Theology of the Corporation: A Conversation with Michael Novak

Religious philosopher Michael Novak, cofounder of Crisis Magazine, was the 1994 recipient of the Templeton Prize for Progress in Religion. According to many observers, Novak’s influence played an important role in the drafting of Centesimus Annus, Pope John Paul II’s 1991 encyclical on Catholic social teaching. In particular, Novak’s work is seen within the Holy Father’s vision of the free society as a threefold system — political, economic, and moral.

In 1981, Novak published Toward a Theology of the Corporation in which he first examined what he called the “high spiritual vocation” of the business corporation. Aiming for a more general audience, in 1997 he published three lectures sponsored by Pfizer Inc., the New York-based pharmaceutical company, entitled The Fire of Invention: Civil Society and the Future of the Corporation. An expanded version of these Pfizer lectures is available from Rowman & Littlefield.

This interview was conducted by Joop Koopman.

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Koopman: For most readers, economics conjures up facts and figures of a strictly material nature. In your book, you uphold the publicly owned business corporation as an institution endowed with great “moral possibilities,” as an engine of change and a guarantor of civic freedom and stimulant for man’s cocreativity with his Creator. How did you make this connection between theology, Catholicism, and economics? What prompted you?

Novak: When I was still in the seminary in the late ’50s, I had already begun to investigate the relationship between religion and economics. It was clear that figures like Jacques Maritain, Reinhold Niebuhr, and John Courtney Murray had studied the relationship between religion and politics. But no one had done much with economics. People in the humanities showed no adequate absorption in the field. I took up the matter; it became an ambition.

My wife, Karen, and I were in Rome during the second and third sessions of Vatican II. One of my most vivid memories was the growing conviction in those days that the modern period is the era of lay people: the move from emperors and kings to rule by citizens. At least in democratic societies, lay people share sovereignty over their own countries. If things go wrong, it is their responsibility to make corrections. If new initiatives are needed, it is their responsibility to imagine them. This became a dominant theme in my thinking.

One of the most important places for the laity to act — particularly if the poor are to be raised up — is the economy. In the end, it is not government that alleviates poverty, but a growing economy. We need to move the poor into the middle class. That is primarily the responsibility of lay people in the economic sphere.

In those early days, though, you were clearly on the Left.

I was convinced that a good Christian, even a good humanist, had to be on the Left and probably couldn’t be a friend of business. Business was merely buying and selling, mere hucksterism, after all. Nevertheless, upon completion of my studies in philosophy and theology, and then the social sciences, I began to catch up on studying economics by way of Christian socialism. Reading all the theories, I had a concrete turn of mind and wanted to see what some of these ideas would mean in practice. But I couldn’t find a socialist state that I could admire.

One that had succeeded, you mean?

One that I admired. Sweden, for example, was a successful, wealthy country. But I found life there, when I visited, rather gloomy. The atmosphere was psychologically stifling, without a sense of liberty, generosity, or risk. It was all about safety and holding on to what people had — trying to get privileges out of the government without doing anything in return. Then there was the Soviet Union, of course. My family had come from Slovakia. It was clear that communism had made a mess of it in the entire region. Everywhere I looked there was disappointment. All the socialists’ experiments in Asia and Africa had clearly failed, too. I came to the conclusion that there had to be something wrong with an idea that kept inspiring experiments that all eventually failed.

These discoveries were part of your own “conversion” from the political Left toward a conservative position. Who guided you in particular?

I began to see the point of writers like Joseph Schumpeter and Nobel Prize-winner Friedrich von Hayek, who held up the art of enterprise, the creative initiative of starting up new companies, as the most important, dynamic feature of the economy. They believed that economists too seldom study the entrepreneur; their main focus tends to be on an aggregate number — that which is already achieved, what is already present and working. They then miss the dynamic factor, like Steve Wozniak and Steve Jobs working in a California garage, launching the Apple personal computer — an invention that would change the face of American industry within twenty-five years. In that time span, from ground zero, more people would come to be employed in the computer industry and in the field of computer-driven communications than in any other industry.

Hence, as you have put it, a “full-fledged theology of the lay person” has to take economic matters into account.

Don’t forget that the largest number of Jews, Christians, and Muslims are working in businesses, as owners, managers, entrepreneurs, or simply as workers. Most lay people spend most of their time engaged in economic activity. And a worker today might become an entrepreneur tomorrow. Hence, the age of the laity required the development of a theology of economics and, finally, a theology of the business corporation.

