his work, ‘Economics of Welfare’, from 1920, is the foundation of further discussion on welfare economics. Parallel to Pigou is the development of post-Marshall economics, with names such as J. Robinson, M. Keynes and others.

7.8. Recent trends in social economics. Social economics has its origin in eighteenth century France, where it began with theoretical reflections on human activity in relation to economic affairs, responding to the teaching of Smith and his followers. Social economics is defined as a systematic study of how a society organizes its material resources. According to social economists, mainstream economic analysis does not give a complete perspective of economic life141. Social economics, which evolved from welfare economics, stands in the shadow of conventional mainstream economics. Economists today agree that economic analysis has to identify the forces in economic activity that need to be strengthened, and those that need to be restrained. Economists of different traditions discuss what forces cause which effects. Social economists argue with other economists about what issues concerning economic activity need to be explained. Social economists need to consider two elements when formulating policy: their own philosophical foundation, and the specific empirical description of significant issues in the economy. The overlapping of these two elements will give rise to ethical problems. Lionel Robbins142 (1898-1984) argued as others did, that no longer is there only a quantitative conception of welfare; there is now also a general welfare of society which is the welfare of different people. Economics is no longer neutral in regard to ethics and morality, hence valuejudgements. However, there is no consensus about this trend or attitude and how it is to be incorporated into economics, which is reflected in ‘Prologue to Economic Understanding’, “the function of the economist is not to provide answers to ethical or value questions, but only to identify such problems and place them in sharp focus so that intelligent choices can be made.”143. That the economist should not directly be engaged in moral and ethical issues is in

141

Finn, D. R. (1987): W hen are Econom ic Explanations Persuasive? A View from Social Economics, Review of Social Economy, pp.1 142 Schumpeter, J. (1954): History of Economic Analysis, George Allen and Unwin Ltd. 143 Richard S. Martin and Reuben G. Miller (1965): A Prologue to Economic Understanding, Cbus, pp. 85

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contrast to J. Keynes, who in ‘The Scope and Method of Political Economy’144 wrote “no solution of a practical problem, relating to human conduct, can be regarded as complete, until its ethical aspects have been considered”. Hence, Robbins’ view is not commonly agreed upon145. Robbins defined welfare economics in terms of “all allocation of scarce resources between alternative ends”. For Robbins, economics should not be normative in its approach and economists could make their analyses in strict economic terms and advise politicians, who in turn would decide what was the best use of particular resources in a given situation. Thus, it is left to the politicians to decide whether decisions are to be made according to the most profitable economic terms, or, if not, how extra costs subsequently are to be covered. He saw no contradiction between a positivistic economics approach and the needs of humanity and morality.

7.9. Summary. To summarize, this chapter argues that, •

in Catholic social teaching, fundamental economic principles are found. These principles are based on a particular set of premises and hence challenge the conventional way of thinking about economic affairs.

Catholic social economics has responded to the development within mainstream economics and responded to the prevailing and dominant understanding of the nature of economics.

with Adam Smith’s teaching, economics became an independent discipline, and developed into conventional economics and heterodox economics.

new welfare economics which accepts value-judgement became the natural point of departure for Catholic social economists.

economists are obviously seeking a more just society and economy, hence are interesed in how to allow for value-judgment in economics.

144 145

Keynes, John N. (1891): The Scope and Method of Political Economy, Lodon, pp. 59 Kenney, James E. (1971): Social Economics: Its Meaning and Relevance, Review of Social Economy, pp. 108

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•

as Catholic social economics challenges the premises of mainstream economics it will force mainstream economists to re-think their theories when moral and ethical issues are questioned.

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8. NORMATIVE VS. VALUE-FREE SCIENCE The value based foundation and the normative aspect in Catholic social economics make it significantly different from conventional economics. Conventional economics claims to be value free, and therefore ethical issues are only with difficulty incorporated into its philosophical premises. Today’s unavoidable ethical issues require a solution, which Catholic social economics accommodates. This chapter describes the normative aspect of Catholic social economics and how this challenges the fundamental principles of conventional economics. This chapter also emphases that Catholic social economics operates with the principle of the goal of the economy. Furthermore, this chapter establishes the fact that Catholic social economics regards itself to be both postivistic and normative. The chapter suggests how moral and economics are united. Finally, it offers evidence that ethical issues are no longer dismissed in mainstream economics.

8.1. Introduction. According to conventional economics facts and values can be separated, and the only norm of evaluating economic performance is efficiency. With the introduction of welfare economics and social economics values and facts cannot really be separated. It is increasingly difficult for conventional economics today to claim that normative economics is outside its domain. There has in recent years been an increasing interest in the normative aspect of economics, and a rethinking of the principles of economics according to ethical norms.

8.2. Catholic social economics versus conventional economics. Catholic social economics is normative and holistic in its approach in contrast to conventional and heterodox economics, which both have adopted a positivistic approach. To reconcile Catholic social economics with conventional and heterodox economics (social economics) it is important to know this. Conventional economists have shown an interest in the normative aspect of economics. This has come about in the light of to days growing unemployment and economic globalization. The economic globalization may not or may contribute to economic development, and diminish the difference between rich and poor world economies. Catholic social economics, personalist economics today, will not advocate one economic system as superior. It emphases that any economic system, normative or not, that best will fulfill the need of man, is to be chosen. Hence meeting human needs, the need of the body and the soul, 81


is most important when evaluating economic performance. Since the Enlightenment there has been a shift in the philosophical foundation, economics developed into a positivistic science. Homo economicus became the norm and mathematical tools were used to explain economics. Conventional economics, founded on the teaching of Adam Smith, had adopted the philosophy of the Enlightment. In his book ‘The Wealth of Nations’ he viewed the economic processes and functions as mere production (transforming resources into goods and services), distribution (moving goods and services through space and time), exchange (transferring ownership of goods and services produced) and consumption (utilizing goods and services to meet needs and satisfy wants). The claims of Economics to be a value-free “science”, however, mirrors its 19th century positivist origin, when economists distinguished between positivistic and normative economics. Economics as a “science” developed two attributes, first it made use of mathematical formalism, and second, it claimed to be value-free. An economic theory based on Catholic social teaching would therefore be explicitly normative economic theory and not scientific. Yet all economic theory is necessarily normative, because it rests on implicit valueassumptions. Just as all observations require theory, all theories require value judgements. Values and value judgements enter into theory construction on the basic level, as it gives the theorist a vision of the reality they attempt to explain. This vision is pre-analytical in the sense that it exists before any theoretical formulation takes place. Values and value judgements come from the theorists’ philosophical preconceptions, and are often unknown to the theorist. The theorists accept these philosophical preconceptions as true without subjecting them to investigation. Value norms and ideologies have influenced the development of economic theory. Neoclassical economic theory’s lack of historical and social context is justified by the belief that economic phenomenon is in essence “natural” and not the end result of natural forces and laws (scarcity and human nature), and not the end result of social activity. The laws and theories that make up neoclassical economic theory are considered natural laws, exposing invariant economic forces. Yet neo-classical theory like all social theory is built upon value judgements and premisses. Students of economics in the 20th century show increasing interest in viewing economics from a more normative perspective.

8.3. The goal of the economy is central to Catholic social economics. Catholic social economics is rooted in Heinrich Pesch’s solidaristic system. It is normative 82


and value laden. According to Pesch the goal of the economy is a fundamental concept of economic science. This is a typical scholastic element and stands in contrast to modern economics, where the question “what is the goal of the economy?” no longer is asked. Pesch on the other hand found this crucial and writes: “not material goods, nor the formation of wealth and capital, but the material welfare of men constitutes the aim of that aggregate of activities and institutions which are to be called the “economy”“146. To Pesch economics was a social science. He states: “in the natural science it is a question only of knowledge of causes and effects; in the social sciences, however, to which economics belongs the concern is ultimately about the knowledge of means and results in relation to a desired goal”147. As a consequence of this view the activities of individuals and organizations, and the production and distribution of goods, can only be identified as economicaly efficient, if the common good is served. Economics can not be the goal in itself but only a means to achieve a higher goal, the common good. In contrast to conventional economics, economics according to Pesch was normative and hence his economic theory was based on to two basic premises; the goal of the economy, and the common good, which differed from utilitarianism. Therefore the intrinsic goal of the economic process is for the economists to define desirable and attainable goals, which lead to the socio-economic well being of people.

8.4. Catholic social economics is both positivistic and normative. According to solidarist economics and personalist economics, economics is both a positivistic and a normative science, as it is concerned with man as an economic agent. Pesch understood economics as “a natural discipline, which has to do with a natural ordering of economic life and therefore with “natural ethics”“148. Economics is thus a practical social science, which deals with essential functions of the economy. Pesch argued that “if the economic process is not a matter of a “natural inter-relationship” and if these processes rest for the most part on the free actions of citizens, corporations, political judgement, on actions which in not way are “naturally” determined, which therefore can be as they are or could be otherwise, then it can hardly be understood how economic science, properly eliminates the question of how an economic “should be”, and how it can renounce the prerogative of being a practical science 146

Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 504-507 Pesc h, H. (1 926 ): Lehrbuch der Nationalö kono mie, V ol. II, 4 th ed., Freiburg im Br.: Herder, pp. 297 148 Pesc h, H. (1 922 ): Lehrbuch der Nationalö kono mie, V ol. III, Freiburg im B r.: Herder, pp. 63, note. 3 147

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oriented by a scientifically established and founded norm, and to this extent of being a normative science”149. Solidarism, the basis for Catholic social economics, does not accept the principle of certainty, which is prerequisite for accepting economics as a science. Therefore, according to solidarist economists, economics is understood as a moral science, which for conventional economists opens up for a new dimension in understanding the fundamental concepts150.

8.5. The relationship between ethics and Catholic social economics. The “principle of economy” is to be understood in wider sense than the conventional way of understanding economics. Pesch sees the “principle of economy” as a principle of reason, which can be applied to all human activity. He states that “the “principle of economy” is a general principle of practical reason; a principle of prudent, rational management of affairs, proper not merely to economic life, but extending even to being a cosmic principle”151. It is evident that Pesch offered a new way of looking at economic affairs based on a set of different premises from those of conventional economics. To Pesch the philosophical premises were explicit, whereas for modern economists they are implicit. The economist must pay serious attention to all causes or factors, whether they be material or dealing with efficiency. There will in Pesch’s economic system never be a conflict between what is economically and ethically true and good, and what is morally wrong cannot be economically right, due to the explicit philosophical foundation upon which the system is constructed. His teleological approach caused a Methodenstriet with the neo-Kantian positivists according to whom it was not feasible to talk about the value-judgement in social science, because it was not supported by empirical evidence. Pesch responded to this insisting that without an evaluation of the social performance of economic processes and systems, economics simply makes no sense. Mulcahy gives this useful summary of the relationship between ethics or morals and economics according to Pesch152: •

The moral law has general validity for all times and places. It has reference to the free actions of men; and thus it is applicable to such actions in the economic order. There

149

Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 475 Waters, W. (1988): Social Economics: A Solidarist Perspective, Review of Social Economy, pp. 118 151 Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 467 152 Mueller, F. (197 7): So cial Ec onomics: T he Perspe ctive of P esch and Solidarism, Review of Social Ec onomy, pp. 294 150

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no longer is consensus in the Roman Catholic Church concerning this absolute view and this understanding of the natural law principle. •

The moral law directs men’s actions to their last end; and therefore any contradiction of the moral law directs men’s actions to their last end; and therefore any contradiction of the moral law is a contradiction between the temporal and eternal end of man.

The economist cannot consider the formal object of his science except in relation with the general welfare. Thus he cannot forget the inner unity of the general culture and of the entire welfare goal of the political society.

The material welfare of a people is conditioned by the level of morality existing in the economic life of the people.

The economist can receive aids from ethics for further progress in his theorizing.153

8.6. Ethical issues are no longer dismissed in conventional economics. There is a shift among economists today with regard to the relationship between economics and ethical issues, and there is no longer a seeming consensus among economists that economic theory must not be value-laded. At a seminar organized on the 5th November 1990 in the Vatican City by the Pontifical Council for Justice and Peace with the aim of letting distinguished economists reflect on the interaction between ethical values and economics, and the significance this would have in regard to the social teaching, the following leading economists were present: Kenneth J. Arrow, Anthony B. Atkinson, Parata Dasgupta, Jacques H. Dreze, Peter J. Hammond, Hendrik S. Houthakker, Robert E. Lucas, Jr., Edmond Malinvaud, Ignazio Musu, Jeffrey D. Sachs, Amartya Sen, Horst Siebert, Witold Trzeciakowski, Hirofumi Uzawa and Stefan Zamagni. Several of these leadings economists opened up for the idea of bringing ethical values into economics. They saw this as necessary in today’s world and encouraged a normative approach. Edmond Malinvaud in his article argued that if altruism is taken into account in the working of economic theory, then the result is not significantly different from the assumption that economic agents act individuali-stically. Therefore, there is no need to make ethical modifications. Robert E Lucas, Jr. dismissed that ethics has anything to say in economics, “Economics does not have or imply a view of the 153

Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 504-507

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nature of man. Economics is a method for understanding human behaviour that works through the construction of artificial, fictional people - robots, one might say - and the study of the workings of artificial economic systems made up of such agents. The idea is that by studying the behaviour of highly simplified theoretical systems, we can gain understanding of the way actual societies respond to changes in their situation”154. Peter J. Hammond took the extreme opposite stand. He argued in his article that there was a need to establish an ethical economic system and for this to be achieved it was necessary to “organize production reasonable, efficiently by measures such as encouraging fair competition and using market forces on the supply side of the world economy, but be sure to intervene judiciously on the demand side of markets in order to ensure that the resulting goods, services, and job opportunities are distributed as justly as possible, while bearing in mind the crucial need to preserve incentives in order that individuals, firms, and other organizations should all be encouraged to desirable outputs and to acquire and deploy useful skills.155”

8.7. Summary. To summerize, this chapter argues that •

conventional economists are now more open to recognise the importance of a normative perspective in economics, that is especially the nature of man.

the positivistic approach in economics has proved to be insufficient when dealing with ethical issues in economics, as it has tended to neglect the social context in which conventional economic theory has been formulated.

bringing philosophical premisses into economics is in no way new, because they are already there implicitly.

Pesch caused a Methodenstriet when he included moral and ethics in economics. Catholic social economics sees itself as both normative and positivistic in approach.

154

Pontifical Co uncil for Justice a nd P eace (1992): Social and E thical Aspects of Economics, A Colloquim in the Vatican, Vatican City, pp. 71 155 Pontifical Co uncil for Justice a nd P eace (1992): Social and E thical Aspects of Economics, A Colloquim in the Vatican, Vatican City, pp. 62

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9. SOLIDARIST AND PERSONALIST ECONOMICS. Catholic social economics rests upon the fundamental principles in Catholic social teaching, which it has expressed in a new and radical way. Solidarist economics and solidarism are not new concepts, but significant Catholic scholars have given them a specific connotation. Though Catholic social economics is not yet as systematically developed as conventional economics, it makes a competent contribution to including ethics in economics. This chapter discusses the origin of the principle of solidarity, which is one of the three fundamental principles in Catholic social teaching. It also discusses the foundation for the development of solidarist economics based on Pesch’s definition of solidarity. It also describes how the principle of solidarity can be applied in practice. The chapter evaluates the new development of personalist economics which has emerged in recent years and is advanced by scholars such as Edward O’Boyle, as a product of the age of electronic communication. Further it will be argued that personalist economics with its premises in personalism will contribute instructively to conventional economics. Finally, is briefly discussed the rise of Catholic Social Market Economy in Germany, which is a direct consequence of Catholic social teaching.

9.1. Introduction. In the wake of the French Revolution, social economics emerged at the beginning of 1825 in France. Earlier, Adam Smith’s narrow wealth enhancement was primarily concerned with material wealth whereas the social economists were concerned with human material welfare and recognized that the ultimate object was to maximize human well-being. This normative approach was divided into a secular-normative branch and a religious-normative branch of social economics. In this dissertation the focus clearly is on the religious-normative branch of social economics which poses a challenge to the premises and principles of mainstream economics.

