Free Markets Have Their Limits: Two Cheers for Capitalism

A discussion of John Paul II’s latest encyclical, Centesimus Annus, begins logically with a brief examination of the famous document whose centenary it commemorates, Pope Leo XIII’s Rerum Novarum, the grandfather of the great social encyclicals of our century and the one that singlehandedly created a new theological discipline now commonly referred to as the “social doctrine” or “social teaching” of the Roman Catholic Church. No doubt, the older Christian tradition had much to say about justice as a social virtue and the proper uses of wealth, but not until the moral problems spawned by the industrial revolution became acute during the latter part of the nineteenth century was the need felt to bring this body of knowledge to full development and give it its present form.

One of the most interesting and provocative aspects of Leo’s encyclical is its teaching concerning private property, which it describes as a stable and permanent, inviolable, and indeed “sacred” right—ius sanctum. The somewhat unexpected appearance of the word sacred in this context was not an accident. In the first draft of the text, Matteo Liberatore, S.J., one of Leo’s chief collaborators, had written with amazing candor, “Private property is sacred”—la propriety privata e sacra. Never before in an official Church document had the right of property been so forcefully asserted. The older view, summarized in Gratian’s Decree and well articulated by Thomas Aquinas, was that at the outset the earth and its resources were common to all and that their subsequent allocation to private individuals pertained to the “law of nations,” considered by Thomas to be a part of the positive law—ius positivum (Summa Theologice, I-II, 95, 4; II-II, 66, 2).

Long experience had shown that in general material goods are more peacefully, more efficiently, and more fruitfully managed when entrusted to individuals than when left undivided. In that sense, private property was clearly in accord with human nature and was to be encouraged whenever possible.

Such had been Aristotle’s view and such is the position that came to be all but universally accepted once Aristotle’s Politics was translated into Latin, shortly after the middle of the thirteenth century. Still, no one went so far as to speak of private property as “sacred” and “inviolable,” or even as a natural right, if only because the notion of natural rights as distinguished from civil rights is foreign to the literature of the entire pre-modern period. Private property was sanctioned because under normal circumstances it was the system that worked best, but there was nothing sacrosanct about it. Whenever necessary, exceptions to it could be made not only in the name of charity but in the name of justice as well.

Astonishingly, no one at the time of Rerum Novarum seems to have been aware of the fact that the notion of private property as an inalienable right was a daring innovation only recently imported into Catholic theology by the Jesuit Luigi Taparelli d’Azeglio. Father Taparelli had been a teacher of the future Leo XIII at the Roman College and later became the author of the most influential treatise of moral theology written by a Catholic in the nineteenth century, a mammoth work of over 1,500 pages entitled Theoretical Essay on Natural Right, which in his encyclical on Christian education (Divini Illius Magistri, 1929), Pius XI was still recommending as a work comparable in value to those of Thomas Aquinas. In one of his letters, Taparelli himself informs us that he was ill prepared to write on the subject of natural right when, at the age of 50 and with no special training, he was assigned to teach it at the Jesuit Studium in Palermo. The little that he knew about it, he says, came from Locke and his numerous progeny, in whose works the notion of private property as an absolute or imprescriptible right bulks large.

All of this changed when, thanks in large part to Taparelli’s zeal, the Thomistic renewal began to take hold in Italy, but it was a long time before Thomas’s views could be thought through and assimilated. University life had been severely disrupted by the French Revolution and the Napoleonic wars, and its reorganization would require a minimum of two generations, for the core of new teachers needed for this gigantic task first had to be trained before they could train others. It bears noting that, although Taparelli was fully committed to the propagation of Thomism, his knowledge of Thomas appears to have been mostly inherited from the conservative Protestant theologian and philosopher of religion, Christian Wolff, whose manuals enjoyed enormous popularity among Catholics from the second half of the eighteenth century onward.

To his credit, Taparelli stopped short of calling private property “sacred and inviolable.” That precise formula can be traced back to Adam Smith’s Wealth of Nations (I, 10, 2), from which it found its way into the French Revolution’s Declaration of the Rights of Man and the Citizen (1789) and eventually became a commonplace in the political literature of the nineteenth century. As late as 1868, John Stuart Mill could still write: “The sacredness of property is connected, in my mind, with feelings of the greatest respect.”