Little study had been done in this area, I found. In the ancient world there had been a tendency to hold up the contemplative virtues as superior to the active life. They are, of course, but that shouldn’t result in a demeaning view of the practical virtues. We should not look down on the Marthas of this world.

The United States, one could argue, is a country created for and full of Marthas!

The modern age, as Tocqueville points out, particularly through the American experience, has recognized that, whatever the beauty and necessity of the contemplative virtues, if the suffering of the poor is to be alleviated, there has to be a special burst of creative energy.

Irving Kristol’s writings helped me look into the American idea, and to contemplate the nature of the American genius. I discovered there were a number of others who were trying to be democratic socialists or social democrats, but who ended up being disillusioned and began considering the American experiment in a new light. Whatever else you may say about it, the United States is the one country where business in city after city, and village after village, was responsible for the survival of communities. There is a sense of gratitude toward business as a result.

And business here is not an oppressive, elite class of aristocrats who have opportunities no one else has. Business is built by ordinary people, coming from ordinary families.

That is not the case in Europe?

In Italy, by contrast, the great companies, like Olivetti and Pirelli, for example, belong to old aristocratic families. There is little entrepreneurial about it. The same is true for Germany and France.

In Europe, business leaders come from the elite?

Precisely. That is just not the way it is in the United States. In Washington, D.C., the millionaires tend to be car dealers and contractors. Of course, the dynamic factor is difficult to quantify; it is always in formation. Entrepreneurship is the only long-term way to help the poor, to bring them employment; and to give opportunities to new people — who are not part of the elite and/or dependent on old money and technologies — to develop entirely new economic activities.

In your book you note that the country’s founders deliberately looked to commerce as a founding principle, rather than the military, religion, or aristocracy.

Quite self-consciously, after Montesquieu and Hume, the founders had developed the theory that a good society, that is, a society good for the poor — a society in which they will rise up most rapidly — and good for democracy, should not be built on the aristocracy, the clergy, or the military. Instead, one should promote commerce and industry. These necessarily require the rule of law, peace, and the habits of prudence — savings, the return of 1 or 2 percent a year on investments. That is the best road to progress. It is not exciting, not heroic, but it will actually do more good for more people in the long run. In a sense, there was a theory about capitalism in place before even there was capitalism!

In the book you cite Tocqueville, praising Americans as “heroic traders.” What did he mean? Would you speak of trading as a virtue?

Tocqueville thought it was. He compared the American sailors to the British, their willingness to take risks for a small profit. They managed to bring tea back from China before the British; it helped them prosper and win the markets from the competition — by daring, courage, and working harder.

But how do you lift this willingness to take chances into the realm of moral virtue?

Such an attitude is inherent in liberty, which always means making decisions whose outcomes you cannot always foresee. It means taking responsibility for that outcome. You need an appetite for risk to act as a free person.

Centesimus Annus speaks of the creativity of man as a social, economic agent. Do you equate the risk-taking creativity you speak of with man’s participation in God’s creation as a co-creator? Is that the nature of stewardship over creation?

It is stronger than stewardship. Stewardship implies something that has already been achieved and must be maintained. Creativity implies that God hid riches in the universe that haven’t been discovered yet. It is up to us to find and develop these riches. He put them there for the good of the human race. Happily, there is a growing tendency today to see economics as a humanistic discipline; to press inquiries more toward a philosophy of action, the recognition of human capital. This includes the human capital that is the enjoyment of the arts, or of sports. Such pleasure is the main goal of economic activity, pleasure not only of a physical sort, but, above all, of a civilizing and contemplative sort — prayer included. To make time for this, many people are willing to work very hard and creatively.

You insist that business, given room to operate and to reap the rewards of inventiveness, can be a spur to creativity. Hence, you argue the importance of patents and the securing of intellectual property rights in the cyber age. These provisions offer someone an incentive to be creative by ensuring the ability to reap the profits from one’s creativity.

Don’t forget that the right to patent or copyright — the recognition that ideas are a form of property — was embodied in the Constitution. For Lincoln that, along with the invention of the printing press, was one of the five or six great steps forward in the history of humanity. John Paul II, in his way, very much recognized the value of human capital in this regard as a key economic factor. Human activity involves the whole human being, and involves choice and responsibility. That is the biblical vision of man.

