Caritas in Veritate, Chapter Three

Note: This post is the third in a series of posts on Pope Benedict XVI’s “Caritas in Veritate”. Also see posts on the Intro and Chapter One, Chapter Two, Chapter Four, Chapter Five, and Chapter Six and Conclusion.

Now for a discussion of Chapter 3 of Pope Benedict XVI’s social encyclical, Caritas in Veritate. As I mentioned in my last post of this series, Chapter Three is where Benedict most directly addresses the idea of the economy. Benedict says from the outset that the economy has been misconstrued and abused for much of human history:

Then, the conviction that the economy must be autonomous, that it must be shielded from “influences” of a moral character, has led man to abuse the economic process in a thoroughly destructive way. In the long term, these convictions have led to economic, social and political systems that trample upon personal and social freedom, and are therefore unable to deliver the justice that they promise.

He also seems to take on the more conservative notion that charity can obviate the need for justice, but the reverse is also false.

Because it is a gift received by everyone, charity in truth is a force that builds community, it brings all people together without imposing barriers or limits…the logic of gift does not exclude justice, nor does it merely sit alongside it as a second element added from without; on the other hand, economic, social and political development, if it is to be authentically human, needs to make room for the principle of gratuitousness as an expression of fraternity.

To summarize, charity is necessary but not sufficient for justice.

He then distinguishes between different levels of justice in the context of markets:

In a climate of mutual trust, the market is the economic institution that permits encounter between persons, inasmuch as they are economic subjects who make use of contracts to regulate their relations as they exchange goods and services of equivalent value between them, in order to satisfy their needs and desires. The market is subject to the principles of so-called commutative justice, which regulates the relations of giving and receiving between parties to a transaction. But the social doctrine of the Church has unceasingly highlighted the importance of distributive justice and social justice for the market economy, not only because it belongs within a broader social and political context, but also because of the wider network of relations within which it operates. In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. Without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function.

This section strikes me as incredibly important. It is thoroughly Polanyi-esque, implicitly arguing that the economy is embedded in society and needs to be treated as such. There is also this notion of trust that is introduced. I think trust would often be categorized by economists as an “institution,” something that can likely be made exogenous when thinking about the economy, but this is naive, Benedict argues. Trust is both a foundation of and a result of the economy.

The emphasis on social and distributive justice is also important because it forces the faithful to think outside the usual Christian paradigm of justice vs. mercy. Social justice is not simply an option, as mercy might be, but a necessity. Casting the economy in these terms forces the faithful to work so that the economy does not just enable, but guarantees, social justice.

Next, Benedict seeks to redefine economic activity. In this section, I’m beginning to see some contradictions cropping up. First,

Economy and finance, as instruments, can be used badly when those at the helm are motivated by purely selfish ends. Instruments that are good in themselves can thereby be transformed into harmful ones. But it is man’s darkened reason that produces these consequences, not the instrument per se. Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.

So, it’s not the economy’s fault; it’s the people who are running it. By the same token, however,

Economic activity cannot solve all social problems through the simple application of commercial logic…The Church’s social doctrine holds that authentically human social relationships of friendship, solidarity and reciprocity can also be conducted within economic activity, and not only outside it or “after” it. The economic sphere is neither ethically neutral, nor inherently inhuman and opposed to society. It is part and parcel of human activity and precisely because it is human, it must be structured and governed in an ethical manner.

To reconcile these two sections, I think we need to realize that the first paragraph is not an endorsement of charity-based capitalism. When reading the second paragraph, particularly the part about the economy not being ethically neutral, it seems that Benedict is calling on humans to structure the economy in a just manner. Thus, the blame is not so much on humans who fail to act charitably, but on those who perpetuate an economic system that inherently leads to injustice.

Benedict then continues with ideas of embeddedness:

Today we can say that economic life must be understood as a multi-layered phenomenon: in every one of these layers, to varying degrees and in ways specifically suited to each, the aspect of fraternal reciprocity must be present. In the global era, economic activity cannot prescind from gratuitousness, which fosters and disseminates solidarity and responsibility for justice and the common good among the different economic players.

Then, in another important move, Benedict calls for people to reenvision enterprise:

What is needed, therefore, is a market that permits the free operation, in conditions of equal opportunity, of enterprises in pursuit of different institutional ends. Alongside profit-oriented private enterprise and the various types of public enterprise, there must be room for commercial entities based on mutualist principles and pursuing social ends to take root and express themselves. It is from their reciprocal encounter in the marketplace that one may expect hybrid forms of commercial behaviour to emerge, and hence an attentiveness to ways of civilizing the economy.

This is sort of a call for an economy that fosters more Mondragons, not just for people to create more Mondragons. In other words, we must create an economy where socially-oriented enterprises like Mondragon are not simply headed for failure.

Along these same lines,

In order to defeat underdevelopment, action is required not only on improving exchange-based transactions and implanting public welfare structures, but above all on gradually increasing openness, in a world context, to forms of economic activity marked by quotas of gratuitousness and communion. The exclusively binary model of market-plus-State is corrosive of society, while economic forms based on solidarity, which find their natural home in civil society without being restricted to it, build up society.

And now, recognizing the limits of traditional business:

Old models are disappearing, but promising new ones are taking shape on the horizon. Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value…Moreover, the so-called outsourcing of production can weaken the company’s sense of responsibility towards the stakeholders — namely the workers, the suppliers, the consumers, the natural environment and broader society — in favour of the shareholders…Today’s international capital market offers great freedom of action. Yet there is also increasing awareness of the need for greater social responsibility on the part of business.

To conclude the section, Benedict again shifts the focus to these issues in the context of globalization:

humanity itself is becoming increasingly interconnected; it is made up of individuals and peoples to whom this process should offer benefits and development…Despite some of its structural elements, which should neither be denied nor exaggerated, “globalization, a priori, is neither good nor bad. It will be what people make of it”…It is necessary to correct the malfunctions, some of them serious, that cause new divisions between peoples and within peoples, and also to ensure that the redistribution of wealth does not come about through the redistribution or increase of poverty…Unfortunately this spirit is often overwhelmed or suppressed by ethical and cultural considerations of an individualistic and utilitarian nature.

Benedict, in a Stiglitz-esque fashion, concludes by calling for a more just globalization, one that does not suppress ethics with so-called free market ideology. A more just globalization, in summary, will keep the economy in its proper place, embedded in society. It will be welcoming toward socially-oriented enterprises that operate under a stakeholder model. All this is essential to his notion of social justice. The lack of the social justice is not the fault of the economy, but of the people who have helped perpetuate the current structure of the economy. Of course, all this still leaves the question, how will the economy transition, and who will bring that about? Benedict pays lip service to political freedom throughout this chapter, but this obviously is still lacking. How will this develop into more practical recommendations? Stay tuned.

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