It seems odd at first glance to speak of wealth or money, which is not an end in itself but at best a means to an end, as something “sacred” and “inviolable.” How this came about will become clearer if we recall the ideological context to which these terms originally belonged, namely, the theory of sacred kingship as it had developed in the West since roughly the twelfth century. According to that theory, which has its roots in the Old Testament (e.g., I Samuel 26:9), the person of the king, the anointed of the Lord, was sacred and inviolable. This meant that any attack on his life or violation of his prerogatives was a sacrilege.

We find an echo of that theory in Federalist 69, where Hamilton, who is comparing the British king to the American president, says of the former that his person “is sacred and inviolable; there is no constitutional tribunal to which he is amenable; no punishment to which he can be subjected without involving the crisis of a national revolution.” Without any exaggeration or oversimplification, one can say that in the course of the modern period the divine right of kings was replaced by the sacred right of property. To convince oneself of it, one has only to look at Locke’s Two Treatises of Government, the first of which is an attack on Filmer, the foremost theorist of divine kingship, and the second, a defense of private property, the keystone of Locke’s own political thought.

Needless to add, Pope Leo, who was not a theological illiterate and constantly sought the advice of the best theologians of his time, had no intention of deifying mammon or declaring material wealth intrinsically holy. His main concern was with the plight of the modern worker, whose lot he was eager to improve. Calling the right of property “sacred” was his way of combating socialism, which was daily growing more powerful and posed an even greater threat to human dignity than the unbridled liberalism of his day, insofar as it deprived the worker not only of the fruit of his labors but of his freedom. Still, it does not take much imagination to realize that his all-out defense of private property ended up by benefiting the rich as much if not more than it did the poor. The mentality that informs it is not far removed from the one that Anatole France gently but ever so effectively satirized when, in The Red Lily, he praised “the majesty of the laws, which forbid rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.”

To be sure, Leo was careful to distinguish between “ownership” and “use.” One’s right to the property for which one had toiled was sacred in the sense that it could never be abrogated, but the property itself had to be used for the good of all. Ownership was a matter of justice; “use” was a duty of charity and hence unenforceable by law. The day was not far off when this highly conservative view would be challenged by powerful voices not only outside the Church but within it, including that of the prominent social Catholic La Tour du Pin, one of the founders of the important French social action group Oeuvre des Cercles.

Property Limits

This brings us directly to Centesimus Annus, which, coming as it does on the heels to the dramatic collapse of socialism in Europe and throughout the world, has vindicated in a spectacular way Rerum Novarum’s prophetic (if a bit one-sided) stand on private property, but not without adding a good deal of its own to what Leo had said. Since the new encyclical has already been well analyzed by others, I shall limit myself to a few observations about the points on which it seems to me to go beyond Rerum Novarum, depart from it, or otherwise improve upon it.

The most obvious of these concerns the emphasis on the “universal destination of material goods,” the issue on which, if my interpretation is correct, Leo’s encyclical was most vulnerable. Leo had made it plain that material goods, although privately owned, were intended for everyone’s benefit, but by shifting their use from the sphere of justice to that of charity, he deprived that principle of all legal force and left its largely unspecified application to the initiative of individual Christians or groups of Christians.

On that score, Centesimus Annus has a lot more to offer. It devotes a long chapter to this matter and goes into considerable detail about such timely issues as aid not only to the poor and the marginalized among us but to poorer nations, the protection of the environment, the maximization of human as well as of material resources, and the like. It also prudently refrains from speaking of private property as a sacred right, thus tacitly repudiating a key teaching of Rerum Novarum or at least rephrasing it in such a way as to make it conform more closely to standard Church teaching. The change was all the more proper as the rapidly evolving political situation in Eastern Europe had done away with the need to trumpet the inviolability of private property as a bulwark against the rising tide of socialism.

When Pope John Paul II affirms that for Leo private property was not an “absolute value” (Centesimus, 6) or an “absolute right” (30), he appears to be offering what used to be called a “benevolent interpretation” of his predecessor’s teaching. Granted, Leo’s vigorous defense of private property is hedged about with all kinds of admonitions regarding its charitable use, but the gist of his argument is precisely that, contrary to what the Church and virtually everyone else had previously held, one’s ownership of legitimately acquired goods is not forfeited by one’s misuse of those goods. I might add that John Paul II’s reinterpretation is “benevolent” in more ways than one, for there is a good chance that, were he alive today, Leo would be among the first to acquiesce in it.

