In his encyclical Centesimus Annus, Pope John Paul II wrote some controversial words on the subject of capitalism, the interpretation of which has been the subject of much disagreement among Catholics interested in the economy. A common reading of this encyclical portrays Pope John Paul as a run-of-the-mill free market liberal, even a moderate libertarian of the socially conservative stripe. Pope John Paul is claimed by this reading as the great papal defender of capitalism. But I want to propose that this reading is deeply mistaken, and is based upon that classical mistake of reading out of context. Upon closer reading, including some of his other encyclicals, I might very well have thought JPII a straight-up socialist — had he not made it quite clear that he condones neither capitalism nor socialism (these terms being defined a certain way — keep in mind how equivocal words are), and for quite similar reasons.
In the famous paragraph 42 of Centesimus Annus, the Pope writes the following words:
42. Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?
The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.
Here the pope gives two definitions of capitalism. The first is basically the free-market/private-property form of economy, where people who own things make things and sell them, etc. Catholic defenders of capitalism will often point to this first definition as the definitive proof of JPII’s economic liberalism. But note how that sentence contains a qualification, that it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy.” In other words, “capitalism” is not JPII’s preferred word for the market economy, and so a market economy of private property and free exchange etc. is not his preferred definition of capitalism. Presumably, then, his preferred definition of capitalism is that which he gives in the very next sentence: a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious. And this sort of economy he cannot condone.
One can assume from this that Pope John Paul II prefers an economic system in which economic freedom is circumscribed by strong juridical frameworks at the service of total human freedom (which, interestingly, is both ethical and religious in nature). JPII is explicitly advocating strong state regulation of the market, in the service of explicitly formulated ethical and religious ends (sounds like integralism). He will have none of the supposed individualistic neutrality of liberalism-libertarianism, which frees individual desires (specifically the desires of the wealthy) of all limitations.
Pope John Paul is known as the great pope of anti-communism, and indeed it shows in this encyclical. In the very next paragraph, he claims that Marxism failed to provide a solution to economic crisis — but, crucially, the pope acknowledges that there is a crisis, and what’s more, it appears very like the crisis which Marx himself once observed in capitalism (if understood now in a new way), namely alienation:
The Marxist solution has failed, but the realities of marginalization and exploitation remain in the world, especially the Third World, as does the reality of human alienation, especially in the more advanced countries. Against these phenomena the Church strongly raises her voice. Vast multitudes are still living in conditions of great material and moral poverty. The collapse of the Communist system in so many countries certainly removes an obstacle to facing these problems in an appropriate and realistic way, but it is not enough to bring about their solution. Indeed, there is a risk that a radical capitalistic ideology could spread which refuses even to consider these problems, in the a priori belief that any attempt to solve them is doomed to failure, and which blindly entrusts their solution to the free development of market forces.
Again, all the while opposing Marxism, the pope nonetheless rests firmly on the belief that, good as markets are, regulation by the state is something good and necessary, in order to solve the real problems of poverty and alienation caused by capitalism. He views libertarianism and unfettered market forces as insufficient to do this, and as being naive for distrusting the effectiveness of social and political solutions.
Alright then, a capitalist will respond; so maybe he just believes in a more regulated form of capitalism.
But there’s more to John Paul II’s understanding of what exactly capitalism is. He lays out in significantly more detail his understanding of capitalism in the earlier encyclical Laborem Exercens, where again — all while firmly criticizing communist Marxism as such—he applies seemingly modified “Marxian” insights to his analysis of capitalism, especially where he decries the separation and conflict of capital and labor, and the subordination of the latter to the former. In fact, in paragraph 7 he explicitly describes capitalism as such by exactly this perverse relationship between capital and labor, which he claims is an inversion of the proper relationship established in the book of Genesis:
In all cases of this sort, in every social situation of this type, there is a confusion or even a reversal of the order laid down from the beginning by the words of the Book of Genesis: man is treated as an instrument of production, whereas he — he alone, independently of the work he does — ought to be treated as the effective subject of work and its true maker and creator. Precisely this reversal of order, whatever the programme or name under which it occurs, should rightly be called “capitalism.”
In part 11, he goes on to recount and analyze the dimensions of the class conflict between labor and capital which emerged with the rise of industrial and exploitative capitalism:
Throughout this period, which is by no means yet over, the issue of work has of course been posed on the basis of the great conflict that in the age of, and together with, industrial development emerged between “capital” and “labour”, that is to say between the small but highly influential group of entrepreneurs, owners or holders of the means of production, and the broader multitude of people who lacked these means and who shared in the process of production solely by their labour. The conflict originated in the fact that the workers put their powers at the disposal of the entrepreneurs, and these, following the principle of maximum profit, tried to establish the lowest possible wages for the work done by the employees. In addition there were other elements of exploitation, connected with the lack of safety at work and of safeguards regarding the health and living conditions of the workers and their families.
