Erasmus | Catholicism and capitalism

Redeeming the system

A study asks whether the 2008 crash could have been avoided by heeding the pope

By B.C.

A NEW paper published by Theos, a London-based religious think-tank, will raise hackles on the right and left alike, if only because of its title: "Just Money: How Catholic Social Teaching can Redeem Capitalism". Advocates of capitalism will certainly retort that the system has no need of redemption. The core meaning of the word redemption is something like "to secure the freedom, or the very existence, of someone or something at a price...." And as a supremely efficient instrument for resource allocation and price discovery, so the argument would go, capitalism should have no need of any external agency to purchase its right to exist. It just needs to be allowed to do its job. At the other extreme, critics on the left will retort that capitalism is so wicked that it cannot be redeemed by anything, least of all the doctrines of Catholicism.

Yet the paper by Clifford Longley is well worth reading, if only because it presents in readable language ideas which normally lie buried deep inside closely argued papal encyclicals and other cerebral writings. Mr Longley explains some of the key concepts in an elaborate body of thought which began to emerge in 1891 with a document called Rerum Novarum which accepted with qualifications the ideas of a free market in capital and labour. They include not just "solidarity"—the idea that all members of society must look out for one another's welfare—but "subsidiarity" or the widely devolved distribution of power. Catholic Social Teaching (CST) seeks to chart a middle way between unrestrained capitalism and dirigiste socialism by stressing the vital role of civil society: all the institutions, from the family to voluntary associations and churches, that stand between the individual and the state.

Mr Longley also stresses the need to cultivate virtues such as trustworthy behaviour and dismisses the idea, which was fashionable a decade ago, that the market has its own mechanisms for driving out untrustworthy behaviour. He recalls the Catholic teaching that accepts the idea of private property ownership, but with the qualification that the proprietor must be a good and socially responsible steward.

Much of his paper is devoted to a critique of the financial and economic boom that preceded the crash of 2008. It is implied that if the "market fundamentalism" and "neoliberalism" of that frothy era had been tempered by a good dose of CST, the collapse might have been avoided: and that CST is the answer to averting such tragedies in future.

Well, nobody who lived through the boom and bust of the current century's first decade can deny that it still merits some careful and contrite study. But to ascribe the tragedy of 2008 to "market fundamentalism" alone is itself a form of fundamentalism. The analysis would be more interesting if it looked at the ways in which, prior to 2008, liberal and non-liberal impulses clashed. In the sub-prime mortgage fiasco, for example, some role was played by the government-backed mortgage agencies—Fannie Mae and Freddie Mac—as well as the bond dealers of Wall Street. Those dealers, in turn, were looking for ways to minimise risk for themselves while heaping risk on vulnerable small borrowers. You do not have to be an advocate of CST to detect a dangerous situation there; there is no coherent theory of the market that does not allow the need for information and risk to be fairly distributed.

And in triggering the euro-zone crisis, the extreme rigidity and non-liberalism of southern European societies, economies and political systems, has surely played as much role as any "neoliberal" crusade. Indeed the very word "neoliberalism" on the lips of the European (and Catholic) left has become an almost meaningless term for "whatever we don't like". The discussion only becomes illuminating when you accept that the tragedy of extreme austerity and massive youth unemployment is a result of paleo-anti-liberalism (the refusal to tackle gerontocratic career structures, bureaucracies and restrictive practices) as much as any neo-ideology. That is one reason why Spanish, Italian and Greek youngsters flock to "liberal" London. Mr Longley is quite right to say that "market fundamentalism" is dangerous. But so, as the Catholic church knows, is every other kind of fundamentalism.

Discover more

A high-noon moment for Pope Francis over the Amazon

Ideological rifts widen as Catholic bishops ponder endangered forests and married priests

Why American Muslims lean leftwards for 2020

Islam’s followers are not so much firebrands as nomads in search of a home


Taking sides in the Orthodox Church’s battles over Russia and Ukraine

Conflicts within Slavic Orthodoxy are having some strange side effects