9.2. Catholic social teaching and solidarist economics. Catholic social economics has its origin in the social encyclical Rerum Novarum. However, before this encyclical there had been a reaction among Christian scholars to the prevailing trends in society and they proposed the formulation of a Christian political economy. Christian philosophers reacted to the secularization of society after the Enlightenment and did not accept 87


the prevailing view that everything could be explained for by the use of reason and proved empirically. Catholic social economics held on to a philosophical foundation and a world-view that allowed for the sacredness of human nature. The teaching of 19th century liberalism and Marxism had obviously failed to provide a just economy. In this context with an increasing alienation of the human person in economic affairs Pesch interpreted the principle of solidarity.

9.3. The origin of the principle of solidarity. Solidarity may be defined in a short and popular way as: We are one human family. Our responsibilities to each other cross national, racial, economic and ideological differences. We are called to work globally. For different uses of the principle of solidarity in Catholic social teaching see appendix III. However, the principle of solidarity was not a new principle. Solidarity is not a specific Catholic principle and it has been used by different ideologies where it is referred to as “a natural law of solidarity”. It can be argued that the principle of solidarity is a core principle in both sociology and economics. Hence the sociologist Dürkheim assigned it to be an important component in the reconstruction of the social order; Adam Smith assumed the existence of the principle when he developed his theory about the division of labour and J.B. Say also assumed solidarity in his theory of markets. The principle has several meanings and is not a concept to which the Christian churches have an exclusive claim. However, it has also been given a specific Christian interpretation and was used, before Pesch refined it further, by Catholic scholars including Vogelsang, von Kettler, Hitze Pieper, Cathrein, Scheler, de Mun, Max Scheler and Toniolo156. Pesch’s solidaristic system has its origin in the Toniolo’s line of thought. Toniolo (1845-1918), who also contributed to the formulation of Rerum Novarum, defined in his two-volume work ‘Treatise in Social Economy’ social economics as, “the social economic science, which investigates the forces, institutions and processes of the people in the order of wealth, as the material means to the ends of civilization”. Pesch gave the principle of solidarity a specific interpretation. He and his followers developed a separate Catholic social theory at a time when modern theories of liberalism and communism had become prevalent in society. With his distinct definition of the principle of solidarity, Pesch rejected the

156

See appendix IV

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individualism of the capitalist system and the collectivism of the socialist system. Pesch used the principle of solidarity as a foundation for his solidaristic system. He was the first who used the concept as the dynamic principle of an economic system or as the “organic principle”157. He gave the principle a new interpretation and used it in a new and different way. Pesch defined solidarity as “describing first and foremost, and most generally to the social interdependence, the actual reciprocal dependence of human beings on one another”158. He argued that “in its application to a social community and in its twofold function and strengthening the community, (solidarity) denotes the ordered integration of the efforts that are either socially united or are yet to be so united, to achieve a morally licit or morally necessary common end “159 The principle of solidarity still has a major role in the social teaching of the Catholic Church and can still be traced back to Pesch’s definition. Pope John Paul II ,with his keen concern for the need of solidarity among man, especially in respect to the workers’ struggle for justice, and his introduction of personalism, has defined solidarity as: ”It is above all a question of interdependence, sensed as a system determining relationships in the contemporary world, in its economic, cultural, political and religious elements, and accepted as a moral category. When interdependence becomes recognized in this way, the correlative response as a moral and social attitude, as a “virtue”, is solidarity ... a firm and persevering determination to commit oneself to the common good”.160

9.4. Pesch’s definition of solidarism. Between the two world wars, liberalism and Marxism flourished ,and solidarism was developed further by other scholars. Pesch himself had formulated his solidaristic system in full harmony with the moral teaching of the Catholic church and reflected the natural law principle as applied to economic affairs. He defined solidarism in his Lehrbuch as “that social system which emphasizes the solidary association of men as such members of the natural societies of family and State”161 and his solidarism is obviously grounded in the Christian doctrine concerning the value of the person. Moreover, he emphasised that as a principle, 157

Erderer, R. (1991): Heinrich Pesch, Solidarity, and Social Encyclical, Review of Social Economy, pp. 599 Erderer, R. (1991): Heinrich Pesch, Solidarity, and Social Encyclical, Review of Social Economy, pp. 358 159 Pesch, H . (192 4): Lehrbuch de r Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 412 160 Sollicitudo Rei Socialis paragraph 38 161 Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 432 158

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solidarism is social-ethical and that it is an economic system. “Catholicism gives to the world no economic constitution, and is bound to no definite economic system”162 and if occasionally the expression “Christian” or “Catholic” economics is used, this can be misunderstood. Economics is a natural discipline, it has to do with a natural ordering of economic life, therefore with “natural ethic”163. There is no consensus among scholars today and Erder argues that solidarism is a social philosophy and not an economic system. He argues that it has inspired the economic system and thus is “the social system of labour”164.

9.5. Pesch’s solidaristic system. What characterised Pesch’s solidaristic system was that to him it was a fundamental principle without which there would be no reconstruction of the social order. The principle of solidarity is a fundamental principle for his system. His approach is teleological though some scholars disagree with this, but he himself describes his economic system as being “anthropocentricteleological”165 with the purpose of explaining the unique position of man. “The working man in the midst of society” means that God has entrusted the lordship of the world to man himself166. Pesch based his understanding of the nature of man on the teaching of Thomas Aquinas (see chapter 4), and this view is absolutely central in the understanding of solidarism. The basic economic unit is identified with man whose sacred status must be respected. Man is seen as the “subject” and the world must always serve man. Consequently, man can never become subordinate to the world and be reduced to a mere “object”in a working relation, and due to his sacred status in society he has certain rights which are more fundamental than those entered into by contract, a view not accepted in conventional economics. Man’s freedom can therefore never be contracted away. Though man may not always act for the common good he is expected to do so in a group and everything is subordinate to the fulfilment of the common good, the welfare of society. In regard to decision making of the group, the common good is the guiding principle. Therefore the economy of the individual person is subordinate to the

162

Pesch, H. (1922): Lehrbuch der Nationalökonomie, Vol. III Freiburg im Br.: Herder, pp. 547 Pesch, H. (1922): Lehrbuch der Nationalökonomie, Vol. III Freiburg im Br.: Herder, pp. 61 164 W aters, W . (1989 ): Evolution of Social Eco nomics in Am erica, pp. 98 , in Lutz, M. (ed): Social Eco nomics: Retrosp ect and P rospect, London: Kluwer A cadem ic Publishers 165 Mueller, F. (1941): Heinrich Pesch and His T heory of Christian Solidarism, Aquinas Papers: No. 7, The College of St. Thomas, pp. 14 166 Pesc h, H. (1 926 ): Lehrbuch der Nationalö kono mie, V ol. II, 4 th ed., Freiburg im Br.: Herder, pp. 215 163

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national economy and in order to strive for the common good and providing for the needs of the whole people, the individual welfare may give way to the whole. The view of society in solidarist economics is also different from the nominalistic and individualistic view found within conventional economics. According to Pesch, society consists of individuals who are “bound together through a common purpose and an inner principle”167 and not through a contract, and therefore a social philosophy may also be identified. The economy is seen as an organic-moral unity which is made up of many autonomous economic units united by the goal of the economy and the authority of society.

9.6. The nature of the principle of solidarism. Solidarism as ideology was not specifically Catholic and does not embody a homogeneous series of systems and was therefore the object of different interpretations. Franz Mueller168 referred to the different French systems of solidarist thought embraced by people such as Dürkheim, De Molinari, Bourgois etc. Christian Solidarism is not to be identified with these solidarists, though there are some similarities. One important similarity is that society is defined as a moral organism, hence the union of many, and in this moral organism man is only a member of the social body. On the basis of a different set of philosophical premises, Pesch sees this bond between man and the moral organism, society, as being a common purpose and an inner principle169. There are slightly different interpretations among Catholic scholars of solidarism. Gustav Gundlach sees solidarism as that social system which makes the reciprocal solidary association of each community with its members the dominating principle of living together. Jospeh Husslein who attempted to spread the knowledge of the term solidarism according to Pesch in the English speaking world of academics described solidarism as a system based on the principle of “justice and charity for all”. It is thus “a further crystallization of Catholic doctrine into a sound Christian social system”170. Oswald von Nell-Breuning171, a firm advocate of Solidarism, refers frequently in his commentary on the encyclical

167

Pesc h, H. (1 924 ): Lehrbuch der Nationalö kono mie, V ol. I, 4 th ed., Freiburg im Br.: Herder, pp. 272 Mueller, F. (1941): Heinrich Pesch and His T heory of Christian Solidarism, Aquinas Papers: No. 7, The College of St. Thomas, pp. 13 169 Mulcahy, R. (1952): The Economics of Heinrich Pesch, Henry Holt and Company, pp. 163 170 Mueller, F. (1941): Heinrich Pesch and His T heory of Christian Solidarism, Aquinas Papers: No. 7, The College of St. Thomas 171 Nell-Breuning, O. v. (1936): Reorganisation of Social Eoconomy, The Bruce Publishing Co. 168

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Quadragesimo Anno to solidarism, and it appears that this philosophy permeates the whole text as he frequently refers to Heinrich Pesch. Solidarism is thus different from liberalism and socialism as it rests on its own principles and reflects the Aristotelean and scholastic principle of “via media�. It is based on natural reason and is not a third way but a middle way between the two extremes, liberalism and Marxism. Solidarism is distinguished sharply from all social theories that deny the dignity and relative autonomy of the person.

9.7. The development of solidarist economics. The school of solidarist economics which began to take form based on Pesch’s solidaristic system had a view on human nature significantly different from the current view in conventional economics. The state, in solidarist economics, is a necessary good to ensure the realization of the common good (distributive justice) and all members are expected to contribute to this realization (contributive justice). An important institution in this scenario is the government whose role though is limited and constrained by the principle of subsidiarity172. Society consists therefore of free citizens who in order to seek justice must accept the authority of the state where human freedom and dignity are respected. There have always been two incompatible schools of social thought in the Association of Social Economics. One school represents mainly conventional economists who emphasizes the policy aspect of economics and base it on a Christian ethical foundation. The other school is more radical as it is based on solidarism as founded by Pesch in Germany and later developed by his study-group. It is from the more radical school that solidarist economics emerges and later personalist economics. The founding father of what is now emerging as personalist economics is Stephen Worland. Solidarist economics as formulated by Stephen Worland and Goetz Briefs came at a time when there was renewed interest in welfare economics. Social economics as a discipline within mainstream economics became more evident in the 1960s. There are several different understandings of it. Bruyn173 said that social economics has important roots in the dialectical tradition of Hegel and Karl Marx. He argues that its real purpose is to bridge the gap between

172

See chapter 10 Bruyn, Severyn T. (1981): Social Economy: A Note on Its Theoretical Foundations, Review of Social Economy 173

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capitalism and socialism as it links both traditions and has elements from the works of Karl Marx, Max Weber and other scholars. He argues that Karl Marx is a social economist. Political economy was subject to the dynamic of conceptional dialectics, which Karl Marx began when he wrote the ‘Critique of Political Economy’ in 1859. He argues that in the Critique, there was a social concept which explained that the new social economy would be self-governing. Bruyn defines social economics as “a scientific model emerging with a theoretical framework to study the economy as a self-governing order in society”. There are many similarities between social economics and Catholic social economics as both rest on ethical and moral principles. Stephen Worland174 saw no contradiction between economic reasoning based on scholastic philosophical principles and modern welfare economics which he points out in ‘Scholasticism and Welfare Economics’. In welfare economics today, there is also an acceptance of the teleological nature of economic activities and systems related to existential human ends. The scholastic doctrine of “just price” in modern welfare economics has received a wider meaning and is seen as necessary in order to fulfill as efficiently as possible the teleological task of the economic system. Goetz Briefs, the other founder of solidarist economics, made an important contribution to the development of Catholic social economics. Briefs’ approach is different from Worland’s. He is normative in his approach, a personalist175, who emphasises the centrality of the person, and human dignity is used as a benchmark for evaluating ideas and societal structures. His philosophy was rooted in the scholastic natural law tradition and the social doctrines of the Catholic Church. His contemporaries had problems dealing with capitalism as it changed rapidly. Briefs used sociological, political and economic concepts in explaining the nature of capitalism. He emphasised the centrality of man whom he saw as intelligent, free and responsible. He hence defined modern capitalism as a socio-ethical economic system seeing capitalism as a historical phenomenon176. Solidarist economics is not easy to place within mainstream economics and many will argue that it is not economics in the conventional way of thinking. According to Schumpeter’s distinctions between systems of political economy, economic thought, and

174

Worland, S. (1967): Scholasticism and Welfare Economics, University of Notre Dame Personalist in the sense that it is the person not the human individual who is at the cen ter of economic ac tivity. The emphais of the person contra ry the individual as a central part of our econ omies. This shift and new foc us is explicit in the papal encyclical by John Paul II. 176 Briefs, H. (1983 ): Go etz B riefs on C apitalsim and D emocracy: A n Introduction, Review of Social Ec onomy, pp. 219 175

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economic analyses, the work of Pesch, Catholic social economics and teaching cannot be treated as economic analyses. There are several parallels in Pesch’s work on economic theory to the thinking of Lionel Robbins, but the Catholic branch of social economics is distinct in several ways. In recent years solidarist economics has been succeeded by personalist economics as presented by Edward O’Boyle (see later in this chapter).

9.8. Peschian solidiarity vs. liberalism and Marxism. Solidarity in the Peschian understanding is opposed to liberalism as it involves all people and all nations. The principle has a biblical origin and is universal. In this light the foundation of the social order is the family, which is the core of society. In Catholic social teaching, the family is a miniature of society. Capitalism has clearly undermined the solidarity of the family with obvious consequences for society today. Collectivism, too, which is characteristic of Marxism is not the same as the Peschian solidarity, as solidarity among people of the same political state excludes class conflict. A significant element in Pesch’s solidarity was that he extended the principle of solidarity to include people in the same industry, occupation or profession and used it also to describe the occupational relation between employee and employer. He was thus the first to develop a system of political eco- nomy dealing with the constitution and organization of national economy based on a diffe- rent set of premises from liberalism and Marxism which dominated the period he wrote in.

9.9. Solidarity in modern society. According to Pesch’s definition of solidarity, it is inherent in us all and is found in all stages and areas of human life. Because of the complexity of modern society, solidarity among human beings has become more urgent and significant than when Pesch wrote. He understood solidarity primarily as the dynamic principle of an economic system and social life, and predominantly as a principle of justice. The rationale of solidarity is the realization of the common good, hence the general welfare of the community. Solidarity is an ethical requirement today if people’s actions, constrained by legitimate interests and the human rights of other people, are to contribute to the common good177. This gives a different perspective to

177

Briefs, H. (1984): Solidarity Within the Firm: Principles, Concepts and Reflections, Review of Social Economy, pp. 299

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solidarity as it indicates a community of interest and responsibilities leading to the welfare of both the individual person and of smaller groups. Therefore the goal of the economy is thus not efficiency, as in mainstream economics, but the common good. This is understood as the welfare of the personand at the same time the welfare of the community, which is not the sum of all individuals’ welfare as in utilitarianism. There is an obvious mutual relationship between the welfare of the individual person and the welfare of the larger social group, society. It is therefore difficult to say which is the cause and which the effect. The principle of solidarity is therefore closely related to the other fundamental principles in Catholic social economics. Pesch envisaged his solidaristic system as a triangle where, at the summit were the twin virtues of social justice and charity, from which came the principle of subsidiarity and the principle of vocational groups. In this system solidarity had specific applications at the various levels of society178. Hence the Peschian understanding of solidarity is fundamental for the development of the other principles in the social teaching and a proper understanding of the social teaching in the economic order. Briefs179 defined the economic order as that which is to provide for the “material” well-being of all persons who constitute society. In order to achieve a level of material well-being man has to engage in economic affairs and hence use human and physical resources, on the basis of certain principles. It is these principles Catholic social teaching defined and hence implicitly formulated a solidarist economics and later personalist economics. Pesch’s principle of solidarity is general and not very specific. Edward O’Boyle, who in recent years has contributed considerably to the field of social economics and proposed a new understanding of it, has applied the theory in practise. He applies the principle of solidarity in a specific organizational context. He thus distinguishes between different types of solidarity. The types of solidarity are: •

firm-specific (referring to workers forming a union)

industry-wide (referring to the same industry forming a trade association)

intra-firm (referring to labour and management agreeing about how to improve quality and productivity)

178

Ederer, R . (199 1): H einrich Pesc h, Solidarity, and Social and Social Encyclical, Review of Social Ec onomy, pp. 599-601 179 Briefs, H. (1984): Solidarity Within the Firm: Principles, Concepts and Reflections, Review of Social Economy, pp. 296

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inter-firm (referring to producer and supplier agreeing on timely delivery of supplies)

area-wide (referring to businesses agreeing to assist other business in extraordinary circumstances)

supra-firm (referring to all parties setting aside their differences in order to solve problems which requires everyone's contributions)

9.10 Personalist economics. Personalist economics has become an object for discussion among scholars of Catholic social economics. In his social teaching, Pope John Paul II articulated the centrality of the human person in economic affairs as well as in economic systems. Hence, he condemned market economies and warned against consumerism which led man to think that his value was linked to having more, rather than being more, and thus jeopardising human freedom and dignity. His social teaching forms the basis for personalist economics. Personalist economics becomes value-laden because the human person as a free and intellectual being is capable of making moral choices, which are restrained by justice and charity. Personalist economics thus differs substantially from conventional economics. Conventional economics sees man as a rational utility-calculating individual, and personalist economics sees man as a person, hence a moral agent. It is essential to be aware of the difference between person (personalism) and individual (individualism) a difference made clear in the contrasting philosophical premises underlying economic teaching. Once this is obvious it will convey more easily the consequences it will have for economic theory and the relevance of personalist economics. Personalist economics is thus more a moral science as it addressees human behaviour in economic affairs. Reflecting on the discussion on accepting Adam Smith’s work ‘The Wealth of Nations’ and ‘The Theory of Moral Sentiments’ as a unified system, it may be argued that conventional economics in its early days also had this moral aspect and as such was not as far from personalist economics as it is today.

