Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the new Pope’s criticisms of free market economics

November 28th, 2013

Everyone likes the new Pope, right? Seems a nice guy, a humble man of the people, has a good sense of humour etc etc. A big change in style (at least) from the frosty German who preceded him, however similar their views may still be on abortion and women priests. The new Pope could be engaged in merely a public relations re-branding of the Vatican, the nice-ing up of a discredited institution by stressing its concerns about the poor. Can’t go wrong defending the poor, can you? On the bright side though, some striking areas of difference are emerging between the two living Popes, when it comes down to the ethics of the modern economy. For instance: Pope Francis has just issued a papal encyclical called Evangelii Gaudium that is damningly critical of the kind of “hands off” free market economics that have held sway in New Zealand for the past 30 years. The full Vatican document in English is here.

The key observations that Pope Francis has on the economy begin at para 53 under the sub-head “No to an economy of exclusion”. It begins:

53. Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “disposable” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.

Pope Francis then homes in on the economic policies and beliefs that create and foster this morally unacceptable state of affairs. Those who believe in the magic of the un-regulated market economy do not pass muster with him:

54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

An ethical debasement is the result:

The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

New Zealand of course, has been the free market Albania of the South Pacific for the past 25 years, or more. Routinely, our political and business leaders have preached the gospel that the state should not intervene to correct the excesses of the market. Pope Francis by contrast, comes down squarely on the side of state intervention as a moral necessity, given the levels of social inequality that are being generated under the current policy settings. As he puts it:

55. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.

Pope Francis doesn’t go quite so far as kicking over the tables of the money changers. But he is forthright on this point. As he indicates, because the market cannot quantify and assign a market value to God (and /or to the moral obligations inherent in the social contract) the two forces – hey, lets call them God and Mammon – are as opposed to each other in the workings of the modern world as they ever were in antiquity. If left unchecked, he concludes, the “free” market will actually produce a system of enslavement:

Behind this [market] attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement. Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order.

In the midst of the asset sales referendum – which asks us to condemn the ripping off of assets owned by all of us all, for the further enrichment of the wealthy few…get this finale:

With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs.”

Now, is this much different from the worthy words that previous Popes have uttered on this subject? Well, yes, it is. Markedly. The last time that a Pope sounded off on such matters was in 2010 when Benedict XVI issued his encyclical document “Caritas in Veritate” which is available in full here. Basically, Benedict took a view on the subject that you might have expected from the likes of the National Rifle Association. Benedict held that the free market was just a tool for which individuals were responsible, in the workings of their own personal morality. The key passage in Benedict’s document began at para 36, which started out by making all the right, compassionate noises:

36. Economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility. Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.

“Justice through re-distribution?” That sounded pretty radical. But no worries for Wall Street, because Benedict then began peddling steadily away from the implications of that incendiary phrase. As in:

The Church has always held that economic action is not to be regarded as something opposed to society. In and of itself, the market is not, and must not become, the place where the strong subdue the weak. Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations. Admittedly, the market can be a negative force, not because it is so by nature, but because a certain ideology can make it so. It must be remembered that the market does not exist in the pure state. It is shaped by the cultural configurations which define it and give it direction. Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man’s darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.

Yeah, right. That’s the NRA position, too. It’s not guns (or free markets) that kill people. It is people, individual people, who are the problem – at least, according to the frosty German. In essence, Benedict returned morality to the same fount of individualism that serves the market so well. Atomise the problem in this way, and it dissolves the need for social action. That’s probably why as Cardinal Ratzinger, and in his role as the Church’s theological hitman in the 1980s, Benedict reacted so venomously against the liberation theologians. The liberation theologians (Leonardo Boff, Gustavo Gutiérrez etc) had argued that the conditions of sin reside in the social institutions that deny opportunity to so many, and which reserve the basic comforts that render moral choices so much easier to make, for the affluent few. To the Vatican of the day ( John Paul II, Ratzinger) liberation theology smacked of socialism.