If Centesimus Annus takes a less extreme view of private property than Rerum Novarum, in other respects it shows itself far more open to modern modes of thought. To measure the distance that separates the two encyclicals, one has only to check how often Thomas Aquinas is quoted in each of them—several times in Leo’s encyclical; not once to my knowledge in Centesimus Annus. This is not to suggest that Thomas is totally absent from the latter but only that its tone is demonstrably less Thomistic than that of Rerum Novarum.

Centesimus Annus notes with good reason that in discussing the organization of society “the Church has no models to present,” since truly effective models can only arise “within the framework of different historical situations” (43). It likewise freely admits that the Church “is not entitled to express preferences for this or that institutional or constitutional solution,” the devising of which is a task usually best carried out by people on the spot.

These disclaimers notwithstanding, it would be hard to deny that the encyclical offers us at least a general model comprising three distinct elements. First, a liberal democratic structure that acknowledges the freedom and transcendent dignity of the person as a being endowed with pre-political rights that neither the state nor anyone else is permitted to infringe. Second, a free-market mechanism that encourages entrepreneurial initiative as a means of stimulating economic growth and enabling workers to build a better future for themselves and their families. For the first time in a document of this kind, the encyclical speaks in positive terms of “capitalism,” a word long held in suspicion by theologians because of its tainted origins but now redefined in keeping with the norms of Christian morality (42).

The third element is the common destination of material goods, which we have already mentioned and which is expressly introduced as a safeguard against the glaring inequities that frequently if not habitually arise when the economic life is controlled by market forces alone (19). History is there to remind us that the founders of modern liberalism were wrong in thinking that, in and of itself, the free interplay of these market forces can be trusted to bring about a reasonably just distribution of goods within a particular society. It is simply not the case that enlightened self-interest is the sole key to the success of our communal endeavors or, as Mandeville put it famously in The Fable of the Bees: Private Vices, Publick Benefits, that the day bees started worrying about moral virtue the hive would be ruined and would recover its prosperity when each one returned to its vices. Without a generous measure of civic virtue, no society, liberal or otherwise, is likely to endure, let alone thrive. Hence the encyclical’s concern to reintroduce into the debate such cardinal, long-forgotten notions as the “common good” or the “spirit of cooperation and solidarity” (see 61 et passim).

As Pope Leo had already argued, the liberal democratic system just outlined has enormous practical advantages over its great modern rival, Marxist socialism. It does a better job of producing the goods that we require for our subsistence and well-being. It makes these goods readily available to a much larger number of people. By doing away with the “bureaucratic oppression” associated with socialism, it makes it possible for human beings to exercise the freedom on which their personal dignity depends. Finally, it is capable of self-correction in a way in which socialism is not. These are the reasons that justify both Centesimus Annus’s ringing endorsement of modern liberalism and the enthusiasm with which that endorsement has been greeted by thoughtful analysts here and abroad. Liberal democracy is after all the modern regime that comes closest to what the Christian tradition had always recommended. Such was Leo’s conclusion and such also is the conclusion at which, on the basis of far greater empirical evidence—Leo and his generation had not yet seen socialism in action—the new encyclical arrives.

What is equally important but more easily overlooked in the midst of the euphoria generated in some circles by the publication of Centesimus Annus are the severe warnings that accompany its defense of liberalism. The least that can be said about the encyclical is that it is anything but naïve about the state of our liberal democratic affairs or blind to the dangers of our free-market economy. It does not suffice to say that the Western democracies have thus far failed to live up to their own principles. The problem lies much deeper, in the principles themselves, which do not conduce to a higher level of morality or foster the kind of spiritual life that the encyclical calls for.