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9.11. Personalist economics focuses on human nature. Edward O’Boyle180 is an advocate of “personalist economics” founded on the philosophical premises within personalism as formulated by Pope John Paul II. In his book he gives this succinct description of Catholic social economics (personalist economics): “(Catholic social economics is) a distinct sphere of economic theory and economic applications that is moral, anthropocentric, teleological, and intertwined with several other spheres.”181. From the illustration in appendix V it is obvious that personalist economics consists of both economic science and moral discipline. It may be argued that all sciences depend on moral discipline to determine the moral dimension of human activity, and any science can be traced back to moral law. Therefore, the law of moral theology and philosophy become indispensable disciplines in order fully to comprehend economics. Philosophy contributes through explaining the meaning of justice in economic matters, and theology brings in the virtue of charity which is needed to unify people in the economic order. Each of the different sciences focuses on a different perspective of the nature of man. They are intertwined and complement each other. To take economic affairs and make it a discipline independent of the nature of man will make it without values, consisting only of a mathematical system. Catholic social economics does the exact opposite. Catholic social economics views economics from the pivotal point, the nature of man.

9.12. The characteristics of personalist economics. Scholars such as William Waters, Stephen Worland, Goetz Briefs, Joseph Solterer and recently Peter Danner have worked in the field of in personlist economics, which they tended to call solidarist economics. Waters, editor of the Review of Social Economics, in stating the differences between conventional market economics and solidarist economics, was clearly proposing a personalist economics. Waters gives this general definition of social economics: ”The major concern of social economics is explaining the economy in its broadest aspects; that is, showing how man deals with ordinary business of using human and physical resources to achieve a level of

180

In 1998 he published “Personalist Economics, Moral Convictions, Economic Realities, and Social Action”, and he also conducts summer courses at the University of Verona (Italy), 181 O’Boyle, E. (1998): Personalist Econom ics, Moral Convictions, Economic Realities, and Social Action, Kluwer Academic Publishers, pp. 12

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material comfort”182.Waters also refers to four hard core premises of mainstream economics, which are the philosophical base to which not much concern is given unless they are challenged by Catholic social economics and what is today becoming known as personalist economics. According to the premises of mainstream economics the individual •

is the basic unit of the economy

who acts freely, self-interestedly, and calculatedly in a self-regulating economy

whose economic behaviour is grounded in reason and though it changes as economic conditions change, is predictable and knowable with mathematical certainty and empirical precision

whose ultimate worth is determined instrumentally.

In contrast to these is personalist economics where the person •

is the basic unit of the economy

who acts freely but within certain limits, self-interstedly, in a self-regulating economy which from time to time must be constrained deliberately in order to serve the common good and protect the weak and the needy

whose economic behaviour is grounded in reason and in faith, changing as economic conditions change, but at times reflecting moral rules and principles, predictable and knowable with mathematical certainty and empirical precision, but sometimes unforeseeable, mysterious and beyond human understanding

whose worth at times may be construed instrumentally, but finally is not reducible to economic calculus because it rests on the conviction that humans have a worth and dignity beyond measure.

Waters stresses that the individual in conventional economics should be replaced by the person, competition should be replaced by cooperation and then solidarity. Without these three key factors a just society which emphasises the dignity of each person is not possible. Personalist economics addresses the economic disorder of the modern age. Conventional economics ends with the fulfillment of man’s needs and the satisfaction of his wants, but personalist economics goes further, as the end of man is beyond this world and because of this man can never be reduced to material objects. Economic systems are there to serve humans

182

Waters, W. (1988): Social Economics: A Solidarist Perspective, Review of Social Economy

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and not the other way round.

9.13. The future of personalist economics. Though personalist ideas found their way into the thinking of Catholic social economics many years ago, personalist economics is new as an independent discipline and no text book on the subject has yet been written. Peter Danner, professor emeritus of economics at Marquette University, has a book in progress on personalist economics. Hence, it is a field within economics which will be offered on curriculum courses in economics at Catholic universities. It makes a real and substantial difference to how economic affairs are understood and how economics is taught. Scholars at US universities have met and discussed how to teach personalist economics to students of economics183. At the meeting various scholars expressed their view of social economics. The following definition was given by Danner, “personalism insists that since economic agents are persons the insights of a personalist philosophy are essential in using economic principles to guide human actions. Thus economic principles entail also a set of philosophical and moral precepts, regarding what persons want and desire, their material betterment, value espousals, competing and collaborating in community with others and contributing to and sharing in the common good”. John Elliot sais, “social economics is concerned with human values, the nature of the person, the distribution of wealth, income, and power and the well-being of those who are not able to fully participate in economic affairs”. Waters held that social economics “will enrich the teaching of economics by focussing on three aspects of an effective and efficient economy: solidarity, creativity and high living standard.” There is no doubt that this is the beginning of a real challenge to conventional economics. Catholic social economics has thus much to offer conventional economics in the way it challenges premises and presents a different perspective. To finish with a quotation from Briefs in 1982: “It is really naive to think - as certain American Catholics did only a few years ago - that the simple and direct application of Catholic social principles could solve all the social and economic problems facing us today”184.

183

O’B oyle, E . (ed) (1 999 ): Teaching the So cial Ec onomics W ay of T hinking, Selected papers form the 9th world congress on social economic s, Mellen stud ies in eco nom ics, vol. 4 184 Briefs, G. (1982): Catholic Social Doctrine: Laissez-faire Liberalism, and Social Market Economy, Review of Social Economy, pp. 246

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9.14. Catholic social economics vs. mainstream economics. Conventional economic thinking builds on the propensity of individuals to act in such a way as to maximize their own welfare. This propensity is reflected in many areas of life and it is clearly operative in market transactions. The intelligent pursuit of private gain is rational behaviour, building on the propensity mentioned. Other modes of behaviour are considered to be non-rational. Conventional economists would regard the behaviour advocated by Catholic social teaching as non-rational, since value-judgement based on ethics and morality is involved. In a world of interdependence, the individual’s decisions will be influenced by the social context and imperfect information. If each economic actor has less than perfect knowledge of the other actor’s behaviour, then the moral hazard appears which leads to increased interdependence. Each actor will adopt strategic behaviour leading to distrust. In an environment of distrust where the actors’ behaviour is based on self-interest, they will not achieve an optimal outcome. Catholic social economics suggests that applying the principle of subsidiarity will facilitate a socially acceptable outcome. This means that competitive situations are to be avoided and cooperative behaviour together with an environment of trust will change the behaviour of the actors. Cooperative behaviour is necessary to complement self-interested behaviour. In Catholic social economy a communitarian approach is encouraged. Much can be learned from microeconomic theory, bearing in mind that there is one important difference, that is, Catholic social thought and economy is based on a communitarian vision and micro-economic theory is based on an individualist concept of society. According to conventional economic theory, society is the sum of the individuals who have decided to associate, as it is mutually beneficial from an individualist point of view. Therefore the common good in this setting is the aggregated welfare of all individual members. Hence, if one individual increases welfare without a decrease in the welfare of another then the common good is increased. Individual freedom is the highest good and the person if left free to pursue self-interest will achieve the maximum personal welfare and social welfare. This is in contrast to Catholic social economics where the aggregated individual welfare is not necessarily the common good. Increase in the common good is possible even if the welfare of the individual is not increased. The goal of the economy is not individual freedom but fulfilment of the common good. Each person in society has rights and duties so he can realize himself as a 100


human being. The striving for the common good will enable this realization and therefore transcends private and public life. Hence the person realizes human dignity from the community and not as an isolated individual. In order to ensure that the common good is achieved, public intervention in certain areas of economic life may be necessary as a complement to market competition. This is challenging the principles of conventional market economy.

9.15. Social Market Economy in Germany. The Social Market Economy is a concrete example of how Catholic social teaching in a significant way has shaped and influenced policy-making in an economic system. As mainstream economists in the English-speaking countries begin to recognize that ethical issues must also be addressed within economics, Social Market Economy has already been developed in Germany as a natural extension of Catholic social teaching. This is not a mere coincidence. The first people who advocated social reforms in Europe during the industrial revolution were Catholics who were engaged in political and economic life, and names such as Mun, von Kettler, von Vogelsang, F.S. Nitti and others come to mind, as well as the various Catholic social movements. Social Market Economy is even today an important element of the economic system in Germany. The research of German economists and Social Market Economy were largely unknown to economists outside German, as a sad consequence of the events from 1933 - 1945 and the subsequent effects of the Cold War. The principles of Catholic social teaching influenced the academic world and economic thinking in Germany, but this influence is to a large extent ignored and in some cases dismissed as not relevant by economists in the English-speaking countries. The foundation of Social Market Economy goes back to the National Socialist era and the beginning of the Freiburg neo-liberal school, later known as “ordo-liberals”. Schumpeter mentioned this group in ‘Capitalism, Socialism and Democracy’185 . The founding fathers of Social Market Economy were Wilhelm Röpke, Ludwig Erhard and Alfred Müller-Armack, who created the term in 1947. Müller-Armack defined Social Market Economy as “a possible order of the market economy, as yet not realized in history. It is clearly different from laissez-

185

Schumpter, J. (195 0): Cap italism, Socialism and D emocra cy, New Y ork: Harper & Brothers

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faire Liberalism. Yet, in contrast to economic control opposed to the market economy, which in the past decades paralysed large sectors of the automatic market mechanism, the Social Market Economy is based upon the premises that competition is indispensable as an instrument of social organization. While accepting the need for competition in principle, one needs also to be conscious of the variety of insights and claims to be attributed to the word “social””186. If politicians are to act in accordance with moral and social principles then Social Market Economy will provide a set of premises. It is necessary to be aware of the “underlying moral values which constitute the basis for the construction of society”.He sees it as “the only possible way of achieving social progress while maintaining the functions of the market”. Ludwig Erhard interpreted “Social Market Economy as an economic system combining market freedom with social equilibrium, with the government playing a regulating role and creating the framework for market processes”187. Social Market Economy at that time was based on the moral and ethical values of Catholic Social Teaching. There is no unambiguous definition of Social Market Economy, and Ederer attempts to sum up different opinions in this definition: “The Social Market Economy is a socio-economic system in which the fundamental processes, production, exchange, and distribution, operate for the most part in response to free decisions of consumers and producers competing on the market, but where these are subject to such restraints as may be dictated by the demands of social justice”188.

9.16. Summary. To summarise, this chapter argues that •

based on the principles of solidarity and solidarism, and using neo-scholasticism as the new philosophical foundation, Henrich Pesch offered a new and unique way of viewing economic affairs, which led to the later formulation of solidarist economics and personalist economics.

186

Erderer, R. (1969): Capitalism, Socialism, and Social Market Economy, Review of Social Economy Nagelschmitz, H. (1997): Ludwig Erhard: Architect of the “Economic Miracle”, A Tribute on his 100 th birth annive rsary, G erma n News, The M agazine, Aug./Sep t. 1998, www.germ anem bassyindia.o rg/news/marc h97/erhard .htm 188 Erderer, R. (1969): Capitalism, Socialism, and the Social Market Ecnomy, Review of Social Economy, pp. 29 187

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Henrich Pesch worked systematically with the application of Catholic social teaching in economic affairs, rejecting both liberalism and Marxism, and proposed solidarism as a via media.

by using personalism with its emphasis on the two-dimenstional nature of man, a more just society will be possible respecting both human dignity and freedom.

by applying the principles underlying personalist economics to more traditional approaches in mainstream economics, new aspects of conventional teaching will appear.

the major contributions to the establishment of personalist economics come from scholars such as Waters, Worland, Goetz Briefs, Joseph Solterer and recently Peter Danner and Edward O’Boyle. Waters points out the differences between the hard core premises of conventional economics and personalist economics.

personalist economics challenges mainstream economics in several respects such as questioning the foundational values of mainstream economics.

Social Market Economy in Germany is a direct example of how Catholic social teaching has shaped an economy.

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10. SUBSIDIARITY, A FUNDAMENTAL PRINCIPLE IN CATHOLIC SOCIAL ECONOMICS Since Catholic social teaching and economics challenge the underlying value-premises of conventional economics, which are often not explicitly known to the economist himself, it is essential to have an understanding of these fundamental principles. The principle of subsidiarity, which is a fundamental principle in Catholic social teaching and economics, has found its way into conventional economics and policy-making. The chapter describes and discusses the origin and history of the principle of subsidiarity in Catholic social teaching, and how it found its way into the language of the European Union.

10.1. Introduction. Catholic social economics is more a social philosophy than economic analysis and theory. It looks at economic affairs from the point of view of human nature. It is necessary to understand its two fundamental principles, subsidiarity and the common good, as well as its philosophical premises to see how these principles offer an understanding of economic affairs different from conventional economics. The principle of subsidiarity originates in Catholic social teaching. However, its roots can be traced further back than Quadragesimo Anno. The principle has later found its way into the political sphere of the European Union. It is a principle which, though fundamental to Catholic social economics, is particularly relevant when dealing with policy-making, as it offers a way to evaluate the proper relationship between the state or a superior body, and a subordinate body. It is a principle which is essential to ensure human dignity and freedom.

10.2. The principle of subsidiarity in Catholic social teaching and its definition. A popular definition of subsidiarity is allowing the individual members of a large organisation to make decisions on issues that affect them, rather than leaving those decisions to be made by the whole group. For different references to the principle of subsidiarity in Catholic social teaching see appendix VI. As expressed in the encyclical Quadragesimo Anno, Pope Pius XI saw the principle as necessary to restore social order. Earlier, Pesch in his economic teaching paved the way for the principle, though he did not explicitly define it. However, the principle of subsidiarity pervaded his teaching on solidarism. The principle was formulated by Oswald von Nell-Breuning and was explicitly defined in Quadragesimo Anno by Pope Pius XI. The definition is given as a negation with respect to the 104


role of the state. At that time the state was perceived as an enemy “just as it is wrong to withdraw from the individual and commit to a group what private enterprise and industry can accomplish, so it is an injustice, a grave evil and a disturbance of right order, for a larger and higher association to arrogate to itself functions which can be performed efficiently by smaller and lower societies.”189. The formulation must be understood in the light of 19th and early 20th century liberalism. With this rather negative view of the state, the role it has to fulfil the principle of subsidiarity is “(the state) therefore should leave to smaller groups the settlement of business of minor importance, which otherwise would greatly distract it; it will thus carry out with greater freedom, power and success the tasks belonging to it alone, because it alone can effectively accomplish these: directing, watching, stimulation, restraining, as circumstances suggest and necessity demands”190. The principle of subsidiarity is intrinsically linked with the principle of solidarity and social justice and charity. Economic life must be subjected to and governed by these twin virtues191. This needs an organic society in which the person is the core unit, living in community, first with family, then extended to larger communities, hence ultimately society, a society where the various members and groups are interdependent. The following economic definition of subsidiarity is offered192: Larger and more powerful elements of the social order such as the state 1) should not usurp the functions of smaller and weaker elements of the social order such as the person and the family, but 2) should provide whatever assistance is necessary so that those smaller and weaker elements are able to function effectively. According to the principle of subsidiarity man must be given as much freedom as possible with respect to the common good. Applying the principle of subsidiarity in economics would consequently lead to promoting decentralized decision-making and the principle of selfdetermination. The principle will be more consistent with a market economy where decisionmaking is decentralized through a system of markets. However an unregulated market economy will not necessarily lead to the common good if the principle of “the invisible hand” is allowed to operate without any moral constraints.

