Thursday, 4 March 2010

Beyond Binary Economics

The continuing economic crisis of our times is only in part about finance. It is true that a near-collapse of the financial system, triggered by a crash in the US property market, brought global capitalism to its knees. Nor does it seem likely that a problem caused in the first place by imprudent lending by banks and mortgage-lenders can have been solved by the injection of billions of notional dollars imprudently borrowed by governments. But this financial crisis, serious though it is, is part of something larger. The more worrying question is whether liberal capitalism itself is inherently unstable and unsustainable, being based on the artificial stimulation of human desire for material goods. An economy that must continually grow or else collapse completely, and in which the true long-term costs of production are hidden or postponed, is surely an unsustainable economy.

Of course, to suggest this in our highly polarized society is to invite the accusation that one is a “Socialist” or at least “on the Left”. If, like me, one rejects Socialist solutions to the crisis, one is then accused of simply being na├»ve, impractical and some kind of romantic. Chesterton was of course accused of all these things, and not entirely unjustly, despite the profundity of his intuitions. But finding
a practical alternative to our present economic system is hardly easy, if it is possible at all.

The most damning critique of what I am (too crudely) calling “liberal capitalism” is not economic but moral. That is to say, even if it were sustainable, it would be a bad way to live, for the hyperactive consumerist economy has a tendency to destroy freedom, culture and the environment. That is to say, (1) it reduces freedom to a matter of quantitative choice while conspiring to enslave us to our desires, (2) it undermines tradition by promoting continual technological progress, thus cutting us off from the past, and (3) it destroys the environment by treating the world as raw material to be consumed or packaged or processed for human ends.

Each of these claims, I think, could be defended in greater detail. The dangers in unrestrained capitalism have become obvious even to exponents of the Open Society such as financier George Soros, who now believes that markets by themselves do not tend towards equilibrium. He argues that the rising alternative to our failed and unjust system of international capitalism is state capitalism of the kind we see in China (see his speech “The Way Ahead” at www.georgesoros.com). But a world dominated by the Chinese model will be a world of intensifying conflict between states. He therefore hopes that a new multilateral economic system will be invented, perhaps involving a radical overhaul of the IMF with the cooperation of the UN.

The Pope's critique of capitalism in Caritas in Veritate is yet more radical. Of course, capitalism restrained by some legitimate authority is much better than unrestrained capitalism. Thus the Pope speaks of the need for regulation and legislation. However, he flatly rejects the "binary" model of market-plus-state (39). Nor does he think it is enough to rely on civil society to soften the impact of these two forces through the cultivation of a moral or cultural ethos that will limit our behaviour in the market, and direct our economic energies towards human solidarity.

In general, when a person or community is behaving in inappropriate or dangerous ways, it may be necessary to restrain them by force. A fence may prevent them wandering over a cliff, or a severe punishment deter a particular crime. In the modern world, where technology is so dangerous, misbehaviour so widespread, and the inability of democratic states to control it so manifest, pressures are rapidly mounting to adopt more tyrannical measures. This is the spectre of "Green Fascism". If we save the planet from destruction this way (if things are as dire as we are told), it may well be at the cost of our own souls and freedom.

That is why the Pope in Caritas in Veritate directs attention to ethics as a dimension of economics. He is reaching for a way to place moral concerns not outside but within both market and state. In section 45 he writes: "The economy needs ethics in order to function correctly - not any ethics whatsoever, but an ethics which is people-centred." In a Catholic view, the root of ethics is not some arbitrary set of commandments received from God; the “good” is built into creation, and what is good for man is what tends towards human fulfilment. Human beings can only reach happiness through the gift of themselves to others. This is why, for Aquinas, love is the form of all the virtues.

The idea that we are made for self-gift is familiar to Catholics in the context of papal teaching about marriage and the family, which was unfolded by John Paul II into a complete theology of the body. It’s most famous reference point is in the documents of the Second Vatican Council, especially section 24 of Gaudium et Spes, which states that man “cannot fully find himself except through a sincere gift of himself”. Pope Benedict applies the idea to economics, rejecting the idea of homo economicus – “economic man” who always puts his own interest first – in favour of homo socialis, whose “self-interest” is actually the interest of others and of the group. This is the "ethics that is people-centred". We are made in such a way that our true self-interest is served by giving of ourselves to and for others. He deepens this point in chapter 5 by a “metaphysical interpretation of the ‘humanum’ in which relationality is an essential element” (55).

In section 34 the Pope writes that “Gratuitousness is present in our lives in many different forms, which often go unrecognized because of a purely consumerist and utilitarian view of life. The human being is made for gift, which expresses and makes present his transcendent dimension.” Over and over again the Pope insists that “in commercial relationships the principle of gratuitousness and the logic of gift as an expression of fraternity can and must find their place within normal economic activity” (36). This is why he calls for new types of economic entity and wealth-creation that do not seek profit as an end in itself, but as a means to an end, namely the common good of human community (38).

If these words are to be translated into action, we must take seriously the Pope’s call to rethink our economy and our lifestyle, to support local economies, to decentralize economic power according to the principle of subsidiarity, and to steer globalization towards greater human communion and the sharing of goods (42).