The term most often used by the pope to describe this morally less attractive side of American life is “consumerism,” the modern version of hedonism, that is, the excessive attachment to material goods and the unrestrained commitment to their pursuit. The problem, although more visible today than ever before, has been with us for a long time. Americans, Tocqueville once suggested, had performed the extraordinary feat of elevating “egoism” to the level of a philosophical principle. He spoke not as a critic but as a true friend of liberal democracy, one who was willing to administer the bitter medicine it needed if its promises were to be fulfilled. Centesimus Annus does not think differently. One of its fears is that the Western countries will interpret the demise of socialism as a one-sided victory that dispenses them from making “necessary corrections” in their own system (56).

And there is much to be corrected. The list of evils has seemingly grown longer rather than shorter with the passage of time. One has only to think of the breakdown of the family, the abortion plague and the push for the legalization of euthanasia, the sexual revolution, the principled defense of pornography in the name of freedom of speech, the scandal of poverty and homelessness in the midst of great opulence, the squalor of our ghettoes and devastated neighborhoods, the growth of the drug culture, the proliferation of blue-collar and white-collar crime, the scams and rip-offs of which we are the often unconscious victims, the pitiable state of American education at all levels, the trivialization of the arts and the media, and with that the enumeration has barely begun.

One can always argue that the liberal democratic system is not itself responsible for these evils, that it is an essentially benevolent system whose aim is to provide decent living conditions for as many of us as possible, and that the amount of crime, licentiousness, and vulgarity with which we have to put up is the price to be paid for the freedom we enjoy. While the argument is not without merit, it nevertheless fails to take into account some important facets of the problem. In particular, it overlooks the fact that by and large the needs which our market economy strives to satisfy are not natural but artificial needs, stimulated by the market itself and calculated to increase its profitability. Instead of trying to inculcate habits of self-restraint in the minds and hearts of its citizens, it attaches them ever more firmly to the material goods in terms of which it teaches them to measure their standard of living. What it confronts us with is not the simple hedonism to which common human nature is prone but a dynamic hedonism that feeds upon itself, endlessly creating the new desires that will fuel our commercial enterprises.

The fact of the matter is that modern liberalism has always been better at taking care of our bodies than of our souls. Nor has it ever tried to do anything else. This is not to deny that the system occasionally succeeds in producing its own brand of morality. The redefined capitalism of which the pope speaks—”capitalism properly understood,” as Michael Novak calls it in a phrase reminiscent of Tocqueville’s “self-interest properly understood”—is not amoral. It, too, has its virtues, but they are of a different order. They are the instrumental virtues of bourgeois society, virtues that are more concerned with the proper functioning of the system than with the perfect order of the soul. As Pope John Paul II writes,

Important virtues are involved in this process, such as diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships, as well as courage in carrying out decisions which are difficult and painful but necessary, both for the overall working of a business and in meeting possible setbacks.

For such virtues we can be grateful, but it is doubtful whether they will give us all that we could and should have as human beings and Christians.

Rocco Buttiglione goes straight to the heart of the matter when he says that the core of Centesimus Annus is its attempt to replace the alliance between libertinism and a free-market economy with an alliance between a free market and solidarity. What remains unclear is how, concretely, this alliance is to be brought about and what will hold it together once it has been forged, especially since its two poles originate in different parts of the soul and tend to pull us in opposite directions. Unless something is done to cement it, the new alliance is liable to prove much less stable than the first. According to the encyclical, the solution to the problem is to be sought in religion, morality, law, education, and culture, all of them “values” to which it grants, and urges the state to grant, autonomous status (19). All well and good, at least until such time as one begins to wonder about the grounding of these autonomous values.

Following Thomas Aquinas, Leo XIII looked to nature for that grounding. The assumption was that human beings are ordered to certain pre-existing ends, such as the knowledge of the truth and the achievement of moral excellence, to which they are inclined by nature itself. It was the task of education to build upon, strengthen, and purify these natural inclinations through the acquisition of the virtues, both dianoetic or intellectual and moral. One learned to look upon the good of the whole of which one was a part, not as an alien good, but as one’s own good. Solidarity or action in concert with others for the good of the whole became, as was said, “connatural.” What reason prescribed or pointed to, nature supported. The whole idea was to harmonize duty and inclination in such a way as to overcome our alienations and recover the wholeness of which our fallen condition so often deprives us.