189

Quadragresimo Anno paragraph 79 Quadragresimo Anno paragraph 80 191 Quadragresimo Anno paragraph 88 192 Formulated by Edward O’Boyle in e-mail 25 th February 2002 190

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10.3. Origins of the principle of subsidiarity. The principle of subsidiarity is a social-ethical principle with roots far back in history. Though not explicitly defined, traces of the idea were used by people as different as Cicero and Abraham Lincoln, since it is a moral and natural principle reflecting the needs inherent in man’s moral nature. There is no unanimous consensus among scholars with regard to the origin of the principle of subsidiarity as it is expressed in Quadragesimo Anno. Ad Leys in his doctoral thesis ‘Ecclesiological Impacts of the Principle of Subsidiarity’ 193 argues that both Höffner and Oswald von Nell-Breuning are wrong in their argument that the principle first emerges as such in Thomas Aquinas Pol. II lect 5. He argues to a degree rightly that the principle of subsidiarity or rather, resemblances of it have emerged through history until it takes the definite form as expressed in Quadragesimo Anno. Much of the principle is reflected in the formulation of basic human rights and a liberal and individualistic view of man, explaining the relations between man and the group he is in, and the norms for their mutual relationship while respecting his individual freedom and dignity as a person. Most scholars of Catholic social teaching and economics agree that the term “subsidiarity”as we now understand it is first used in Quadragesimo Anno but there are elements of the idea in Rerum Novarum, where Pope Leo XIII describes the rights and duties of state towards the family to relieve poverty but that state intervention should be limited194. An organic society195, which is a pre-requisite for the principle of subsidiarity, will be organized in smaller units, hence groups of businesses, industries, vocational groups, finance, labour, the professions etc. where each group co-operates with others in order to achieve the common good, welfare for the group at large, under the supreme authority of the state. The state is to leave to the intermediate groups and the individual person to achieve what they can by their own abilities and only to intervene to the extent that the group or the individual is unable to secure important needs of the group or the person. In economic affairs it thus means; as much individual responsibility as possible and as much state intervention as necessary. Trade unions are an example of the use of the principle of subsidiarity and were encouraged by

193

Leys, A. (1995): Ecclesiological Impacts of the Principle of Subsidiarity, KTC N o. 28, Kampen, pp. 75 Rerum Novarum paragraph 11 195 Organic social theory in the Roman C atholic sense frequently compares society to the human body. That is, as the organism of the body has priority over individual limbs, so the needs of the community has priority over its individual members. Catholic organic social theory places emphasis on the temporal welfare of the com munity as a who le, as well as the do minan ce of the spiritual over the temporal. 194

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Pope Leo XIII. They were not new, but the guilds of the medieval European cities had suffered from internal abuses, and the establishment of the mercantilist groups had turned into “states” who arrogated more and more control to themselves which led to the suppression of the common good. The dissolution of these groups was completed with the emergence of liberal capitalism. Adam Smith criticised these “corporations” which were an infringement of the free market forces and an obstacle to the principle of ‘the invisible hand’, which leads to the maximum welfare of the individual and hence the common good according to Smith.

10.4. Subsidiarity in the policy-making of the European Market. The principle of subsidiarity found its way not only into Catholic social teaching but also into policy-making, politics and economics. It recommends the right level of decision making, ensuring respect for human dignity and rights, and the principle of the common good. However, it is a principle which has been used and misused both by the Church and by the secular world. The Catholic Church used it in Italy after World War II when centralised state institutions were eroding the authority of the Church, and the German Christian Democrats have used the term to justify internal devolution. It was later used by the European Commission to calm down the fears of those member states which saw the Union as a threat to national governments and parliaments196. Today the concept is widely used within the European Union and is closely related to the concept of sovereignty. In article 3B of the Maastricht Treaty, subsidiarity is defined as: “in areas which do not fall within its exclusive competence, the Community shall take action...only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the object of this Treaty”197 The Treaty thus makes clear that there is a separation of responsibilities between the Community and the member states but a precise definition of these responsibilities is lacking. The principle of subsidiarity is taken from Catholic social teaching, but lacks the guidance of the twin virtues of social justice and charity. The inclusion of the principle in the Maastricht Treaty satisfied at the same time those parties who tried to limit or even reverse the

196 197

Teasdale, A. (1993): Subsidiarity in Post- Maastricht Europe, The Political Quarterly Publishing, pp. 188 Golub, J. (1996): Sovereignity and Subsidiarity in Eu Enviromental Policy, Political Studies, XLIV, pp. 692

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growth of power in the Community and those who wanted to enlarge the authority of the Community. The ambiguity of the principle is found in the different interpretations of the principle among miscellaneous ideologies regarding the proper relationship between state and society.

10.5. The principle of subsidiarity and European integration. The principle of subsidiarity has been commonly accepted and used by the politicians of the European Union. This is because many German, Italian and French politicians have been brought up with an emphasis on Catholic social awareness. Since the 1940s, the principle of subsidiarity has been a major issue for Christian Democrats in promoting European integration, and they have dominated the debates in the European parliament. Hence it is a widely used concept in the context of the European debate and it appears it in all cases it is used as a clear criterion for the separation of responsibilities between the competence of the Community and the member states. In the 1950s, it was used to put an end to the accusations of federalism which were often levelled against the Community, in the late 1970s and early 1980s, it was used to justify the extension of the competence of the European Commission and in the 1990s the principle was used to restrain the potential expansion of power of the European Commission.198 Founded thus on Catholic social teaching and favouring personalism the Christian democratic ideology has developed an elaborate view of subsidiarity which has consequences for practical policy.199 All of the original leaders of the Christian Democratic movement were Catholic statesmen such as; Alcide de Gasperi, Robert Schuman, Konrad Adenauer, Charles de Gaulle. The movement peaked in the 1950s but has thereafter weakened because of the challenges of secular society. 200 Through the strong influence of Christian Democratic politicians in the European Parliament the principle of subsidiarity was adopted by others. The principle of subsidiarity together with the principle of solidarity has become the cornerstone of the Christian Democrat credo, though it has been interpreted differently among the Christian

198

Teasdale, A. (1993 ): Subsidiarity in P ost- M aastricht Euro pe, T he Political Q uarterly P ublishing, pp. 1 Kersbergen, K . et al. (1994): The Politics of Sub sidiarity in the E urop ean U nion, T he Political Q uarterly Publishing, pp. 222 200 Charles, R. (1998): Christian Social Witness and Teaching, Vol. II, Gracewing, pp. 130 199

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Democrats themselves as a result of their background in a denominational structure and the different expressions of Christian Democracy in different countries. In respect to the use of the principle in the European Union it has never solved any conflict of interest but only transferred and postponed latent political confrontations, since all have settled for the lowest common denominator. Therefore, it is perceived as a constitutional principle, an agreement between central and local public actors, rather than a political principle. The principle will naturally be given different interpretations if different views of the relationship between state and society are held. However the principle together with the principle of solidarity and the twin virtues of social justice and charity does provide a tool for rebuilding the correct relationship that ought to exist between large and small organizations of people, and for establishing the proper role of government in the social and economic life of the community. According to the principle, the state should respect the integrity of the family and should procure the necessary means and institutions for the family so that each person may in a responsible way participate in social and economic life and hence contribute to the common good, the welfare of all people. Therefore the state should only intervene in the family by its care in ensuring the continuance of the family and the menaced rights of the family members, or of public welfare, and then only in a way where the dignity and freedom of the person are respected.

10.6. Summary. To summarise, this chapter argues that •

in Catholic social teaching and economics the principle of subsidiarity ensures that the principle of the common good prevails. Conventional economics overlooks the relationship between the two principles.

•

the principle of subsidiarity has become widely accepted within the European Union and is a useful tool for the discussion of European integration.

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11. COMMON GOOD , A FUNDAMENTAL PRINCIPLE IN CATHOLIC SOCIAL ECONOMICS The principle of the common good is a fundamental principle in Catholic social teaching and is also found in conventional economics. The principle is differently interpreted in conventional economics and Catholic social economics. The principle of the common good in conventional economics has short-comings and cannot fully accommodate the ethical and moral aspects of economic affairs. When the philosophical premises underlying the formulation of the principle in Catholic social teaching are understood, it can be shown how the principle can give a more competent answer to the moral and ethical questions faced by economists with today.

This chapter discusses how the principle of the common good, based on the assumption of duality in human nature, may challenge the conventional way of understanding economics. The chapter suggest that Catholic social economics and conventional economics can complement each other, although they differ in their understanding of the principle of the common good. To build up an argument that supports the above statement, this chapter discusses the philosophical origin of the principle of the common good in Catholic social economics and in Adam Smith’s principle of the invisible hand.

11.1. Introduction. The principle of the common good is a major principle in Catholic social economics and conventional economics, and depending on the philosophical origin, different interpretations of economic affairs are offered. The principle of the common good is what the principle of subsidiarity is to ensure.The principle of the common good in Catholic social economics has a different connotation from conventional economics. In Catholic social economics this principle is not explicitly defined and has to be understood in the light of changing social conditions. It emphasises the duality of human nature as individual and as social. When Adam Smith refers to the principle of the invisible hand in both ‘The Wealth of Nations’ and ‘The Theory of Moral Sentiments’, he uses the principle of the common good, in which he emphasises the individuality of the human person, though he does acknowledge human sociality. He lacked the philosophical tools to reconcile the two aspects of human nature.

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11.2. The common good in Catholic social economics and conventional economics. In Catholic social teaching, the principle of the common good could be briefly defined as “The human person is both sacred and social. We realize our dignity and rights in relationship with others, in community. “We are one body, when one suffers, we all suffer.” We are called to respect all of God’s gifts of creation, to be good stewards of the earth and of each other”. For different references of the principle of the common good in Catholic social teaching see appendix VII. The principle of the common good determines the way economic affairs are viewed. It is a fundamental principle for Adam Smith’s perception of the invisible hand. The principle of the common good in Catholic social teaching poses a challenge to Adam Smith’s understanding of the same principle. When the principle of the common good is defined, changing social conditions have to be taken into consideration. However, the common good of the community and the common good of the person both hav to be achieved.

11.3. The origin and nature of the common good in Catholic social teaching. The teaching of Adam Smith and Catholic social economics originate from two different lines of philosophical thought which do not exclude each other but have significantly different connotations. This implies a different understanding of the principle of the common good. The two understandings can be bridged by examining the premises underlying the principle and the view of human nature. But first we must trace the concept of the common good and its underlying assumptions through Catholic social teaching. The good life or the common good is a principle which has occupied the great philosophers from the time of Plato until today. In Catholic social teaching, the common good expresses what is good for the person based on the relationship between the person and the state. It is the good of all and of each person in society or the community, and it originates in those human needs that arise when people live and work together, as social beings. This two-fold emphasis on the common good of the person and of the society is found in the teaching of philosophers who emphasise either one or the other, but Catholic social teaching synthesises the two.

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11.4. The philosophical origin of the common good in Catholic social economics. According to Plato201 (427-347 B.C), whose ethic was eudaemonistic202, the true happiness of man and thus the achievement of the highest good was through development of his selffulfilment as a rational and moral person. His point of departure was the individual man. The good life or the common good was therefore identified with the happiness of man. This good life could only be achieved if man by virtue of his nature engaged in society. Man was thus born into a mutual relationship which extended beyond the family to society. Since family and society cannot be viewed independently of each other and are intermingled because of man, then man has to live the good life in both places. Consequently a society could not be established where the common good existed if all citizens were morally bad, and conversely, if society were morally bad then individual man would not be able to live a good life. The purpose of the state or society was solely to serve the needs of man who cannot exist as an isolated being independently from communion with other beings. The end of society was economic and the principle and division of labour were realised because of the natural differences in human endowments with regard to talents and skills, which were used to serve society in a variety of ways. The law was significant in this respect as it regulated the relationship between man and society, and Plato wrote about one absolute moral law. Aristotle203, a pupil of Plato, had a somewhat different point of focus. He started out with the state or society and identified the state with the happiness of the individual. Happiness was understood as the common good and thus a necessity for the good life of man. The state was a natural society and it was only in this that man could attain fulfilment of his own natural end which was perceived as happiness. Therefore, only within society could man live in a meaningful way. The state in itself had no rights but its right of existence was only to ensure the supreme good of man both with regard to his intellectual and moral life in order for him to live a good life, which also assumed that the truly happy man was sufficiently equipped with external goods204. The family was the smallest unit of society existing for the realization of life and daily human needs. Once two of these smaller units interact bonds are established and larger units evolve and reach a level of self-sufficiency, though in each of the smaller units the 201

Copleston, F. (1985): A History of Philosophy, Book one, Volume I, Image Book, pp. 127 - 262 An ethical do ctrine holding that the value o f moral action lies in its capacity to prod uce happiness 203 Copleston, F. (1985): A History of Philosophy, Book one, Volume I, Image Book, pp. 266-378 204 Aristotle: Athenian Constitution. Eudemian Ethics. Virtues and Vices, vol. XX, translated by Rackham, H. (1935), Loebs Classical Library, E udemian E thics 21 4 b 25 f. 202

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daily need of man is realized. Hence the common good was defined as the good life lived by an individual which enabled the good life of others in the society of which the individual was a member. If the good of the individual is compared with the good of society, Aristotle accentuated the common good of society, “even if the good is the same for the individual and the city, the good of the city clearly is the greater and more perfect thing to attain and to safeguard. The attainment of the good for one person alone, is to be sure, a source of satisfaction; yet to secure it for a nation and for cities is nobler and more divine�205. The reason the common good of the state is ranked higher than the individual is because the sum of the common good of each individual is not identical with the common good of the state. Hence the sum of welfare of the individuals in society is not identical with the welfare of society, because society to Aristotle embodied different classes of citizens with different restrictions imposed on each to achieve a good life. Hence what constituted a good life for one individual was not necessarily the good life for another individual. Utilitarianism represented by Bentham later disputed this view. Neither Plato nor Aristotle saw in the person the intrinsic worth or dignity which is the result of the belief that man is created in the image of God. However both saw a need for maximizing the good of society and if this were achieved, it would be identified as the good life or the common good. They had different views on how this could be achieved: for Plato it was through the means of commutative justice and for Aristotle through the choice of the best form of government. Within the Latin Christian church, Augustine’s (354-430) ideas based on Platonic philosophy dominated Western thought until Thomas Aquinas. For Augustine the perfect city is the city of God and not the city of man. The goal of the individual is the city of God and not the individual himself (city of man). Between these two cities Augustine saw a continuing struggle in this world. There was also a continuous struggle in man between good and evil which was also reflected in society. Hence in society he saw two groups of individuals between whom there was an ongoing struggle. In the one group man would be subordinate to the law of God and in the other group man would set self love highest and succumb to the pleasures of this world. Though there was this division in society between good and evil, Augustine focussed on a world community since all human beings will constitute a unity because of the common

205

Aristotle: Nicomachean Ethics, translated by Ross, W. D. (1908), Oxford: Claredon Press, Nicomachean Ethics 109 4b 6 -9

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nature of man. Hhe expressed this in his work ‘City of God’, “since God knew that they (the Hebrews and their descendants) would not obey, He (God) made use of temporal chastisement to test the handful of loyal believers He had made among them, and to render alert those followers He was to have later on among all those peoples for whose sake He was planning to make good His second promise, in the revelation of His New Testament, in the incarnation of Christ”206 . This division among men was foreseen from the beginning but what unites men as human beings is not whether they are Romans or Greek or Gentiles but the common human nature which they all share. The struggle reflected in history made Augustine associate the ruling powers of Assyria and Rome with the city of Babylon (the city of man) and the Latin Christian church was identified as the city of Jerusalem (the city of God). A person could be a Christian and as such belong to the church but if the person at the same time was governed by the principles of the city of Babylon, such as self love and no love for God, then the person would morally and spiritually belong to the city of Babylon. Therefore the Romans who submitted to the empire served the demons and not God. An official person from the state would come from the city of Babylon but could belong to the city of Jerusalem provided that his conduct was governed by his love for God and he strived for justice and charity. The person would thus be from the city of Jerusalem, who then served in the city of Babylon, and was called to be emperor, serve the magistrate or lead the republic. His heart would be directed towards God provided he was a Christian. The state would only be a truly just or moral state if it was a Christian state since Christianity is what makes individuals good citizens. Society is then understood as a multitude of rational creatures in common agreement about to the things it loves207. Augustine’s view of state and man differs from Cicero’s understanding, and it was Cicero’s ideas that influenced Adam Smith’s view of society. According to Augustine, true peace is only found in the city of God, “my heart is restless until it rests in you”, the peace found in the city of man “is more like a solace for unhappiness”208. The common good was therefore peace which served as a means for man to reach eternal life

206

St. Augustine: City of God, bo ok 17, ch. 2, translated and abridged by W alsh, G. et al. (1958), New Y ork: Image Bo oks 207 St. Augustine: City of God, bo ok 19, ch. 24, translated and abridged by W alsh, G. et al. (1958), New Y ork: Image Bo oks 208 St. Augustine: City of God, bo ok 19, ch. 27, translated and abridged by W alsh, G. et al. (1958), New Y ork: Image Bo oks

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with God. This peace would be judged by the divine law. Focussing entirely on the end goal of life for man, Augustine paid little attention to the social structures and conditions and the injustice that was found in the city of Babylon, this earthly city. Man would then as soon as he reached the ultimate goal experience happiness immediately. He wrote about three types of living in society - the life of inactivity, the life of activity in human affairs and the life of action tempered by contemplation - would point to which of the three that most easily would make it possible for the individual to reach the ultimate goal.209 The principle of the common good in Catholic social teaching is founded on the teaching of Thomas Aquinas, who was influenced by both Augustine and Aristotle. Thomas Aquinas had the same view on the state as Aristotle: it had a utilitarian function but was not evil as perceived by Augustine. According to Aquinas, man should fulfil his obligations as a good citizen, and the state is a natural institution willed by God. Principles are needed which regulate man’s relationship with the rest of society and with God, who is man’s ultimate end.

