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 naïve, 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).