As the Church Discovered the Virtues of Religious Liberty, Eventually the Church will Appreciate the Charisma of Democratic Capitalism

It took long centuries for the Catholic Church, which frequently had aligned itself with State power, to come to a better understanding of the moral and prudential virtues of religious liberty. Developing as an institution during a time of authoritarian and rather primitive societies, the Church understandably accommodated to traditions by which the instruments of the State were used by those in power both to govern and to inculcate the vision of the elites.

In his famous book, We Hold These Truths: Catholic Reflections on the American Proposition, published in 1960 on the eve of the Second Vatican Council, American Jesuit John Courtney Murray offered the success of the unique American experiment in religious liberty as evidence of a new moral truth consistent with the natural law tradition of the Catholic Church.

The Second Vatican Council was greatly influenced by Murray and his observations about religious liberty in the American context. At the close of the Council in 1965, Pope Paul VI promulgated Dignitatis Humanae (The Declaration on Religious Freedom) formally declaring as Catholic teaching that “the right to religious freedom has its foundation in the very dignity of the human person.”

Writing about Murray and the Second Vatican Council, Judge John Noonan observed that “the Declaration on Religious Freedom would not have come into existence without the American contribution and the experiment that began with Madison.” John T. Noonan, Jr., The Lustre of Our Country: The American Experience of Religious Freedom 353 (1998).

The Catholic Church eventually came to appreciate that authoritarian government, especially as to religious freedom rights, created the environment for abuses and ultimately weakened faithfulness.

Likewise, the Church eventually will come to understand that authoritarian government approaches to economics also are rife with opportunities for abuse (crony capitalism, structuring the system to benefit political and economic oligarchies, rent-seeking by favored economic and political actors, etc.) and ultimately undermine prosperity.

But, just as was true with the slow evolution of the Church’s views on religious liberty, the Church will take some time to appreciate in its teaching that democratic capitalism has been the greatest engine for prosperity in the history of the world and creates the free space for moral structures and intermediary institutions, such as the Church.

As Catholic philosopher Michael Novak observed some 35 years ago in his classic work Toward a Theology of the Corporation at 1 (AEI 1981), “[m]ost theologians of the last two hundred years have approached democratic capitalism in a premodern, precapitalist, predemocratic way; or else they have been socialists, usually romantic and utopian rather than empirical.”  Novak was one of the first to deprecate “the anticapitalist bias of the Roman Catholic Church," which has been plagued with “systemic misperceptions about the nature of democratic capitalism.”  Id. at 9-10.

A Church that is rightly and genuinely concerned with the plight of the poor cannot afford to ignore the realities of economics.  In contrast with the static societies of the Middle Ages, during which the Church began to consider the economic moral order, the modern world has seen hundreds of millions lifted out of poverty by the innovation of free market economies during the past century and more.  We would do well to remember the harsh realities of human existence in the precapitalist period, as Novak explains:

Until the rise of democratic capitalism a permanent condition of poverty was seen as a given.  Indeed, in the 1780s four-fifths of all French families spent 90 percent of their income simply buying bread — only bread — to stay alive.  In 1800 fewer than 1,000 people in the whole of Germany had incomes as high as $1,000.  Yet in Great Britain from 1800 to 18509, after the sudden capitalist take-off that had begun in 1780, real wages quadrupled, then quadrupled again between 1850 and 1900.  The world had never seen anything like it.  After World War II dozens of other nations — but not all nations — used the ideas of democratic capitalism to experience even more rapid growth.  (Id. at 23-24.)

By contrast, nations with excessive government intervention into markets during that same post-World War II period discouraged innovation, investment, and growth, leading to economic stagnation. Point to a nation with a history of heavy-handed government interventions into markets, and you will be pointing to a nation that has suffered a (comparative) decline in economic growth.  A prosperous nation can afford to consider how best to allocate wealth, while a poor nation needs to focus on economic growth, which in turn demands relatively free markets.

Consider two contrasting examples:  South Korea as representative of the “economic miracle" in much of Asia.  And Argentina as illustrative of the cronyist interventionst approach by governments in much of Latin America.

A half-century ago, South Korea experienced a level of poverty like that in the poorest nations of Asia and Africa.

A century ago, Argentina was “one of the world’s wealthiest countries, with a standard of living on part with that of the US.”  Michael Boskin, Why does Chile prosper while neighbouring Agentina flounders?, The Guardian, Nov. 22, 2013.  

Let’s compare the trajectories of these countries, with different economic policies.  In 1950, Argentina was a wealthy country, with per capita GDP of $6164 — far above South Korea’s of only $1185.  By 2010, Argentina had grown only to $13,468, while South Korea’s had jumped to $30,079.  The annual growth rate in Argentina over those 60 years barely broke 1 percent, while South Korea enjoyed a growth rate above 5.5 percent.  Christopher D. Piros & Jerald E. Pinto, Economics for Investment Decision Makers 629 (Wiley 2013).

Despite beginning this period as a poor and war-torn nation, South Korea by adopting largely (but not completely unregulated) free markets has become an advanced society with a leading economy.

Despite beginning the period as a wealthy country, Argentina through political instability, excessive spending and debt, and repeated government intervention in markets has fallen steadily downward.  At its worst point a little more than a decade ago, 60 percent of the population of Argentina was below the poverty line.  On the Heritage Foundation “Economic Freedom Index,” Argentina ranks 169 out of 178 nations. 

Many factors — culture, political arrangements, monetary policy, natural resources, educational investment — play a role in a nation’s economic progress (or lack thereof).  But economic freedom remains indispenable.  Of course, no nation permits entirely free markets.  A stable legal system governed by the rule of law which holds people to account for agreements and punishes abuse is also essential.  Antitrust laws to prevent monopolies are standard.  Labor rights should be added to the mix.  And reasonable rate of taxation is necessary to build infrastructure and ensure educational opportunity.  In fact, contrary to the conventional wisdom in many Church circles, the number, extent, comprehensiveness, and intrusiveness of current governmental regulations and market controls imposed on economic entities in the developed world, national and international, is striking.  In sum, a thoroughly free market does not exist in this country.

The question is the right balance between free markets to allow creativity, innovation, and growth, and legal security to keep order in markets and prevent abuses.  The same is true in balancing the virtue of religious liberty against the imperative needs of a society.  And we cannot begin to find that balance without first appreciating the charisma of democratic capitalism.

Fortunately, Saint John Paul II already has jump-started the movement of Church moral teaching on economics beyond pre-modern assumptions:

If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy,” “market economy” or simply “free economy.” But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative. (Centesimus Annus, para. 42.)

Progress seldom proceeds in a straight-line.  As that progress moves haltingly forward in the future, Saint John Paul II’s vision will ascend again.