Wednesday, 25 March 2009

Catholicism and Capitalism: Questions and Answers

Following my earlier post on the second Faith Matters lecture at Westminster Cathedral, Professor Philip Booth offered to respond to a "questions and answers" for this blog. The questions from the audience at the end of Professor Booth's lecture expressed concern about the inequality that many saw as being an implication of a "free economy". I hope that these three "questions and answers", though not directly asking about that concern, do nevertheless shed some light on it. I am grateful to Professor Booth for his willingness to do this, and hope that this post will promote discussion about his lecture. A video of Professor Booth's lecture can be found here on the Diocese of Westminster website.

Q1. You prefer the term “free economy” to other terms such as “market economy” or, perhaps, “capitalism”. You also refer to the “market sector of a free economy”.

What features distinguish a “free economy” in the sense in which you intend the term from, say, “capitalism” as it might be intended in general use by others?

This is clearly a question of semantics. I am not sure that the word “capitalism” communicates the essence of a free economy very effectively. Communities may choose to live freely whilst having little or no capital and whilst holding their goods in common (monks for example). A free economy, subject to the rule of law clearly allows this. The word “capitalist” I think promotes an emphasis on “accumulation”, “investment” and, of course, “capital”. I have nothing against these things but they do not communicate the essence of what a free economy is all about.
Q2. In your lecture, you refer to “self interest” and to “selfishness”, and say that these two should not be conflated.

Is there a real difference between “self interest” and “selfishness”, or is this just a play on words with the former term implying a positive valuing of the same thing that receives a negative valuing from the latter term?

I am not a philosopher so I would not want to say where one concept begins and the other ends. Let me answer as an economist (and as a Christian) who sees both concepts in practical operation. It is a bit like the difference between breathing and panting for breath. Somebody panting for breath is clearly still breathing just as somebody who is acting selfishly clearly believes they are acting in their own self interest. But, also like breathing, merely going about one’s daily economic business acting in one’s own self interest is not selfish. I was not selfish by cycling to the station today, or eating toast for breakfast, or buying the bread to make the toast, but I was acting in my own self interest. More generally living a clean life (which we may do even if we have no Christian beliefs) is in our self interest, even if Christians do it for different reasons. So, what I am saying is that we need an economy that works in harmony with self interest for two reasons. Firstly, because self interest is a generally benign force by which we make many economic judgements and, secondly, because a free economy (unlike one where power is centralised in government) at least brings some good from the fallen human nature that manifests itself in selfishness. A free economy requires agreement from another person to enter into a contract so self interest generally promotes the general economic interest. [The repeated use of the word “general” is important – economists often try to be too precise and try to perfect things that cannot be perfected].

Now lots of qualifications are needed here: Christians can read this far and then try to make my logic go further than is intended. Firstly, there are many areas of life where self interest is not the main criteria for judging whether to undertake an action: any mother or father will be aware of that. Secondly, selfishness can, especially where there are concentrations of economic power (whether local or national), create significant damage (though, in general, I fear that such damage is worsened by concentrating power in the government so how we deal with the problem is a moot point). Thirdly, we should never neglect the importance of “ethics” in business – as consumers and producers, as managers and owners. This is not the often meaningless doctrines of “corporate social responsibility”, nor is it the well-meaning but possibly not helpful process of “socially responsible consuming”. I mean straightforward, good, old fashioned ethics (not cheating, not exploiting ignorance, not hiding things from the board of directors, not riding roughshod over property rights when the state does not protect them properly and so on).
Q3. “The state has … taken upon itself …. the provision of income to families in times of need …” “The state may intervene, as a last resort, to try to assist the poor”.

Why should the provision of benefits through the welfare state not be understood as appropriate last resort intervention by the state? What is the boundary that distinguishes between the state “taking upon itself” and appropriate “last resort” intervention?

Thankfully the answer to this one is shorter. There is no absolute boundary here. I also made the criticism that the state was increasingly taking over child care so I was trying to indicate a gradual encroachment by the state. I think the state has two main roles. One is providing income to those who are simply poor (despite working). How this should be done and to what extent is a matter of debate. I do feel, however, that, with regard to the contingencies of life (health, life, pensions, unemployment etc), voluntary initiative (insurance companies, mutual associations, unions and charity) will do better than the state. The principle of subsidiarity demands that the private sector be given its opportunity. The state may fill in the gaps; it may provide the legal framework; it may help finance the contributions that are necessary for the
poor. I think that if you were able to take the 19th century social reformers around an area of serious UK poverty (and poverty is not just a lack of money, remember; in many senses people seem to have less hope, drive, initiative and desire for self improvement than, say, 80 years ago) and tell them that the British government will spend over 50% of national income, the biggest chunk of which is on the welfare state, in 2010-2011, they would be horrified. Indeed, many of them would have predicted it!

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