In South America in particular, Ratzinger’s reactionary response to liberation theology has been a total disaster. By rolling back the Church’s grassroots ministries for the poor and by actively diminishing the influence of liberal bishops such as Dom Helder Camara of Brazil, the John Paul II/Benedict papal regimes inadvertedly opened the door to Pentecostalism, which has made deep inroads into poor communities across Latin America. As an Argentinian, Pope Francis is well aware of this dismal trend. Belatedly, he appears to be trying to swing the pendulum back the other way. In mid September, Francis even met informally with Gustavo Gutierrez, the so called “father” of liberation theology.

This is not to say that Pope Francis is some Catholic re-incarnation of Che Guevara. Yet judging by this latest encyclical at least, Francis seems to be well aware that sin and temptation have their origins in social and economic structures, as much as in the heart of the individual standing before the Cross. It will be interesting to see what – if anything – his Papacy makes of the insights that he has stated so clearly and passionately.

ENDS

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    1. 9 Responses to “Gordon Campbell on the new Pope’s criticisms of free market economics”

    2. By Matt on Nov 28, 2013 | Reply

      Nice post, it’ll be interesting to see how far Frankie takes it.

      But: Isn’t it really a truism that the market is not responsible for the despair of the many, it’s the way it is used? Specifically the way that it has been grossly corrupted (advertising + PR, intellectual property, lack of transparency etc).

      Perhaps we should define what we mean when we talk about the ‘free market’ – the ideal (which might be a good thing, we’ve never realised it); or the actuality which is just a vacuous oxymoron at best.

    3. By wee eck on Nov 28, 2013 | Reply

      @matt

      Here’s my defintion: The ‘free market’ is a euphemism for control of the economy by the wealthy.
      Whether the idea itself was cynically deployed from the very outset or merely appropriated by the wealthy, when it became clear it would benefit them, I don’t know.

      The crux of the market problem for me is that, when a transaction occurs between two participants in a market system, the participant with the most power/information will (usually) be do better out of the deal than the other participant. The net result, after many transactions among many market participants is that wealth and power and information is relentlessly ratcheted up to the most powerful/wealthy.
      This is the key reason why redistribution is ultimately necessary for a balanced economy.
      It is my understanding that this is what occurred in many western countries post world war 2, until about sometime in the 70′s.
      And it worked.

      Personally I think the world is too far gone and the wolves are too thoroughly in control of the hen house for anything significant to change unless something epic occurs.

    4. By Mick McCrohon on Nov 28, 2013 | Reply

      ” A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules” and it’s name is Trans-Pacific Partnership Agreement (TPP(A)) !

    5. By Mick McCrohon on Nov 28, 2013 | Reply

      Wow ,just sell the art treasures and save all the poor across the planet …what a PR bonus for GOD !

    6. By Allison on Nov 28, 2013 | Reply

      I hold a Bachelor of Economics and before I finished my third year of study, I had lost faith in neoclassical economic theory. People sometimes say I don’t believe because I dont understand. However, I do understand and thats why I don’t believe.

      The entire foundation of neoclassical economic theory is built on a large number of highly improbable assumptions. Whilst theories allow one variable to change, to study the effects of changing it – the model collaspes if you remove all the assumptions. A free market contains the following elements:
      * Perfect competition (doesn’t exist)
      * No profit (rather incompatible with the idea of capitalism)
      * No power inbalances between parties
      * Perfect information
      * People acting in a completely rational manner, so that decisions are not made by emotion, prejudice or other social reasons.

      Several businesses focus on the market imperfections they face, but fail to identify the market failures linked to the business world (such as monopolies,information inbalances, power inbalances,cartels,lobbying of government, use of insider connections etc). A free market economy has never and will never exist.

    7. By TeKupu on Nov 29, 2013 | Reply

      “Routinely, our political and business leaders have preached the gospel that the state should not intervene to correct the excesses of the market.” – But ask for a state-sponsored handout as soon as their beloved market bites them on the arse!