8 comments:

  1. Exceptional exposition.

    My circle of friends have been speaking of these exact matters for decades.

    Perhaps the moment has arrived when mankind will lose the 'hardness of heart' and finally be able to address these issues.

    chris dorf

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  2. I wanted to clear up a insufficient statement in the blog post:

    The Economy Project said:

    "It is true that a near-collapse of the financial system, triggered by a crash in the US property market, brought global capitalism to its knees. Nor does it seem likely that a problem caused in the first place by imprudent lending by banks and mortgage-lenders"...

    That is not fully correct.

    It was the casino capitalism of Hedge Fund and Derivative trading, off the books, of credit default swaps, collateralized debt obligations, and mortgage backed securities, and the fraud in the rating agencies which rated objects AAA which were FFF risk objects.

    For more, read Michael Hudson here:

    http://michael-hudson.com/articles/usa/100217WallStreetMovesKill.html

    Pax et Bonem,
    chris dorf

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  3. Suggestion:

    Perhaps you would like to critique George Wiegel's article shredding the Peace and Justice influence of Caritas in Veritate found at

    http://article.nationalreview.com/399362/icaritas-in-veritatei-in-gold-and-red/george-weigel?page=1

    excerpt:

    "Centesimus Annus also displayed a far more empirically acute reading of the economic signs of the times than was evident in the default positions at Justice and Peace. Moreover, Centesimus Annus jettisoned the idea of a “Catholic third way” that was somehow “between” or “beyond” or “above” capitalism and socialism — a favorite dream of Catholics ranging from G. K. Chesterton to John A. Ryan and Ivan Illich. "

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  4. Hmm, yes. Weigel's comments are notorious. Not sure I want to wade into this, but I'll think about it.

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  5. I have kept up with the folks at The Center for Economic and Social Justice for a decade or more. ( WWW.CESJ.ORG )

    I was wondering your beliefs about their voluminous writings regarding the Economic Model that they have created (referred to as Binary Economics because it seeks to have 2 sources of income for individuals - 1) wages and 2) ownership of the means of production) based upon the work of Louis Kelso, Mortimer Adler, Buckminster Fuller, and others.

    Norm Kurland wrote this on his Kelso LISTSERVE site in response to my question re "Caritas in Veritate":

    Chris,

    I read George Wiegel's piece and agree that to date there is no sound
    "Catholic Third Way." But there is a sound and universal principle that
    the institution of private property is "sacred", consistent with human
    nature , and should be accessible to every human being.

    What the social encyclicals so far lack are the three clear, universal
    and interdependent basic principles of "economic justice" as is, in my
    judgment, best described in chapter 5 of the poorly entitled /The
    Capitalist Manifesto/ by Louis Kelso and Mortimer Adler. See chaper 5
    in http://www.kelsoinstitute.org/pdf/cm-entire.pdf. For a more
    condensed version see
    http://www.cesj.org/thirdway/economicjustice/ageoftherobot.html
    . I've waited
    for over 45 years for someone to refut these three principles as the
    framework for a just and free market system for the world.

    Weigel like most conservative is either blind or indifferent to the
    artificial legal and institutional barriers in our tax, money and credit
    systems to genuine equality of access to the "social tools" needed by
    every human being to acquire a sufficient ownership stake in productive
    land, technologies, rentable space and other things like robots that
    will increasingly displace workers at the workplaces of the world. Such
    blindness and/or indifference -- particularly in the world of finance --
    is what perpetuates the ever-broadening wealth gap in the world. Lift
    those artificial barriers and create new social tools that would truly
    equalize future ownership opportunities and global poverty could be
    eliminated within several generations through a more just, free and
    efficiently productive market system. Frankly, I think Weigel is
    ignorant of the JUST Third Way. Why don't you email him and make him
    aware that he is missing something that is true and just that he can
    discover by visiting the websites at www.kelsoinstitute.org and ours at
    www.cesj.org?

    When the Vatican issues an encyclical on these three interdependent
    common-sense principles of economic justice that involve no
    redistribution of existing wealth, then there will be a sound and
    logically compelling "Catholic third way" that is consistent with the
    "Just Third Way" (with a heavy emphasis on the word "Just"). And the
    world will pay attention to and embrace the Pope's message.

    Are these principles unclear to you? Trust your own mind and sense of
    reality for judging what's true or false.

    Norm

    chris dorf

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  6. Fascinating! I will post a link on the Project site to the CESJ, which I had not heard of, and discuss this approach in a future post. Another topic to cover is Rudolf Steiner's 'Associative Economics' (www.aefriends.com). I also want to come back to the Weigel question at some point.

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  7. I am sure Norm would love to talk with you. He has been building bridges and working on this model for 45 years. He is driven to facilitate justice.

    He can be reached here :

    thirdway@cesj.org

    His groups discussion site is here:

    KELSO_BINARY_ECONOMICS@LISTSERV.KENT.EDU

    chris dorf

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  8. I think my project of Transfinancial Economics would be of interest...

    http://www.p2pfoundation.net/Transfinancial_Economics

    ReplyDelete