Your book is written for a general — that is, not specifically Catholic — audience. Yet, it implies very strongly that moral choices bring very definite practical benefits. By contrast, much of contemporary religious discourse seems to utterly lack any pragmatic dimension.

It exhibits an utter lack of knowledge of the real world. Recently, the Jesuit provincials of Latin America condemned “neoliberalism” as a cause of poverty. But poverty doesn’t have causes; it is the normal state of most human beings everywhere. What does need explaining is how to create wealth in a real and steady way. In the real world, that is the practical question. But religious figures so often want to make an ideological point, without actually studying what will help the poor in practical terms.

You speak of the “inimitable creativity” of the business corporation, the envy of other institutions, such as academia, the political world, and even the Church. Couldn’t these benefit from an infusion of the dynamism that marks the world of business?

In Centesimus Annus 32, the pope describes the community that is operative in the business corporation as a community with many different parts, all of them providing goods and services to other human beings. This is done in a concerted way, and it involves risks. Success depends on certain human virtues, such as prudence, but also risk-taking. This is a good example of what the Church has always been trying to teach about the relationship between the individual and the community, the pope dares to say.

Speaking of dynamism, or a lack thereof, take the universities in Latin America, some of which are nearly five hundred years old. Yet, these schools are not known for having pioneered a single new invention. They are very good at passing on the tradition, but they are not known for their creativity. One of the institutions that has done the most to revolutionize the way we live — in developing technology, goods, and services — is the business corporation.

And the first transnational business corporations, you write, were the monastic communities of Europe in St. Bernard’s time, selling wine and cheese across the continent.

The time between 1100 and 1350, economic historian Randall Collins has observed, was the era of greatest technological advance in the history of humanity — and most of it was due to the monastery, particularly the Cistercian communities: the mills they invented, for example, and nautical innovations which made possible the exploration of the ocean; the invention of the harness for horses, which took pressure off the horse’s neck and put it on the horse’s shoulders, literally harnessing horsepower for the first time in human history.

You emphasize that a minimum of state interference is essential to the success of business or any incorporated body. Is business overregulated today, in your opinion?

There has to be regulation consistent with good order. But we have been under the regulatory pattern of the New Deal for seventy-five years now, which has brought unprecedented interference from the state. Most business people today, in contemplating a new project, don’t first consult the inventors but the lawyers! We live in a society that is achieving a kind of socialism by regulation. And regulation always invites corruption.

Practically speaking, think of all the technological advances that came out in the wake of the capital gains tax cuts in the Reagan era. The extra money helped start up Apple, Intel, fiber optics, satellite communications, fax machines. All these things have revolutionized our life today. Thanks to institutions such as venture capital funds and corporations and the ability of new people, like Steve Jobs, with no money, to start Apple and find investors, we are experiencing prosperity.

Some would criticize you as being too much of an Americanist in these matters. Don’t you paint too rosy a picture of the American experiment?

Few scholars in Europe — or even here, ever since World War II — study American ideas, American political philosophy. What are the ideas behind the Declaration of Independence, the Federalist Papers, etc.? These ideas need to be studied. The bishops should give seminars on American ideas in Rome. But which theologians today have studied Jefferson or Madison? To bring this up, even, invites accusations, because it is so rare. I do not argue that the model is for everyone, but the American way is one more voice that needs to be heard, at the very least. But at the same time, American culture is not what it once was. Our children do not possess the same virtues of our grandparents. We need to return to the virtues of the founders.

I do not agree with those, like David Schindler, who see the American experiment as flawed from the beginning with a corrosive relativism — that seems to me to give the game away to the ACLU vision of American history — a serious mistake on the practical and theoretical levels.

Do Catholics bring a particular sensibility to economics?

I don’t think that it is an accident that Schumpeter and von Hayek, coming from a Catholic background, were quick to see the creative side of the entrepreneur. Catholics, unlike Protestants, have a positive view of creation. Some Protestant thought exalts redemption by stressing the incompleteness and sinfulness of creation. Max Weber, for example, influenced by Calvinism, emphasizes the denial and asceticism of economic activity. He overlooks creativity. We are made in the image of God and it is our vocation to be creators, to help repair the Kingdom, to bring out from creation the things hidden in it from the beginning.