    8. By John Monro on Nov 29, 2013 | Reply

      Thanks Gordon. I am now 66 yrs old, and my upbringing in a country scarred and impoverished by war (the UK) has undoubtedly had a indelible mark on my ethics and political opinions. It is almost impossible to believe now that a Tory government of the 1950′s under Macmillan, should seek to compete with Labour as to which government could build the most council houses to provide a home and shelter for those that most needed it. But that is how it was, a common agreement that society didn’t just exist to further the advantage of the already advantaged, but understood that a robust society can only be built on firm foundations of the mass of the population prospering and achieving the best they can for themselves. Perhaps it takes a war to get this degree of common understanding, which is a bit of a shame.

      I have observed the neoliberal experiment as a particular Anglo-Saxon phenomenon, and have observed with increasing concern over the last thirty years the domination if this destructive dogma, and the ability of the powerful to have ever more say in the way our society is controlled, and how they can get even the victims to celebrate their own impoverishment, now that is real triumph.. Not only is neoliberalism anti-humane, but of course, in the long term even worse, it is anti-environmental. We might here have some real concerns for the poorer in our society now, but these are as nothing as the promise of what is likely to happen to the poorer in society in say fifty years’ time.

      If Pope Francis continues to preach in the same vein, he might even begin to see his churches begin to fill up again.

    9. By peterlepaysan on Nov 30, 2013 | Reply

      Actually talk about “the market” translates to “nothing else matters except profit matters”.

      Sounds like a mafia motto.

    10. By Jo on Jan 19, 2014 | Reply

      In your blog, you quote Pope Francis as saying “behind this free market attitude lurks a rejection of ethics” but is it this a rejection of business ethics or a question of personal ethics?

      Ethics are the moral principles that govern a person’s behaviour or the conducting of an activity.

      A free-market economy is defined by Mike Moffat in Economics.About.com as “an economy where all markets within it are unregulated by any parties other than those players in the market.” Ideally in a free market, the government neither limits the market by regulating industries or protecting them from internal/external market pressures nor actively promotes it by owning economic interests or offering subsidies to businesses.
      According to The Treasury (http://www.treasury.govt.nz/economy/overview) New Zealand has a mixed economy which operates on free market principles.
      Part of the role of this relatively free market economy is to collect taxes which can then be used to help bridge a gap in inequality by providing education, health care and subsidised housing.

      Pope Francis seems to be of the opinion that a free market economy leads to an economy of exclusion and inequality in which ‘Human beings are themselves considered consumer goods to be used and then discarded.’ However the Pope fails to explain why this exclusion and inequality is caused by the ethics of the free market as opposed to the personal ethics of those involved in the market.

      The previous Pope, Pope Benedict commented that a free market economy is governed by individuals – who in turn are responsible for their own ethical behaviour. He is quoted as saying “Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones.”

      John Hasnas in an article for Business Ethics Quarterly (1998) wrote:
      “Philosophical ethics must provide human beings with guidance in all aspects of their lives. …business ethics is an attempt to focus this general theory exclusively upon those aspects of human life that involve business relationships.”

      It follows that business ethics are the moral principles that guide a corporation’s activities and many business ethicists define this as the allocation of social responsibility to a corporation or organisation.
      Hasnas states that social responsibility is “the ethical obligations, if any, that business or business persons have to expend business resources in ways that do not promote the specific purposes for which the business is organized.’

      In the New York Times in 1970 Milton Friedman wrote an article titled ‘The social responsibility of business is to increase profits’ (1970). In this article he states that requiring a corporation to have social responsibility is “pure and unadulterated socialism.” In Friedman’s view these entities exist on paper, not as real persons and they exist to be profitable. He claims that a corporation cannot have either social or ethical responsibilities to society as a whole when the role of the persons managing a business is to maximise profit for their owners or shareholders.
      R.Edward Freeman in A stakeholder theory of the modern corporation (1988) posits a much wider definition of social responsibility. He maintains that social responsibility for a business involves managing that business in the interests of all primary stakeholders. These stakeholders include owners, stockholders, employees, suppliers, customers and the local community.
      While this definition of social responsibility does lean much further towards the Pope’s idea of business ethics, it is still a long way short of what the Pope would like to see business do for society.