11.5. The nature of the common good in Catholics social economics. Founded on an Aristotelean and Thomistic understanding, the principle of the common good has a central place in Catholic social teaching and social economics. It is rooted in a communitarian view of society and stresses at the same time the dignity of the human person and the social nature of this dignity. According to O’Boyle the common good means the needs of human beings which derive from the fact that human beings exist not just as autonomous individuals but as social beings in community with one another. Thus the common good demands, for instance, that we take measures to protect ourselves from contagious diseases (acquired because we live in community with one another) even when that deprives us as autonomous individuals of some of our freedom. The common good also requires that wages be set not just in terms of the worker’s individual contribution (marginal productivity) but in terms of the need to foster teamwork and a sense of community in the workplace for the company to be successful as an economic enterprise210. Catholic social teaching views the principle of the common good both in relation to the individual and to society and suggests that a society organized organically is best suited to

209

St. Augustine: City of God, bo ok 19, ch. 2, translated and abridged by W alsh, G. et al. (1958), New Y ork: Image Bo oks 210 E-mail from Edward O’Boyle from 12 th April, 2002

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meet the demands of the principle. In an organic society there are self-governing smaller units of business, industry, finance, labour, the professions and farming communities, each one largely solving their own problems in co-operation with others for the fulfilment of the common good. However, the state has the supreme authority but is only to intervene when public welfare demands it and the common good is not served. The common good is to be fulfilled both in relation to the individual and to society as a whole and in Gaudium et Spes (1965) (‘Pastoral Constitution on the Church in the Modern World’) is defined as “the sum total of social conditions which allow people, either as groups or as individuals, to reach their fulfilment more fully and more easily”211. In contrast to utilitarianism where social welfare is the aggregated welfare of each individual, the common good has two levels, the level of the individual and the level of the group. Hence, taking as a point of departure the human needs that arise when men live and work together in society, the principle of the common good is followed when the good of the group and of the individual is achieved. Consequently the common good is not necessarily served when economic agents pursue their self interest, as in Adam Smith’s principle of the invisible hand. If the common good is to be achieved in society, all members of society must contribute to it in accordance with the principle of contributive justice.In return for justice which is ensured by society, all must contribute towards the common good of society, so that man may live in a peaceful and well-ordered society. Introducing the principle of contributive justice in economics as a necessity for the fulfilment of the common good leads to a value-laden understanding of economics and introduces a normative approach. It also contributes towards the promotion of the community in which man finds his freedom and dignity reflected. If cooperation is used as an acting principle in the economic process, it is necessary to embrace the social values of the community, hence the common good. Conventional economics finds it difficult or perhaps unimportant to introduce values into economic affairs and see it as separated from any form of ethics. In contrast to this, Catholic economists argue that self-interest has to be curtailed by moral decisions, which was also acknowledged by Adam Smith, according to the principle of the common good. The Catholic Bishops’ Conference of England and Wales made a statement on‘The Common Good’: “The Catholic Church, in its social teaching, explicitly rejects belief in the automatic beneficence of

211

Gaudium et Spes paragraph 26

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market forces. It insists that the end result of market forces must be scrutinised and if necessary corrected in the name of natural law, social justice, human rights, and the common good. Left to themselves, market forces are just as likely to lead to evil results as to good ones. It is often overlooked that Adam Smith himself did not envisage markets operating in a value-free society, but assumed that individual consumer choices would be governed by moral considerations, not least the demands of justice”212. They emphasised that “the Catholic doctrine of the common good is incompatible with unlimited free-market, or laissez-faire, capitalism, which insists that the distribution of wealth must occur entirely according to the dictates of market forces. This theory presupposes that the common good will take care of itself, being identified with the summation of vast numbers of individual consumer decisions in a fully competitive, and entirely free, market economy”213. However, this is not the case as the common good is not state of affairs in equilibrium, but rather a process. David Hollenbach, a leading Catholic theologian, states “The common good is a social reality in which all persons should share through their participation in it. It is not simply the arithmetic aggregate of individual goods suggested by the utilitarian formula “the greatest good for the greatest number”. In a utilitarian understanding increased aggregated social good is compatible with the exclusion of some persons from participation in it. Emphasis on the participation of all in the common good is particularly important”214.

11.6. Adam Smith’s principle of the invisible hand and Catholic social teaching. Economists’ interpretation of Adam Smith’s principle of the invisible hand is central in conventional economics, but personalism could be used to give a new understanding of the principle, where there is no contradiction between a self-seeking individual and the achievement of the common good. Some Catholic social economists claim that “the invisible hand” argument of Adam Smith is rejected by Catholic social teaching. However, some argue that Smith’s idea may not be incompatible with Catholic social economics. In his teaching, Adam Smith assumed a morally 212

The C omm on G ood and the catho lic Church’s Social teaching, A statement by the Catholic B ishops’ Conference of England & Wales, 1996, paragraph 77 213 The C omm on G ood and the catho lic Church’s Social teaching, A statement by the Catholic B ishops’ Conference of England & Wales, 1996, paragraph 76 214 Clark, C. (1999): Catholic Social Thought and the Economic Problem, Paper presented for: Catholic Social Thought in the academy: Engaging the disciplines, John F. Henning Institute 3 rd Annu al Co nference on Catho lic Social Thought, St. Mary’s College of California, March 12-14, draft paper.

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responsible economic agent, and therefore the individual seeking self-interest would by guided by an innate moral law. Adam Smith also wrote about “the invisible hand” which reconciles the common good and the self-interest of the individual. Catholic social teaching does not explain as explicitly as Adam Smith how the common good is achieved. Smith argues that it is through the pursuit of the self-interest of the individual. This leads to individualism and therefore according to some Catholic social economists cannot achieve the common good, and they therefore reject the principle of invisible hand.

11.7. The world-view of Adam Smith. Adam Smith based his teaching on Stoic philosophy, which is evident from his major works ‘The Theory of Moral Sentiments’ and ‘The Wealth of Nations’. Not all scholars agree about this Stoic influence215. As Macfie wrote: “Stoic philosophy is the primary influence on Smith’s ethical thought. It also fundamentally affects his economic theory. Stoicism never lost its hold over Smith’s mind”216. In Stoicism the maxim was to live in accordance with nature, and in both ‘The Theory of Moral Sentiments’ and ‘The Wealth of Nations’ the two words “nature” and “naturally” are used very frequently. Because Smith’s philosophical background is Stoicism his approach to the principle of the common good is not the same as that in Catholic social teaching. Smith’s ideas were influenced by Cicero, and philosophers such as Hobbes, Locke, Bentham and Hume, who was a contemporary of Smith. The increasing individualism and stress on the importance of private property of the time influenced his formulation of the principle of the invisible hand. Adam Smith’s understanding of the divine is different from the Christian understanding of God. He believed that the universe or Nature was an enormous sophisticated and subtle machine. This machine was supervised by an omnipotent, omniscient and beneficent indeed, a utilitarian, deity. But though Smith may see this omnipotent deity as a utilitarian, he did not subscribe to utilitarianism as represented by Bentham. The sole aim of the machine (and, probably of the deity himself) is the maximisation of happiness “all the inhabitants of the

215

Clarke, P. (1 996 , 1998): “Adam Smith and the Stoics: T he Influence o f Ma rcus A urelius”, W orking Papers in Economics No. 18, April 1996, University of the West of England, Faculty of Economics and Social Science, rev. January 1998, mimeo, School of Econo mics and International Studies, University of Lincolnshire and Humberside. 216 Raphael, D. And Macfie , A. (1976): “Introduction” in Adam Smith (1976-1980), Volume I, The Theory of Moral Sentiments, pp. 5-6

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universe, the meanest as well as the greatest, are under the immediate care and protection of that great, benevolent, and all-wise being, who directs all the movements of nature; and who is determined, by his own unalterable perfections, to maintain in it, at all times, the greatest possible quantity of happiness”217. “That divine Being’s...benevolence and wisdom have, from all eternity, contrived and conducted the immense machine of the universe, so as at all times to produce the greatest possible quantity of happiness”218. The world is perfect. If man could recognize in his wisdom the grand plan, that is if people knew “all the connexions and dependencies of things”, they would realise that everything is good, and all that happens is for the best and nothing bad can happen. However it is man’s incomplete view of the world that hinders him in realizing that he lives in a perfect world. Thus, the reason why things go wrong is due to the limited perception of man and his partial view of the world. Smith wrote “that as the world was governed by the all-ruling providence of a wise, powerful and good God, every single event ought to be regarded, as making a necessary part of the plan of the universe, and as tending to promote the general order and happiness of the whole: that the vices and follies of mankind, therefore, made as necessary a part of this plan as their wisdom or their virtue; and by that eternal art which educes good from ill, were made to tend equally to the prosperity and perfection of the great system of nature. No speculation of this kind, however, how deeply soever it might be rooted in the mind, could diminish our natural abhorrence for vice, whose immediate effects are so destructive, and whose remote ones are too distant to be traced by the imagination”219. Hence what is morally right or wrong is a question of what feels better. Man cannot increase the total happiness in the world by his actions, it is already there provided by the deity. This is an important aspect of the teaching of Smith on the invisible hand. Some scholars claim that Smith’s world-view is opposed to the Christian world-view. In ‘The Theory of Moral Sentiments’ he refers to a benevolent creator who entrusted man with feelings or sentiments which enables him to distinguish between right and wrong but in making moral judgments it was enough for man to follow his feelings without any reference to a God. This is Deism, not Christianity. Andy Denis220 in his thesis gives an overview of Smith’s world-view: 217

Smith, A dam : The Theory o f Mo ral Sen timents, O xford University Press, (19 76), VI. iii. 3.1 Smith, A dam : The Theory o f Mo ral Sen timents, O xford University Press, (19 76), VI. ii. 3.5 219 Smith, A dam : The Theory o f Mo ral Sen timents, O xford University Press, (19 76), I. ii. 3.4 220 Denis, And rew (2 001 ): Collective an d Ind ividual Rationality: Som e Ep isode s in the H istory of E conomic Thought. PhD thesis. City University, London, pp. 17 218

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The universe is a machine administered by a deity.

The sole purpose of the machine is to maximize happiness

All parts of that machine, including individual people, play their allotted roles.

We do what we do because it is what we are led to by the feelings implanted in our nature by the deity. All is part of the plan.

Even human folly and weakness are part of God’s plan.

Everyone has nearly the same level of happiness.

We should therefore be content with our lot.

The failure to realise this, mistaking wealth for happiness, leads people to be industrious: the economy depends on their being so deceived.

People mistake wealth and good fortune for wisdom and virtue.

This allows them to be reconciled to class distinctions and oppressive rulers.

We like morality and dislike immorality because we only see their proximate effects on human welfare.

This weakness is also a good thing as A) it allows us to be moral and hence on the same side as God, and b) morality, particularly justice, is a prerequiste for society.

Appearances are part of the divine plan.

11.8. Human nature according to Adam Smith. Some scholars221 will argue that Smith and Hume reacted to the views held by Hobbes that the altruistic behaviour of man was to cover up selfishness. They argue that Smith recognized that in human nature there were other feelings and emotions than pure selfishness. In ‘The Theory of Moral Sentiments’ he writes “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it”222. Conventional economists claim that economics has no room for value-judgements and refer to the teaching of Adam Smith in ‘The Wealth of Nations’. Hence it is argued that when man pursues his own self-interest without any intervention, the subsequent result will lead to

221

R.J.Kilcullen, (1996): Adam Smith: the Moral Snetiments, Macquarie University, Pol264 Modern Political Theory: www.humanities.mq.edu.au/Ockham/y64101.html 222 Smith, A dam : The Theory o f Mo ral Sen timents, O xford University Press, (19 76), part I section I in para II.1

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the optimal wealth of society. Man in ‘The Wealth of Nations’ is seen as a rational being stressing the individuality of human nature. It would be wrong to claim that Adam Smith did not see the sociality of human nature. ‘The Theory of Moral Sentiments’ underscores human sociality, seeing humans as strictly social beings and members of a group, and in that way value judgement is brought into economics by Adam Smith himself. In ‘The Theory of Moral Sentiments’ Adam Smith argues that all is good and the reason man has questions about morality is due solely to the fact of humans’ limited perception. Man acts with a sentimental reaction, propensities223, prompted in particular by the emotion of sympathy. In Smiths’s own words “our sense of the merit of good actions is founded upon a sympathy with the gratitude of the persons who receive the benefit of them...Gratitude and resentment...are...counterparts to one another; and if our senses of merit arises from a sympathy with the one, our sense of demerit (must)...proceed from a fellow-feeling with the other”224. The immediate standard of right and wrong involves the propensities found in human nature. Hence Adam Smith presumes that the economic agents have an innate morality and argues in ‘The Theory of Moral Sentiments’ that morality and justice are of major importance. In conventional economics there is a tendency to disregard ‘The Theory of Moral Sentiments’ but if it is assumed that it contributes to the formulation of conventional economics and that fundamental doctrines in ‘The Wealth of Nations’ are introduced in ‘The Theory of Moral Sentiments’, then a way must be found to reconcile the two conflicting of human nature. In ’The Wealth of Nations’ he stressed human individualism and in ‘The Theory of Moral Sentiments’ he stressed human sociality, and hence implicitly brought morality into economics. However ‘The Theory of Moral Sentiments’ is rarely mentioned in conventional economics. Some scholars argue “that ‘The Theory of Moral Sentiments’ is important today mainly as a stage in the formation of Smith’s philosophical and economic ideas”225. Others disagree, hence Raphael and Macfie226 write: “The so-called “Adam Smith problem” was a pseudo-problem based on ignorance and misunderstanding. Anybody who reads ‘The Theory of Moral Sentiments’, first in one of the earlier editions and then in the 6th edition, will not have the slightest inclination

223

Propensities: i.e. tendencies, dispositions, capacities Smith, A dam : The Theory o f Mo ral Sen timents, O xford University Press, (19 76), II. I. 5.7 225 Anikin, A. (1975): A S cience in its Youth (Pre-M arxian Po litical Econom y), Moscow: Pro gress Pub lishers, pp. 187 226 Raphael, D. And Macfie , A. (1976): “Introduction” in Adam Smith (1976-1980), Volume I, The Theory of Moral Sentiments, pp. 20 224

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to be puzzled that the same man wrote this book and ‘The Wealth of Nations’, or to suppose that he underwent any radical change of view about human conduct. Smith’s account of ethics and of human behaviour is basically the same in edition 6 of 1790 as in edition 1 of 1759. It is also perfectly obvious that ‘The Theory of Moral Sentiments’ is not isolated from ‘The Wealth of Nations’. Viner227 also pointed out that Smith had already developed his major economic principles before the publication of either of the two treatises, as Smith referred to these in a lecture in 1749. There seems to be evidences for that the two treatises should be understood as products of a unified system expressing the ideas of Adam Smith. ‘The Theory of Moral Sentiments’ in which human sociality is underscored and to which social economics may be traced back was the first work he published in 1759 but it was also his last. He did not discard it, but made extensive revisions and additions as can be seen in the 6th edition of ‘The Theory of Moral Sentiments’ (1790). In between the revision and additions to ‘The Theory of Moral Sentiments’ he published ‘The Wealth of Nations’ in 1776 and the 5th edition in 1789 (the 6th edition in 1791 was posthumous). This means that in the teaching of Adam Smith, both human sociality and individuality are found, as well as moral and rational economic behaviour. Adam Smith himself frequently used the term human nature in both of his treatises which clearly indicates the centrality of the nature of man in economic behaviour. Conventional economists tend to disregard this while it is emphasised by Catholic social economists. Adam Smith was a philosopher, who, influenced by the current thinking of the Enlightenment, rejected traditional religious beliefs and adopted elements from Stoic philosophy. On the basis of the behaviour of man, he later constructed a theory of how markets worked. This suggests that human nature was a central concept for Adam Smith. As a child of the script age of communication, he could not reconcile the human sociality of ‘The Theory of Moral Sentiments’ with the individualism he embraced in ‘The Wealth of Nations’. This lack of integration, however, can be remedied by the philosophy of personalism, which has emerged in the age of electronic communication. If the two treatises ‘The Theory of Moral Sentiments and ‘The Wealth of Nations’ are read as a unified whole, there will be a new understanding of the principle of the invisible hand, which may then not contrast with personalist economics.