One can understand Pope John Paul II’s reluctance to adopt this line of thought, based as it is on a teleological conception of nature that has supposedly been destroyed by modern science. But there may also be other reasons for his apparent lack of enthusiasm for Thomism, one of them being that the Thomistic school had long been under attack for its failure to come to grips with the problems of the modern age. To make matters worse, twentieth-century Thomism had been further discredited by the involvement of some of its leaders in right-wing political movements on the continent before and during World War II. Pastoral concerns, if nothing else, likewise dictated that the pope’s message be delivered in a language that is more congenial to most of our contemporaries, for whom the categories of medieval scholasticism are now mostly unintelligible.

Accordingly, Centesimus Annus makes abundant use of what Buttiglione calls a “personalistic metaphysics,” the object of which it is to establish by means of a phenomenological analysis, not indeed of nature, but of the acting person, the requirements of a just and full human life. The strategic advantage of such an approach is that it abstracts from natural inclinations and is thus immune to the criticisms leveled at teleology by modern science and philosophy. An added advantage is that it presents us with a loftier conception of morality than the one associated with modern liberalism in its primitive or Lockean form.

One must nonetheless ask how, without further support from nature, this moral ideal will prevail over the powerful forces ranged against it—how, humanly speaking, the “ought” of practical reason will be able to hold its own against the “is” of the passions that resist it. In plain terms, there is strong support on the part of nature for economic entrepreneurship and its monetary rewards. The passions that it calls into play are actual at all times and do not require a painful conversion from a concern for material goods to a concern for the good of the soul. The same cannot be said of the moral “ought,” which gets a better billing in the new scheme but not necessarily better results. What we end up with most of the time is the dreary spectacle of people who talk as if the “ought” were the only thing that matters and act as if there were nothing but the “is.” Commerce and industry prevail over morality and culture, and a more or less intelligent selfishness determines the course of their impoverished lives.

The problem that I set out to explore is whether the content of Centesimus Annus is continuous or discontinuous with that of Rerum Novarum, or, since the answer is apt to be “both,” whether one of these elements outweighs the other. Buttiglione, who is well aware of the issue, resolves it in an eminently sensible way by distinguishing between Christian social teaching, which is immutable, and Christian social doctrine, which develops as a result of the application of that teaching to changing historical situations and is therefore mutable. As a living tradition, Christianity implies more than faithfulness to the letter of the heritage it seeks to preserve; it demands faithfulness to the creative impulse to which it owes its greatness and which, one presumes, is still operative in it. The decisive question in that case is not whether there are changes to be made but whether the proposed changes are compatible with the principles underlying the basic teaching. I am reasonably certain, for example, that Leo XIII would have had no trouble accepting John Paul II’s emended version of his stance on private property. Would he have been equally comfortable with the other novel features of the latter’s doctrine?

The question is not an easy one to answer, but we can make a beginning of sorts by adverting to John Paul II’s unprecedented insistence on the more or less Kantian notion of the “dignity” that is said to accrue to the human being, not because of any actual conformity with the moral law, but for no other reason than that he is an “autonomous subject of moral decision” (13). The more usual view, which Kant was rejecting, is that one’s dignity as a rational and free being is contingent on the fulfillment of prior duties. That dignity could be forfeited and was so forfeited by the criminal who had no respect for and no desire to abide by the moral law. One’s goodness or dignity was not something given once and for all; it was meant to be achieved. Its measure was one’s success in attaining the end or ends to which one was ordered by nature. The Rousseauan and Kantian notion of the sovereign or sacred individual had yet to make its appearance. To be and to be good were two different things.

The matter would obviously require a much more careful examination than is possible here, but the little that I have said about it may help cast the problem in its proper light. Just as Rerum Novarum bears traces of the transition from late medieval to early modern thought, i.e., from the divine right of kings to the sacred right of private property, so Centesimus Annus bears traces of the transition from early modernity to late modernity, i.e., from the Lockean notion of the sacredness of private property to the eighteenth-century notion of the sacredness of the sovereign individual. My question is whether this rather remarkable change in the Church’s “doctrine” might not be indicative of a more than inconsequential change in its “teaching.”


  • Ernest Fortin

    Ernest L. Fortin, A.A. (1923 - 2002) was a professor of theology at Boston College. While engaged in graduate studies in France, he met Allan Bloom, who introduced him to the work of Leo Strauss. Father Fortin worked at the intersection of Athens and Jerusalem.

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