      But working on free market principles has not prevented some ethical malfunctions in the New Zealand business world. Recent examples of poor business ethics in New Zealand include the Pike River mine and the Mangawhai community waste-water scheme.

      But did the ethics of New Zealand’s free market economy cause either of these situations or was it the ethics of the owners/managers?

      With the Pike River Mine, the focus of the company was on achieving a profit as quickly as possible while ignoring safety issues. The company abdicated all social responsibility when lying to employees and the community – all to preserve their financial position. Management made conscious decisions to put profit before anything else – including ethical responsibilities. Wayne Hope in The Daily Blog has a good review of this saga and of the ethics of this business (thedailyblog.co.nz/pike-river-manslaughter).
      The Kaipara District Council’s mismanagement of the Mangawhai wastewater scheme is an example of a local government organisation failing to meet their legal and ethical obligations. And local government can hardly be called a free market economy. It is heavily regulated and publicly audited, but still things went badly wrong. With Mangawhai, there were those who attempted to stop the project through all the correct internal and external channels but despite this the project was still pushed ahead at a massive cost to ratepayers. Kaipara Concerns (http://www.kaiparaconcerns.co.nz) has an in-depth look at the processes and personalities behind this project. There are also good discussions about the local authority’s behaviour on the following blog sites – Breaking Views (breakingviewsnz.blogspot.co.nz/2013/12/frank-newman-incompetent-kaipara), Stuff (www.stuff.co.nz/business/9489722) and Live News (livenews.co.nz/2013/11/19/kaipara-district-council-validation-of-rates-and-other-matters).

      As the Pope is Argentinian by birth and he lived and worked in that country during time of political upheaval and economic woe, perhaps his opinion is based on his knowledge of the Argentinian economy – one which is strongly regulated and unstable. But while Pope Francis is blaming the lack of ethics in a free market economy for deprivation and exclusion or what he calls a ‘morally unacceptable state of affairs’ he also states that a free market economy expresses a ‘naive trust in the goodness of those wielding economic power’.

      With all respect to Pope Francis, surely he is now saying that the damage comes from the business people who are unethical, not the business itself.
      It is not the free market economy that is unethical; it is unethical people working within the free market economy.

      References:

      Debt worsened by rate swap uplifted 5 January 2014 from http://www.stuff.co.nz/business/9489722

      Freeman, R. (2004). A stakeholder theory of the modern corporation. In T.L. Beauchamp & N.E.Bowie (Eds.), Ethical theory and business (7th ed., pp.55-64). Upper Saddle River, NJ: Pearson Education.

      Friedman, M (2005) The social responsibility of business is to increase its profits. In G.D.Chryssides & J.H.Kaler (Eds.), An introduction to business ethics (PP.249-254) London: Thomson Learning.

      Hasnas, J. (1998). The normative theories of business ethics: A guide for the perplexed. Business Ethics Quarterly, 8 (1), 19-42.

      Hope, W in The Daily Blog uplifted on 4 January 2014 from http://thedailyblog.co.nz/pike-river-manslaughter.

      Incompetent Kaipara uplifted 5 January 2014 from breakingviewsnz.blogspot.co.nz/2013/12/frank-newman-incompetent-kaipara

      Kaipara Concerns uplifted 5 January 2014 from http://www.kaiparaconcerns.co.nz

      Kaipara District Council validation of rates uplifted 5 January 2014 from livenews.co.nz/2013/11/19/kaipara-district-council-validation-of-rates-and-other-matters

      Moffat, M. Definition of Free Market Economy uplifted on 3 January 2014 from http://economics.about.com/cs/economicsglossary/g/free_market_e.htm

      The Treasury, Overview of the New Zealand Economy uplifted on 6 January 2014 from http://www.treasury.govt.nz/economy/overview

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