227

Viner, J. (1958): The Long View and the Short, Glenco Ill: The Free Press, pp. 215

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11.9. The philosophical origin of Adam Smith’s principle of the common good. To understand the common good in the principle of the invisible hand it is necessary to be aware of the philosophical foundation. Smith was a drawn to Stoicism which began as a special philosophical school parallel to Plato. Later it became primarily concerned with the freedom and independence of the self. Cicero228 (106-43 B.C.)was an eclectic229 statesman and was influenced by Stoicism. In his ethical teaching during the last period of his life, he held that virtue was sufficient for happiness but also that both external goods and the health of body are fundamental necessities230. Cicero’s point of reference was the Roman Republic and the concepts of cosmopolitanism and individualism were interrelated. His notion of the concept of commonwealth is contrary to Plato’s and Aristotle’s Greek understanding of the free and independent city-state relationship which they considered essential for the good life. To Cicero the common good was “the people’s affair” and here “people” are more than some sort of bond between a group of people. The term means “a considerable number of people who are united by a common agreement about law and rights and by the desire to participate in mutual advantages”231. Society thus consisted of this group of people who in common agree on the laws and rights which all can equally share, and who have the common aspiration to promote the state. In this setting the individual person had no rights separated from the rights of the people, hence the state. Consequently the purpose of the state is to preserve the state and not to maximize the conditions for the self-perfection and the good of the individual person. Inequalities among individuals were a natural result of the fact that different groups in society had different privileges. Cicero’s views on state and society influenced later philosophers and statesmen. With the Enlightenment, the religious aspect of philosophy gave way to secular views in which rationality and empiristic thinking became dominant. Thomas Hobbes (1588-1679) was an empirist and based his philosophy on the senses. He saw an innate brutality and selfishness in human nature. The purpose of the state is specifically to ensure peace among people through a social pact and hence reduce the natural brutality. The pact that is made between two subordinates at the same time requires the establishment of a power which can ensure that the 228

Copleston, F. (1985): A History of Philosophy, Book one, Volume I, Image Book, pp. 417-420 Eclectic: Selecting what seems best from various styles, doctrines, ideas and methods, etc. 230 Cicero: De Finibus 5, 26, 32, 77 ff, 95; Tusculana 5, 13, 39 ff., De Officiis 3, 3, 11 231 Cicero, M . T.: O n the Comm onwealth and O n the La ws, edited by Z etzel, J. (1 909 ), Cam bridge U niversity Press, On the Commonwealth 1.25 229

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pact is carried through. A consequence of this is complete and unlimited authority to the leader. Since man is selfish by nature and always will be, a centralised power is essential. The civil laws are the public conscience and hence the norm for good and evil. The common power is the same as the common good which he viewed as the sum of private goods. John Locke (1632 - 1704) an empirist like Hobbes, but a religious man, distanced himself from the authoritarian perspective. He believed in a natural law of morality which bound the conscience of the individual independently of the state and its civil laws. The person had a natural right to sustain himself, defend his life and to freedom, and hence a right to private property. Critics232 have pointed out that he did not give a thorough description of the principle of the common good. It appears that he identified the preserving of the private goods with the increase in common good. However his view of governmental power was more in line with the scholastic point of view as he saw it more as an organizational structure of the state with the purpose of fulfilling and promoting the common good. Jeremy Bentham (1748 - 1832), the founding father of Utilitarianism, went even further with regard to relating the common good to private goods. He wrote “the interest of the community then is - what? The sum of the interests of the several members who compose it....It is vain to talk of the interest of the individual. A thing is said to promote the interest of an individual, when it tends to add to the sum total of his pleasures; or what comes to the same thing, to diminish the sum total of his pains”233. Wealth for him was the means of happiness. This quick survey of the philosophical ideas of state and the common good shows that there was a significant change in the understanding of the principle of the common good closely related to the idea of the state. What was good for the state was to begin with also good for the individual, who was subordinate to the state. Later some philosophers moderated this view and a greater focus was put on the individual, hence what is good for the individual will also contribute to the common good. Christian philosophers introduced a religious dimension separating the individual from the state, which is no longer the goal of life but is rather seen as the means to fulfill the final goal for man, life with God in eternal happiness. Adam Smith was influenced by the philosophers of the Enlightenment, although he rejected Hobbes’ thesis that humans are totally selfish and disagreed with Bentham’s definition of

232

Copleston, F. (1985): A History of Philosophy, Book one, Volume I, Image Book, pp. 138 Bentham, J.: Introd uction to the P rinciples of M orals an d Legislation, N ew Y ork: P rometheus Bo oks, (1 988 ), sec. 1.4-5 233

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wealth. Smith witnessed the structural changes in society caused by increased commerce, and how the common good was identified with private goods and hence increased individualism.

11.10. Adam Smith’s principle of the invisible hand. In conventional economics the principle of the invisible hand is used to reconcile self-interest and the common good as perceived by Smith and later mainstream economists. So how did Smith himself understand the principle of the invisible hand? Smith used the concept three times in his writings: 1. The invisible hand in ‘The History of Astronomy’, “the invisible hand of Jupiter” - “It is the irregular events of nature only that are ascribed to the agency and power of their gods. Fire burns, and water refreshes...by the necessity of their own nature; nor was the invisible hand of Jupiter ever apprehended to be employed in those matters. But ...irregular events were ascribed to his favour or his anger...Those...intelligent beings, whom they imagined, but knew not, were naturally supposed...not to employ themselves in supporting the ordinary course of things, which went on of its own accord, but to stop, to thwart, and to disturb it”234. The invisible hand is seen in the irregular events of nature. 2. The invisible hand in ‘The Theory of Moral Sentiments’ - “The rich...are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species. When providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life, they are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for...”235. Poor should be contained with their lot as they are just as well off as the rich in the things that really matter

234

Smith, Adam: Essays on Philosophical subjects, The principles which Lead and Direct Philosophical Enquiries illustrated by the History Astronomy, III.2, Liberty Fund, Inc. (1982) 235 Smith, Adam (1976): The Theory of Moral Sentiments, Oxford University Press, IV. 1.10

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3. The invisible hand in ‘The Wealth of Naions’ - “By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it...”236. A consequence of the invisible hand ensured that the unintended outcome of self-seeking behaviour will be socially desirable according to Smith. Without the principle of the invisible hand then in ‘The Theory of Moral Sentiments’ the individual would be subject to large differences in welfare and in ‘The Wealth of Nations’ the total wealth available to society would be smaller than it actually is. There is some disagreement among scholars about Smith’s principle of the invisible hand. One group of scholars hold that it is a term he used with regard toa particular interpretation of Stoic philosophy: “the invisible hand is the name that Smith gives to the covert intervention of the Deity into the affairs of humankind”237. Man is “deceived by nature” to act in socially desirable ways and hence the invisible hand is the unintended consequences of our desire for justice or riches which makes society possible. In Smith’s mind the invisible hand was anything which had to do with divine guidance. “Adam Smith...was something of a cosmic optimist who trusted unintended consequences. The “benevolence and wisdom” of the “divine Being” have “contrived and conducted the immense machine of the universe” in such a way that man may follow his private inclination and obey his most powerful passions, and yet benefit the social order. By taking care of his own happiness, man is led to promote the happiness of others - this is the notorious “invisible hand which leads men to “advance the interest of society” without intending it, without even knowing it. All is for the best in the only possible world that God could have”238. Heilbroner says “ the theme of the invisible hand runs through all of the ‘Theory of Moral Sentiments’. The idea behind it is ... that man is by his human nature incapable of foreseeing the consequences of his actions beyond a very 236

Smith, Adam (1976): The Wealth of Nations, edited by Cannan Edwin, Chicago Press, pp. 477 Heilbroner, R. (ed) (1986): The Essential Adam Smith, London: Norton, pp. 57 238 Gay, P. (1969): T he Enlightenment: An Interpretation, Volume II, The Sc ience Freedom, Londo n: Weidenfeld and Nicolson, pp 361 237

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narrow range. How then does he know what course to follow, when he cannot use his faculties to anticipate the outcome of his own actions, much less those of his fellow actors? The question is answered in much the same way as the provision of a sene of duty and conscience. The Deity, when he created the world, gave to humankind a surer guide than reason. This was the call of its passion....the Invisible Hand refers to the means by which the Author of nature” has assured that humankind will achieve His purposes despite the frailty of its reasoning powers. The means are a number of powerful instincts and prompting that the Deity has instilled within us, which we obey because we have to quite unconscious of their long-term social purpose. In this way, “without intending it, without knowing it” the pursuit of our immediate desire brings us to follow courses of action that would otherwise require a Godlike intelligence to pursue”. Hence “the invisible hand, the divinity which shapes our selfish ends to public purposes”239. Modern conventional economists have also challenged the perception of the invisible hand as expressed by Smith and have emphasised the more secular aspect of it and called it the hand of competition, and completely ignore the religious aspect of Smith’s writings. From this perspective the market is competitive with prices determined by supply and demand and the individual has preferences guided by his/her self-interest. These economists assume that humans are hedonistic, and thus maximize pleasure and minimize pain. The free market with no intervention will then turn self–interest into public welfare because of the principle of the invisible hand. As Smith expresses it in ‘The Wealth of Nations’ “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their selflove, and never talk to them of our own necessities but of their advantages”240. Rosenberg241 interprets Smith’s principle of the invisible hand divorced from Smoth’s religious context. He states: “Smith’s invisible hand had nothing to do with divine guidance. The phrase makes only one unfortunate appearance in the Wealth of Nations - unfortunate because it has been so totally misrepresented. There is no question, either in the specific context where he used the

239

Gray, A. (1931): The Development of Economic Doctrine. An Introductory Survey, London: Longmans, pp. 147 240 Smith, Adam (1976): The Wealth of Nations, edited by Cannan Edwin, Chicago Press, pp. 26-27 241 Rosenberg, N. (1990): “Adam Smith as Social Critic”, The Royal Bank of Scotland review No. 166, “Special Adam Smith Edition, June, pp. 21

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phrase or in the larger context of the argument of the entire book, but that the invisible hand is the hand of competition, which places immense pressure on individuals to behave in ways that simultaneously promote the public interest as well as the private interest”. This view of the invisible hand is commonly found among economists today. However the invisible hand does not only ensure competition but more importantly, if it were not there, neither morality nor social order would be possible. Smith himself in his ‘Theory of Moral Sentiments’ stressed that religion and religious values are an important factor in the socialization of man, as man needs to be social and guided by moral decisions if the market is to run efficiently. Therefore economic man in ‘The Wealth of Nations’ is assumed to be already civilized and socialized.

11.11. Similarities and differences between the common good as used by Smith and by Catholic social economics. It is evident that when Smith wrote “the invisible hand”, he meant the hand of God which intervened indirectly in human affairs for the benefit of the human happiness willed by God. However the God in Smith’s universe is different from the Christian perspective of God and so is the philosophical origin of the concept of the common good. The obvious difference in philosophical premises will lead to major differences in the interpretation and perception of the principle. In modern conventional economics is has been assumed that economics is value-free, but Smith himself realized the need for an innate moral law to constrain people’s behaviour. It is obvious in today’s world that intervention in the market is necessary to ensure the individual’s self-fulfilment and the common good. In conventional economics it is assumed that the free market will find equilibrium without intervention (the invisible hand) so that the individual person is able to pursue his own self-interest and at the same time serve the common good. This is not always the case in the real world. The economy is characterized by interdependence and imperfect information among the market participants. Therefore seeking self-interest will often lead to socially irrational results. In conventional economics it is also assumed that man is rational, which he is not. The imperfect information among participants in the market leads to behaviour that is self-defeating. One way of overcoming the difficulties is morally constrained behaviour in order to overcome the distrust between the groups. Cooperation is a method which according to Catholic social teaching would require 128


the embracing of the social values of the community, the common good, and the practice of the principle of contributive justice. The individualism favoured by Smith needs to be constrained by the principle of solidarity. All Catholic social economists do not reject the free-market and the principle of the invisible hand. For instance Michael Novak maintains that “the free market institutions of democratic capitalism create the conditions in which an invisible hand will coordinate the pursuit of individual self-interest in a way that maximizes the social good actually achieved”242. Novak says that it is impossible to know what is the common good for society as such and that no deliberate efforts from man will bring it about, apart from the fact that it will come about if each individual contributes to the best of his ability on economic affairs (contributive justice).

11.12. Summary. To summarise, this chapter proposes that •

Catholic social economics today holds the view that conventional economics and Catholic social economics differ in their understanding of the common good, however, it is possible to make a bridge between the two. This is done using personalism rather than individualism and utilitarianism by replacing the “individual” with “person” in the principle of the invisible hand.

the claimed difference in the understanding of the common good could be explained as a misinterpretation of Adam Smith’s principle of the invisible hand. Adam Smith’s theory may have been misunderstood because his two works, ‘The Wealth of Nations’ and ‘The Theory of Moral Sentiments’, have been read separately and not as two separate contributions to one theory of economics. Smith’s background gives reason to believe that he himself saw the two works as equally important.

the claimed difference in the understanding of the common good could also be explained by contrasting philosophical premises. The contrasting philosophical premises can be linked if the self-seeking individual is morally constrained.

242

Hollenbach, D. (1989): The Common Good Revisited, Theological Studies 50, pp. 71

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Smith himself struggled to reconcile the two-dimensional nature of man which is referred to in his work. The individuality of man is emphasised in ‘The Wealth of Nations’ it is the sociality of man that is emphasised in ‘The Theory of Moral Sentiments’.