The Church’s social teaching, historically, has been wedded to what might be described as a pro-labor, pro-worker, and communitarian stance, which appears to favor the welfare-state approach. Did John Paul II, in your view, move the Church beyond its more traditional alignment with the labor, social-democrat perspective on economic matters?

There are indications that he learned from Hayek. It is not hard to see, for example, in Centesimus Annus 32 and 33, and through 42, the influence of this. There are definite resemblances. More than Hayek, the pope worries about the poor and he is critical of the faults of early capitalism and its remnants still today.

Capitalism and democracy are thoroughly and genuinely communitarian. Socialism, as its name suggests, pretends to be communitarian, but it involves the community of the hive, or the herd. It is not the human community, which is different from the community of any animal. Individual human beings are unique. Each individual is a center of decision-making and responsibility; each has an immortal soul. We need a theory of community that does justice to the individual person. I believe a form of German romanticism has had too strong a grip on Catholic social thought — organic thinking, seeing everything as connected to everything else, the way an organism is whole. Human beings are not quite like that; we form a community — but, it is a community of free persons.

Didn’t the pope call for some safeguards to protect the poor in a free-market system?

Some of the confusion has arisen because systems that aren’t really capitalist are called capitalist — such as the state-controlled system in Latin America, which is really a form of precapitalist mercantilism. There are markets, but the system is heavily state-controlled in a corrupting way, especially as it is wedded to a disrespect for law and morals. This results in a certain harshness and an unfeeling application of your own interests. That is not a sin of freedom, but a sin of lacking morals. It is an amoral use of freedom. But the immorality, not the freedom, is the problem.

There are those who argue that John Paul II favored some kind of third way, a system using the best of both capitalism and socialism, while avoiding the extremes of either.

The pope explicitly said that Catholic social thought is not a third way. A third way implies some kind of utopia, which doesn’t exist. What John Paul preferred to do — and he was, after all, a phenomenologist — was to understand reality as it is. The pope considered the active forces before him and sought in them the possibilities of good and evil, in order to strengthen the former. That is not to look for a third way, but to encourage the best that there is.

Is Catholic social teaching, then, perfectly compatible with your notion of democratic capitalism?

Perfectly is too strong a word. Catholic social thought has learned by trial and error to see that democratic institutions, for all their faults, do a better job protecting the human rights of individuals and communities — like the Church — than any other alternative. John Paul II believed that the creative activity of the entrepreneur and the use of the market system are the best available means to lift up the poor. That doesn’t imply perfect compatibility with the Gospel — only that nothing better is available. Neither capitalism nor democracy makes for the Kingdom of God, but as existing systems they are closer to the ideal than any other.

Better than the welfare state, in other words?

I am prepared to make that case. Vatican II’s Gaudium et Spes, even as it praises the achievements of the welfare state after World War II, warned against the possible abuses inherent in the system, including the cultivation of a dull apathy and the displacement of private initiative and virtue. Individuals are no longer involved in helping the poor; the state does the work. Real people then are no longer involved in acts of charity, which is crucial for a Christian society. Centesimus Annus makes the same point.

What exactly is the nature of the corporation’s relationship to the democratic-capitalist order?

Tocqueville notes that the first law of democracy is the principle of association, the capacity of free citizens to band together to achieve their purposes — without turning to the state, without turning to the aristocracy. They organize themselves to achieve their ends. This is what makes a mob a people, when individuals can organize themselves into self-governing groups. The mob, as we know, can be a worse tyrant than a king.

Now where do you get the economic funds, the free hours, for private activity? Only from the business corporations, which are the wealth producers. The corporation is the distinctive form of a capitalist order; it is not the individual but the corporation — the voluntary association of people to achieve certain economic and political purposes. The Church itself is a corporation!

The business corporation teaches people not only how to form associations for business, it also provides wealth for people to have free time and discretionary funds. Thus society can be bettered, when there is extra money, beyond taking care of basic shelter, to build a church, and a theater, a city hall, a park. These are ways to benefit the common good. Religion is the first political institution of democracy, Tocqueville said, as it teaches man about his inestimable worth. The second institution, I would argue, is the business corporation, because it provides the economic wherewithal for the practice of civil society. If the state has to provide everything, you simply cannot have democracy.

This interview originally appeared in the November 1997 issue of Crisis Magazine.