These are only a few of the lines and passages which might be cited to indicate that Pope John Paul II, the great enemy of communism, was no friend of capitalism either, as he defined it. Moreover his definition of capitalism, involving the conflict of labor and capital and the unrestraint of economic freedom from juridical and political bonds, is more consonant with the understanding of capitalism put forward by the most prominent theorists of capitalism themselves, from Adam Smith down to Friedrich Hayek and Milton Friedman. And although he rejects the Marxist solution to the ills of capitalism, he is not loathe to use parts of the Marxist critique in his own critique and analysis of capitalism. JPII rightly observes that capitalism subordinated labor to capital, according to “the principle of maximum profit” — which is the effect of Marx’s own observation that capitalism subordinates use value to exchange value, i.e. the value of the actual product of labor to the value extracted by means of market exchanges (money).
Furthermore, simply because the pope does not adopt the Marxist solution as such, it does not follow that he refused to accept certain elements of a solution which might be called “socialistic” in some way. He repeats an old principle of Catholic social doctrine, which he traces back to St. Thomas Aquinas, namely the “universal destination of goods,” according to which all possession of property, even private possession, nonetheless has a use that is for the common benefit of all. The principle of the right to the acquisition of private property, though not per se the cause of conflict between capital and labor, becomes the cause of such conflict only once it is absolutized and exalted over the obligation to serve the common good. Thus, referring to the principle of private property, JPII writes in part 14:
The above principle, as it was then stated and as it is still taught by the Church, diverges radically from the programme of collectivism as proclaimed by Marxism…. At the same time it differs from the programme of capitalism practised by liberalism and by the political systems inspired by it.
Accordingly, in the same section, he lists a number of possible solutions that accord with the Church’s teaching on this subject. Economists and policy wonks will recognize some of these types of solution as those sometimes proposed by none other than socialists, especially so-called market socialists:
In the light of the above, the many proposals put forward by experts in Catholic social teaching and by the highest Magisterium of the Church take on special significance: proposals for joint ownership of the means of work, sharing by the workers in the management and/or profits of businesses, so-called shareholding by labour, etc.
JPII is obviously here in favor of various kinds of collectivization or socialization of the means of production, such as those envisioned by worker-cooperative models, or more broadly by social wealth funds — which take the mutual fund or index fund model and extend it to the whole nation by means of state ownership. In other words, social ownership cannot be ruled out of the vision of a healthy and humane economy — so long as it does not entail the eradication of any form of private ownership as well. In a cooperative model, or in a social wealth fund, individuals themselves participate in a pool of property rights so to speak, and the benefits of the means of production clearly go to them as individuals — even though the management of this property must be carried out cooperatively.
JPII contrasts this with other forms of socialism which effectively monopolize the control of property in the hands of a separate social group, namely the ministers of the state. His critique of this sort of socialistic arrangement is worth noting, first because it is remarkably like his critique of capitalism itself, as something which monopolizes and concentrates property in the hands of one group — even if that group claims to represent the whole society. Without means of ensuring the state’s accountability to society as such, including every person within its purview of care, this form of collectivization risks being not social enough:
Thus, merely converting the means of production into State property in the collectivist system is by no means equivalent to “socializing” that property. We can speak of socializing only when the subject character of society is ensured, that is to say, when on the basis of his work each person is fully entitled to consider himself a part-owner of the great workbench at which he is working with every one else.
Imagine that: state socialism is not social enough, because it monopolizes power in a way very similar to how capitalism does the same thing. This is also the basis of the contemporary distinction between “democratic socialism” and “totalitarian socialism.” The difference is not that one involves central state planning, while the other does not. They both do. Rather, the difference is that “democratic socialism” effectively shares and distributes power and ownership through a wide swath of the social landscape, so to speak, rather than concentrating it in the hand of an unaccountable authoritarian state institution. (In all probability JPII has the Soviet Union in mind here.) It might be better to describe such a democratic form of socialism as cooperativism or corporatism or distributism, accordingly, to make that distinction all the more clear. In any case, it involves genuine forms of social ownership and social use of capital, against any and all forms of individualism or liberalism that inspire the workings of capitalism.
Remarkably, this form of social ownership which the pope advocates is not incompatible with the market economy, as described by the looser definition of “capitalism” cited in Centesimus Annus. The pope envisions an economy where market forces play a genuine role in contributing to the development of industry and entrepreneurship, much in the way that market demand conditions the process of production, aiding in the refinement of the craftsman’s art. And insofar as things are bought and sold and exchanged in such a system, one person gives to another a commodity that was once his own, in return for a commodity that was once was the other’s: it is an exchange of private property. This is by no means incompatible with the structure of an economy where each man participates, as a member of some larger corporate and cooperative body, in the ownership of a common wealth, by which those commodities are produced in the first place. The market thus becomes an instrument of the social body’s act of distributing wealth throughout itself, thus contributing to the common good. The mechanisms of this market process are well known, but what is crucial to note is that they are independent of the key characteristics which JPII identifies in the definition capitalism: unrestrained pursuit of profit, and the exploitation of labor for capital. A non-capitalistic market economy is very much a possibility, and one which Pope John Paul II prefers.
Catholics who appreciate the work of Pope St. John Paul II should not do him the disservice of exalting him as the great defender of the capitalist system. He might have been the defender of markets and market economies, but he was by no means any defender of the unconstrained and exploitative economic freedom of the capitalist class.