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12. CONCLUSION Through solidarist and personalist economics, Catholic social teaching offers a new way of addressing the ethical issues which today confront conventional economic thinking and challenge its value-foundation. Ethical issues can be addressed by economists in a more competent way by adopting the principles fundamental to Catholic social teaching. If conventional economists were aware of the potential of Catholic social economics it would be obvious that it is not a question of exclusion and contrast, but of complementing and supplementing, since Catholic social economics emphasizes the centrality of man. Seeing man as “a person” or “an individual” has consequences for conventional economic theory. I hope I have been able to convey the point or at least to indicate that the term “person” and personalism differs from the term “individual” and individualism, and that this has consequences for economics. Catholic social teaching is significantly different from other social teaching because of the authority claimed by the Catholic church. Catholic social teaching is binding for Catholic politicians, economists and policy-makers. It is a factor that contributes to the daily political agenda in South European countries. Catholic social teaching as it is known today began with the encyclical Rerum Novarum and is not to be considered as a “third way”. It claims to be non-authoritative and offers guidance about how to deal with economic issues and does not favour a specific economic system. The three major principles solidarity, subsidiarity and the common good are dynamic and have to be interpreted in the proper historical context. Not only does Catholic social teaching evaluate pressing social and economic issues but it also indicates a solution. In the first encyclicals, issues such as wage and private property were in focus, as well as the failure of liberalism and the threats of Marxism. Catholic social teaching developed continuously, and with the rise of new challenges to society in the 20th century, issues as globalization, neo-colonialism and the north-south divide were focussed on by the church. Catholic social teaching is founded on a set of philosophical premises rooted in scholasticism and personalism. These premises consequently determine and define the major principles. The renewed scholasticism based on Thomas Aquinas’ teaching marked the first period in the social teaching. Justice was emphasised and economic activity was viewed as a teleological process. The introduction of personalism marked a significant change in the understanding of the major principles. The person, as an individual and social being, was

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emphasized. In the light of the dehumanizing tendencies of modern culture a renewed understanding of the integrity of the human person arose. Catholic social teaching with its philosophical premises was adopted by economists and challenged the conventional way of thinking about of human behaviour in economic affairs and the underlying value-principles. To define economics as a moral science, “human nature” has to be the subject. This is in contrast to the conventional way where economics is a study of causes and effects. Catholic social teaching proposes a holistic view of man as individual and social, as body and soul, and as free and morally responsible. According to conventional thinking, man is either totally individualistic, profit-seeking and free (Homo Economicus) or totally socially determined and caught up in structural constraints (Homo Sovieticus). This difference is both the centre and the root of disputes between Catholic social economics and conventional economics. Because of the secularized tendencies in Western European culture, it naturally becomes more difficult to reason that every single human being is of infinite worth and accordingly that individualism is an inadequate rendering of human nature. Personalism, by focussing on the human person in its two-dimensions, “individual and social”, offers conventional economics a view of the economic agent, not as a self-seeking and profit-maximizing agent, but as an agent with a social conscience and moral behaviour. Catholic social teaching has not developed into an ideology, though elements are found from different economic ideologies and systems. Catholic social teaching stresses that moral and ethical rules have to prevail in economic affairs. Therefore conventional economists need to address ethical issues in economics and adopt a more normative approach. The ethics and the philosophical base of the economists influence how they view economics and the behaviour of the economic agents. Ethical evaluations have to supplement economic evaluations because economic institutions and policies affect people differently. Catholic social economics responds to the way conventional economics disregards human sociality and rejects ethics as a necessary component. Catholic social economics makes a real and substantial challenge to conventional economics since it is concerned with human values, the nature of the person, the distribution of wealth, income and power, and the well-being of those who are not able to participate in economic affairs. It thus ensures a more just society and respect for human freedom and dignity. Catholic social economics obliges conventional economists to rethink their economic theories when moral and ethical issues are involved. In

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this dissertation the discussion of how “spiritual welfare” is measured is not discussed. It is difficult to measure “spiritual welfare” in a mathematical and operational way, since it depends on the prevailing moral understanding of good and bad. Personalist economics rejects the one-dimensional nature promoted by liberalism and Marxism. To deal with the evils of the excessive individualism and collectivism in today’s society, two reforms are needed. First, the social order needs to be more permeated by the principle of subsidiarity and solidarity, and second, man is to be encouraged to act according to the demands of justice and charity. Adam Smith reasoned in economics systematically and analytically, and thought in philosophical terms. His two major works ought to be read as a unified system, each dealing with one of the two aspects of human nature. When ‘The World of Nations’ is read in this context, the apparent contrast between the invisible hand and the common good in Catholic social economics can be bridged and a foundational link can be established if the philosophy of personalism is used in viewing human nature and hence the common good. The principle of the invisible hand and the principle of the common good in Catholic teaching appear to contradict each other, as the first emphasizes the self-seeking and profit-maximising agent in order to reach the optimal common good, and the second sees this as a hindrance. The common good, as understood in Catholic social teaching and economics, is achieved by morally constraining the individual. It is doubtful whether personalist economics will develop into an operational economic theory. However, the holistic view of human nature and hence of economics found in Catholic social economics will continue to be a source of creative criticism of the reductionist tendencies of conventional economics. Only time can show the future of Catholic social economics, but there is room for some conjecture. The first scenario could be called the “O'Boyle-scenario”. This would mean that Catholic social economics develops into an economic discipline proper, and takes its place among the different branches of heterodox economics (humanist economics, feminist economics etc.). If this scenario is to come true, Catholic social economics needs to develop a series of mathematical models. Furthermore Catholic social economics has to be able to point at operative economic policies. The second, more likely scenario might be called the “Divine-scenario”. This would mean that Catholic social economics continues as an intellectual discipline combining a social science orientation

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with a strong ethical, philosophical and theological basis and which rests content with playing the role of the critical observer and counsellor. The potential of Catholic social economics lies in its integrative, non-reductive, two-dimensional perspective on human life and nature and in its ability to relate to and discuss today's pressing ethical issues.This critical perspective on economics is necessary if a more just and humane society is to be achieved. Catholic social economics has a valuable, critical potential, which allows us to pose new questions and look for new answers even when dealing with classical concepts like the invisible hand or modern challenges like the increased dehumanization in today's society.

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Charles, Rodgers: The Social teaching of Vatican II, Its Origin and Development, Catholic Social Ethics: a historical and comparative study, Ignatius Press, 1982 Charles, Rodgers: Christian Social Witness and Teaching, Volume I-II , Gracewing, 1998 Charles, Rodgers: An Introduction to Catholic Social Teaching, Ignatius Press, 1999 Cicero, M. T.: On the Commonwealth and On the Laws, edited by Zetzel, J., Cambridge University Press, 1909 Cipolla, Carlo ed.: The Fontana Economic History of Europe, The Industrial Revolution, Collins, 1973 Coleman, John ed.: One Hundred Years of Catholic Social Thought, Celebration and Challenge, Orbis Books, 1991 Copleston, Frederick: Aquinas, an Introduction to the Life and Work of the Great Medieval Thinker, Penguin Books, 1955 Copleston, Frederick: A History of Philosophy, Book one, Image Book, 1985 Copleston, Frederick: A History of Philosophy, Book two, Image Book, 1985 Cronin, John: Catholic Social Principles, The Social Teaching of The Catholic Church Applied to American Economic Life, The Bruce Publishing Company, 1950 Curran, Charles ed.: Moral Theology No. 5, Official Catholic Social Teaching, Paulist Press, 1986 D’Entreves, A. ed. : Aquinas, Selected Political Writings, Barnes and Noble Books, 1981 Dempsey, Bernard: The Functional Economy, The bases of Economic Organization, Prentice-Hall, Inc., 1958 Door, Donal: Option for the Poor - A Hundred Years of Vatican Social Teaching, Orbis Books, 1983 Duncan, Bruce: The Church’s Social teaching from Rerum Novarum to 1931, Collins Dove, 1991 Eberdt, Mary Lois: Industrialism and The Popes, P.J. Kenedy and Sons, 1952 Englis, Karel: An Essay on Economic Systems, East European Monographs, Boulder, 1986 Esping-Andersen, G: The Three Worlds of Welfare Capitalism, Polity 1990 Fanfani, Amintore: Catechism of Catholic Social Teaching, Westminster, 1960 136


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Raphael, D. And Macfie , A.: “Introduction” in Adam Smith (1976-1980), Volume I, The Theory of Moral Sentiments, 1976 Ratzinger, Joseph: A Turning Point for Europe, Ignatius Press, 1994 Ricardo, David: The principles of Political Economy and Taxation, Everyman’s Library, 1911 Schuck, Michael: The Context and Coherence of Roman Catholic Encyclical Social Teaching, Washington DC, 1991 Schuck, Michael: That they be On: the Social Teaching of the Papal Encyclicals, 1740-1989, Georgetown University Press, 1991 Schumpter, J.: Capitalism, Socialism and Democracy, New York: Harper & Brothers, 1950 Schumpeter, J.: History of Economic Analysis, London: George Allen and Unwin Ltd, 1954 Schuyler, J.: “Heinrich Pesch, S.J.: 1854-1926", Social Theorists, edited by Mihanovich, C.Milwaukee, The Bruce Publishing Company, 1953 Schwer, Wilhelm: Catholic Social Theory, B. Herder Books Co., 1940 Segundo, Juan Luis : Faith and Ideologies, Maryknoll, 1982 Smith, Adam: The Wealth of Nations, edited by Cannan Edwin, Chicago: The University of Chicago Press, 1976 Smith, Adam: Essays on Philosophical subjects, The principles which Lead and Direct Philosophical Enquiries illustrated by the History Astronomy, Liberty Fund, Inc., 1982 St. Augustine: City of God, translated and abridged by Walsh, G. et al., New York: Image Books, 1958 Tischner, Jozef: The Spirit of Solidarity, Harper and Row Publishers, 1982 Troeltsch, Ernst: The Social Teaching of the Christian Churches, Volume I and II, London, 1956 Vidler, A.R.: A Century of Social Catholicism 1820-1920, SPCK, 1964 Viner, J.: The Long View and the Short, Glenco Ill: The Free Press, 1958 Vrana, John: The Concept of the Common Good in the Social Teaching of the Catholic Church 1891 - 1971, Leuven 1975

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Walsh, Micahel ed.: Proclaiming Justice and Peace, Papal Documents from Rerum Novarum through Centesimus Annus, Twenty-Third Publications, 1991 Williams, Paul ed.: Catholic Social Thought and the Teaching of John Paul II, Proceedings of the fifth convention (1982) of the fellowship of Catholic scholars, Northeast Books Edition, 1983 Worland, Stephen: Scholasticism and Welfare Economics, University of Nortre Dame Press, 1967 Wojtyla, K. (translated by T. Sandok): Person and Community, Selected Essays, Peter Lang 1993 Wynne, John ed.: The Great Encyclical Letters of Pope Leo XIII, Benzinger Brother, 1903 Yzermans, Vincent ed.: The major Addresses of Pope Pius XII, 2 vol., St. Paul Minnesota, The North Central Publishing, 1961 Articles and papers Altman, Morris: The Economics of Exogenious Increases in Wage Rates in a Behavioral/XEfficiency Model of the Firm, Review of Social Economy, 1992 Arestis, Philip: Post-Keynesiansim: A New Approach to Economics, Review of Social Economy, 1990 Bartell, Ernest: Economic Development: Normative Criteria, Review of Social Economy, 1966 Bassler, James D.: Individualism, Competitive Economics and the Common Law, Review of Social Economy, 1971 Bellah, Robert N.: Protestant, Catholics and the Common Good, Talk at Regis University, April 6, 1999 Berger-Vossendorf, A.: Problems of Catholic Economic Science, Review of Social Economy, 1949 Bergsten, Gordon S.: Toward a New Normative (Economic) Theory of Politics, Review of Social Economy, 1981 Brennan, Michael: Welfare Economics and Equity: Welfare and Policy, Review of Social Economy, 1964 Briefs, Henry W.: Goetz Briefs on Capitalism and Democracy: An Introduction, Review of Social Economy, 1983 Briefs, Henry W.: Solidarity Within the Firm: Principles, Concepts and Reflections, 140


Review of Social Economy, 1984 Brown-Collier, Elba K.: The NeoClassical and Post-Keynesian Research Programs: The Methodological Issues, Review of Social Economy, 1981 Brown, Doug: Doing Social Economics in a Postmodern World, Review of Social Economy, 1992 Bruyn, Severyn T.: Social Economy: A Note on Its Theoretical Foundations, Review of Social Economy, 1981 Clark, Charles: Christian Social Thought and Management, Paper presented at the Second Catholic Social Thought and Management Conference, Antwerpen, Belgium, July 27-29, 1997 Clark, Charles: Catholic Social Thought and the Economic Problem, paper presented at the Third Annual Conference on Catholic Social Thought, St. Mary’s College of California, March 12-14, 1999 Clarke, P. (1996, 1998): “Adam Smith and the Stoics: The Influence of Marcus Aurelius”, Working Papers in Economics No. 18, April 1996, University of the West of England, Faculty of Economics and Social Science, rev. January 1998, mimeo, School of Economics and International Studies, University of Lincolnshire and Humberside. Cochrane, Kendall P.: Economics as a Moral Science, Review of Social Economics, 1974 Dawson, G.: R.M. O’Donnell’s Keynes: Philosophy, Economics and Politics, Review Essay, Review of Social Economy, 1991 Day, Virgil B.: Corporate Response to Reconstructing the Social Order, Review of Social Economy, 1972 Denis, Andrew: Collective and Individual Rationality: Some Episodes in the History of Economic Thought. PhD thesis. City University, London., 2001 Doody, Francis S.: Keynesian Policies and Christian Social Teaching, Review of Social Economy, vol. VII, No. 2, September, 1949 Ederer, Rupert J.: Capitalism, Socialism, and the Social Market Economy, Review of Social Economy,1969 Ederer, Rupert: Heinrich Pesch, Solidarity, and Social Encyclical, Review of Social Economy,1991 Finn, Daniel Rush: When are Economic Explanations Persuasive? A View from Social Economics, Review of Social Economy, 1987

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Worland, Stephen: Welfare Economics and Equity: Welfare Economics: Some observations, Review of Social Economy, 1964 Younkins, Edward W.: The Common Good Demystified, The Freeman, Vol. 50, No. 5, May 2000 Zebot,Cyril: The Roots of welfare Economics: A Review Article, Review of Social Economy, 1968 Magazines Catholic International, Vol. 11, Issue 2, February, 2000 Concilium, ed. Metz, J. and Jossau, J.: No 105, 1977 Concilium, ed. Coleman, J. and Baum, G: No. 5, 1991 Concilium, ed. Mieth D. and Vidal, M: Vol. 2, 1997 Crises, vol. 9, No. July/August 1991 Crises, December 1992, Notre Dame Press O’Boyle, Edward J. ed.: John Paul II’s vision of the social economy, International Journal of Social Economics, volume 25, No. 11/12, 1998 Priest & People, Vol. 5, No. 5, May, 1991 Pontifical Council for Justice and Peace: Social and Ethical Aspects of Economics, A Colloquim in the Catican, Vatican City, 1992 Promotio Iustitiae, From Rerum Novarum to Decree 4, No. 66, February 1997 Review of Social Economy, Vol. XLIX, No. 4, Winter, 1991 The Common Good and the catholic Church’s Social teaching, A statement by the Catholic Bishops’ Conference of England & Wales, 1996 Encyclopedias A Dictionary of Philosophy, ed. Rosental, M. and Yudin, P., Moscow: Progress Publishers, 1967 Encyclopaedia of Religion and Ethics, (eds.) Hastings, J., Edingburg: T & T Clark, Vol. VIII, 1914 New Catholic Encyclopaedia, Volume 1 - 19, MacGraw-Hill Book Company, 1967

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The New Dictionary of Catholic Social Thought: ed. Dwyer, Judith: Collegeville, Minnesota, Liturgical Press, 1994 The New Dictionary of Theology: Komonchak, Collins, M. and Lane, D. Dublin: Gill and Macmillan, 1992

Encyclicals: There are several sources and the translations from the original texts varies and so does the divisions of the texts. For quick reference but be aware of the translations www.osjspm.org can be used. Pope Leo XIII: Pope Pius XI: Pope John XXIII: Pope John XXIII: Pope Paul VI: Pope John Paul II: Pope John Paul II: Pope John Paul II:

Rerum Novarum (1891), London: Catholic Truth Society, 1951 Quadragesimo Anno (1931), Oxford, Catholic Social Guild, 1934 Mater et Magistra (1961), www.etwn.com/library/ENCYC/J23MATER.TXT Pacem in Terris (1963), www.ewtn.com/library/ENCYC/J23PACEM.TXT Populorum Progression (1967), United States Catholic Conference, 1967 Laborem Exercens (1981), www.etwn.com/library/ENCY/JP2LABOR.TXT Sollicitudo Rei Socialis (1987), Vatican City: Libreria Editrice Vaticana Centesimus Annus (1991), Vatican City: Libreria Editice Vaticana

Encyclicals of a Century, Derby, New York: Daughters of St. Paul, 1942

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APPENDIX I Extracts from Summa Theologiae and Contra Gentiles: Ia, q. 6, art. 4 ad 1 (Vol. 2, p. 93) One may call things good and existent by reference to the first thing, which is existent and good by nature. In this sense, all things are said to be good by divine goodness, which is the pattern, source and goal of all goodness. Ia, q. 96, art. 4, resp. (Vol. 13, p. 134) One person can lord over another as a free man when he is directing him to his own, i.e. the free man's, proper good, or to the common good. And such domination of one man by another would have existed in the state of innocence for two reasons. First, because man is naturally a social animal, and so men in the state of innocence would have lived in social groups. But many people cannot live together in a social life unless someone is in charge to look after the common good. For many, left to themselves, are concerned with many tings, one with only one. And therefore the Philosopher says that whenever many are geared to one thing, you will always find one of them to be principal or director. Secondly, because if one man greatly surpassed another in knowledge and justice, it would be wrong if he did not perform this function for the benefit of others. As it says in 1 Peter, "Everyone putting the grace he has received at the disposal of each other". So too Augustine says that "the just do not rule out of lust to dominate, but out of duty to look after things; this is what the order of nature prescribes, this is how God instituted man." IaIIae, q. 61, art. 5, resp. (Vol. 23, p. 131) Since man by his nature is a political animal, moral virtues as being in him according to his natural condition are called political virtues, for on them depends his behaving well in social life. IaIIae, q. 90, art. 1, ad 3 (Vol. 28, p. 15) The good of a household is subordinate to the good of a political community. IaIIae, q. 92, art. 1, ad 3 (Vol. 28, p. 43) You assess the goodness of any part in relationship to its whole. So Augustine notes that "any part which does not fit in with the whole is ugly." Since every person is part of a political community he cannot be good unless he be well adjusted to the common good, nor can the community be sound unless its parts are in keeping. Hence the politcal commonwealth cannot flourish unless its citizens are virtuous. IIaIIae, q. 61, art. 1 sed. contra (Vol. 37, p. 89) Aristotle assigns two parts to justice, and says that one governs distributions and the other exchanges. IIaIIae, q. 77, art. 1, resp. (Vol. 38, p. 215) Any contract between two parties should be based on an equality of material exchange. But the value of consumer products is measured by the price given, which as Aristotle has pointed out, is what coinage was invented for. It follows that the balance of justice is upset if either 146


the price exceeds the value of the goods in question or the goods exceed the price. To sell for more or to buy for less than a thing is worth is, therefore, unjust and illicit in itself. IIaIIae, q. 108, art. 2, resp. (Vol. 41, p. 121) As Aristotle teaches in the Ethics, while completeness in virtuel comes abort by practice, the predisposition for virtuel is innate. Hence it is clear that virtues bring abort a proper development of tendencies that are innate and that are included in natural law. IIaIIae, q. 118, art. 3 ad 2 (Vol.41, p. 247) The sin of avarice exists where a person goes beyond the measure in regard to possesions. This measure is fixed by justice. Thus avarice is the direct contrary to justice. Contra Gentiles, Book 3, chap. 128, par. 6 (Vol. 4. p. 160) Now, an ordered peace is preserved among men when each man is given his due, for this is justice.

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APPENDIX III Different references to the principle solidarity in the social encyclicals:

(Solidarity) is not a feeling of vague compassion or shallow distress at the misfortunes of so many people, both near and far. On the contrary, it is a firm and persevering determination to commit oneself to the common good; that is to say, to the good of all and of each individual, because we are all really respo nsible for all. On Sociai Concern (Donders) #38

All must consider it their sacred duty to count social obligations among their chief duties today and observe them as such. For the more closely the world comes together, the more widely do peop le's obligations transcend particular groups and extend to the whole world. This will be realized only if individuals and groups practise moral and social virtues and foster them in social living. Then, under the necessary help of divine grace, there will arise a generation of new women and men, the molders of a new humanity. The Church in the Modern World #30

We have to move from our devotion to independence, through an understanding of interdependence, to a commitment to human solidarity. That challenge must find its realization in the kind of community we build among us. Love implies concern for all - especially the poor - and a continued search for those social and economic structures that permit everyone to share in a community that is a part of a redeemed creation (Rom 8:21-23). Economic Justice for All #365

One of the most striking features of today's world, and one due in no small measure to modern technical progress, is the very great increase in mutual interdependence between people. The Church in the Modern World. #23

W e have inherited from past generations, and we have benefited from the work of our contemporaries: for this reason we have obligations towards all, and we cannot refuse to interest ourselves in those who will come after us to enlarge the human family. The reality of human solidarity, which is a benefit for us, also imposes a duty. On the Development of Peoples, #17 Catholic social teaching more than anything else insists that we are one family; it calls us to overcome barriers of race, religion, ethnicity, gender, economic status, and nationality. W e are all one in Christ Jesus (cf Gal 3:28) - beyond our differences and boundaries. Communities of Salt and Light page 10

Another root of this contradiction between affirmation and practice lies in a notion of freedom

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Catholic Social Teaching -- Solidarity

that exalts the individual in an absolute way giving no place to solidarity, openness to others, or service of them, asking like Cain: "Am 1 my brother's keeper?" Yes, human beings are their brother's and sister's keepers. God entrusts us to one another. Our freedom has a relational dimension; we find our fulfillment through the gift of self to others. The Gospel of Life (Donders) #19

To overcome today's individualistic mentality, a concrete commitment to solidarity and charity is needed, beginning in the family. The Hundereth Year (Donders), #49

A world divided into blocs, in which instead of solidarity imperialism and exploitation hold sway, can only be a world structured in sin. Those structures of sin are rooted in sins committed by individual persons, who introduced these structures and reenforced them again and again. One can blame selfishness, shortsightedness, mistaken political decisions, and imprudent economic decisions; at the root of the evils that afflict the world there is — in one way or another — sin. On Social Concern (Donders), #36

The solidarity which binds all men together as members of a common family makes it impossible for wealthy nations to look with indifference upon the hunger, misery and poverty of other nations whose citizens are unable to enjoy even elementary human rights. The nations of the world are becoming more and more dependent on one another and it will not be possible to preserve a lasting peace so long as glaring economic and social imbalances persist. Mother and Teacher, #157

W e must consequently continue to study the situation of the worker. There is a need for solidarity movements among and with the workers. The church is firmly committed to this cause, in fidelity to Christ, and to be truly the "church of the poor." On Human Work (Donders), #8

There can be no progress towards the complete development of the human person without the simultaneous development of all humanity in the spirit of solidarity. On the Development of Peoples, #43

Solidarity is a Christian virtue. It seeks to go beyond itself to total gratuity, forgiveness, and reconciliation. It leads to a new vision of the unity of humankind, a reflection of God's triune intimate life‌ On Social Concerrn (Donders), #40

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Legislation is necessary, but it is not sufficient for setting up true relationships of justice and equality—If, beyond legal rules, there is really no deeper feeling of respect for and service to others, then even equality before the law can serve as an alibi for flagrant discrimination, continued exploitation and actual contempt. Without a renewed education in solidarity, an overemphasis on equality can give rise to an individualism in which each one claims his own rights without wishing to be answerable for the common good. A Call to Action, #23

Solidarity helps us to see the 'other'-whether a person, people or nation-not just as some kind of instrument, with a work capacity and physical strength to be exploited at low cost and then discarded when no longer useful, but as our 'neighbor,' a 'helper'(cf. Gn. 2:18-20), to be made a sharer on a par with ourselves in the banquet of life to which all are equally invited by God. On Social Concern (Bonders), #39

In order to remain a Christian, one must take a resolute stand against many commonly accepted axioms of the world. To become true disciples, we must undergo a demanding course of induction into the adult Christian community. W e must continually equip ourselves to profess the full faith of the Church in an increasingly secularized society. W e must develop a sense of solidarity, cemented by relationships with mature and exemplary Christians who represent Christ and his way of life. The Challenge of Peace, #277

Interdependence must be transformed into solidarity, grounded on the principle that the goods of creation are meant for all. Avoiding every type of imperialism, the stronger nations must feel respo nsible for the other nations, based on the equality of all peoples and with respect for the differences. On Social Concern (Donders), #39 Government officials, it is your concern to mobilize your peoples to form a more effective world solidarity, and above all to make them accept the necessary taxes on their luxuries and their wasteful expenditures, in order to bring about development and to save the peace. On the Development of Peoples, #84

Given these conditions, it is obvious that individual countries cannot rightly seek their own interests and develop themselves in isolation from the rest, for the prosperity and development of one country follows partly in the train of the prosperity and progress of all the rest and partly produces that prosperity and progress. Peace on Earth, #131

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APPENDIX VI Different references to the principle subsidiarity in the social encyclicals:

Still, that most weighty principle, which cannot be set aside or changed, remains fixed and unshaken in social philosophy: Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them. The Fortieth Year, #79

The "principle of subsidiarity" must be respected: "A community of a higher order should not interfere with the life of a community of a lower order, taking over its functions." In case of need it should, rather, support the smaller community and help to coordinate its activity with activities in the rest of society for the sake of the common good. The Hundredth Year, #48

The primary norm for determining the scope and limits of governmental intervention is the "principle of subsidiarity" cited above. This principle states that, in order to protect basic justice, government should undertake only those initiatives which exceed the capacities of individuals or private groups acting independently. Government should not replace or destroy smaller communities and individual initiative. Rather it should help them contribute more effectively to social well-being and supplement their activity when the demands of justice exceed their capacities. These does not mean, however, that the government that governs least, governs best. Rather it defines good government intervention as that which truly "helps" other social groups contribute to the common good by directing, urging, restraining, and regulating economic activity as "the occasion requires and necessity demands". Economic Justice for All. 124

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APPENDIX VII Different references to the principle the common good in the social encyclicals:

The common good embraces the sum total of all those conditions of social life which enable individuals, families, and organiza- tions to achieve complete and effective fulfillment. Mother and Teacher, #74

It is imperative that no one ... would indulge in a merely individualistic morality. The best way to fulfill one's obligations of justice and love is to contribute to the common good according to one's means and the needs of others, and also to prom ote and help public and private organizations devoted to bettering the conditions of life. The Church and the Modern World, #30

It is necessary that public authorities have a correct understanding of the common good. This embraces the sum total of those conditions of social living, whereby men are enabled more fully and more readily to achieve their own perfection. Hence, we regard it as necessary that the various intermediary bodies and the numerous social undertaking wherein an expanded social structure primarily finds expression, be ruled by their won laws, and as the common good itself progresses, pursue this objective in a spirit of sincere concord among themselves. Mother and Teacher, #65

Political power, which is the natural and necessary link for ensuring the cohesion of the social body, must have as its aim the achievement of the common good. While respecting the legitimate liberties of individuals, families and subsidiary groups, it acts in such a way as to create, effectively and for the well-being of all, the conditions required for attaining humanity's true and complete good, including spiritual ends. A Call to Action, #46 It is also demanded by the common good that civil authorities should make earnest efforts to bring about a situation in which individual citizens can easily exercise their rights and fulfill their duties as well. For experience has taught us that, unless these authorities take suitable action with regard to economic, political and cultural matters, inequalities between the citizens tend to become more and more widespread, especially in the modern world, and as a result human rights are rendered totally ineffective and the fulfillment of duties is compromised. Peace on Earth, #63

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Catholic social teaching - on common good Furthermore, the state has the duty to prevent people from abusing their private property to the detriment of the common good. By its nature private property has a social dimension which is based on the law of the common destination of earthly goods. Whenever the social aspect is forgotten, ownership can often become the object of greed and a source of serious disorder, and its opponents easily find a pretext for calling the right itself into question. The Church in the Modern World, #71

To this end, a sane view of the common good must be present and operative in men invested with public authority. They must take account of all those social conditions which favor the full development of human perso nality. Moreover, We consider it altogether vital that the numerous intermediary bodies and corporate enterprises-which are, so to say, the main vehicle of this social growth' be really autonomous, and loyally collaborate in pursuit of their own specific interests and those of the common good. For these groups must themselves necessarily present the form and substance of a true community, and this will only be the case if they treat their individual members as human persons and encourage them to take an active part in the ordering of their lives. Mother and Teacher, #65

As for the State, its whole raison d'etre is the realization of the common good in the temporal order. It cannot, therefore, hold aloof from economic matters. On the contrary, it must do all in its power to promote the production of a sufficient supply of material goods, "the use of which is necessary for the practice of virtue."[7] It has also the duty to protect the rights of all its people, and particularly of its weaker members, the workers, women and children. It can never be right for the State to shirk its obligation of working actively for the betterment of the condition of the workingman. Mother and Teacher, #20

... the whole reason for the existence of civil authorities is the realization of the common good.... Peace on Peace Peace on Earth, #54

Individual citizens and intermediate groups are obliged to make their specific contributions to the common welfare. One of the chief consequences of this is that they must bring their own interests into harmony with the needs of the community, and must contribute their goods and their services as civil authorities have presc ribed , in acco rd with the norms of justice and within the limits of their competence. Peace on Earth, #53

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The riches that economic-social developments constantly increase ought to be so distributed among individual persons and classes that the common advantage of all, which Leo XIII had praised, will be safeguarded; in other words, that the common good of all society will be keot inviolate. The Fortieth Year, #57

The obligation to "love our neighbor" has an individual dimension, but it also requires a broader social commitment to the common good. W e have many partial ways to measure and debate the health of our economy: Gross National Product, per capita income, stock market prices, and so forth. The Christian vision of economic life looks beyond them all and asks, Does economic life enhance or threaten our life together as a community? Economic Justice for All. (Pastoral Message)

For this reason, it is all the more significant that the teachings of the Church insist that government has a moral function: protecting human rights and securing basic justice for all members of the commonwealth. Society as a whole and in all its diversity is respo nsible for building up the common good. But it is the government's role to guarantee the minimum conditions that make this rich social activity possible, namely, human rights and justice. This obligation also falls on individual citizens as they choose their representatives and participate in shaping public opinion. Economic Justice for All, 122

Just freedom of action must... be left both to individual citizens and to families, yet only on condition that the common good be preserved and wrong to any individual be abolished. The function of the rulers of the State is to watch over the community and its parts; but in protecting private individuals in their rights, chief consideration ought to be given to the weak and the poor. The Fortieth Year #25 The members of the Church, as members of society, have the same right and duty to promote the common good as do other citizens. Christians ought to fulfil their temporal obligations with fidelity and competence. They should act as a leaven in the world, in their family, professional, social, cultural and political life. Justice in the World, #38

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Christians must be conscious of their specific and proper role in the political community; they should be a shining example by their sense of respo nsibility and their dedication to the common good; they should show in practice how authority can be reconciled with freedom, personal initiative with solidarity and the needs of the social framework as a whole, and the advantages of unity with the benefits of diversity. The Church in the Modern World, #75

Every day, human interdependence grows more tightly drawn and spreads by degrees over the whole world. As a result the common good, that is, the sum of those conditions of social life which allow social groups and their individual members relatively thorough and ready access to their own fulfillment, today takes on an increasingly universal complexion and consequently involves rights and duties with respect to the whole human race. Every social group must take account of the needs and legitimate aspirations of other groups, and even of the general welfare of the entire human family. The Church in the Modern World, #26

The very nature of the common good requires that all members of the state be entitled to share in it, although in different ways according to each one's tasks, merits and circumstances. For this reason, every civil authority must take pains to promote the common good of all, without preference for any single citizen or civic group. As Our Predecessor of immortal memory, Leo XIII, has said: "The civil power must not serve the advantage of any one individual, or of some few persons, inasmuch as it was established for the common good of all." Considerations of justice and equity, however, can at times demand that those involved in civil government give more attention to the less fortunate members of the community, since they are less able to defend their rights and to assert their legitimate claims. Peace on Earth, #56

Moreover, if we carefully consider the essential nature of the common good on the one hand, and the nature and function of public authority on the other, everyone sees that there is an intrinsic connection between the two. And, indeed, just as the moral order needs public authority to promote the common good in civil society, a likewise demands that public authority actually be able to attain it. Peace on Earth, #136

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We must remember that, of its very nature, civil authority exists, not to confine its people within the boundaries of their nation, but rather to protect, above all else the common good of that particular civil society, which certainly cannot be divorced from the common good of the entire human family. Peace on Earth, #98

Today the universal common good poses problems of worldwide dimensions, which cannot be adequately tackled or solved except by the efforts of public authority endowed with a wideness of powers, structure and means of the same propo rtions: that is, of public authority which is in a position to operate in an effective manner on a world-wide basis. The moral order itself, therefore, demands that such a form of public authority be established.

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