Why Libertarian Catholics are Wrong on Economics Part 4
September 27, 2022 | 1,694 words | Economics, Politics, Philosophy, Religion
A Brief History: Part Four
As my little amateur history draws to a close, I will be offering two concrete suggestions for improving the economic status quo. As a preface to making those suggestions allow me to state for the record I do not disagree with the libertarian premise about regulation stifling innovation and undermining incentives that drive capitalism. Or that capitalism is the best economic system for “freeing” large masses of human beings from lives of misery and poverty.
I am also in lockstep with libertarians who lament government’s frequent blunders when it tries to referee the economic free-for-all.
But when complaining about regulation infringing on individual liberty, and pointing out government workers are often either incompetent or corrupt, libertarians never get around to acknowledging their own shortcomings. With the most glaring being how their pursuit of self-interest frequently runs counter to the common good. It never seems to occur to them if they would simply do a better job of chasing their economic dreams with more compassion and empathy, the social fabric would not be so tattered, and there would be no need for government to take such an outsized role in the economic affairs of the nation.
Then there is the libertarian shibboleth about taxes amounting to thievery committed against the most talented and productive citizens, by those who are not. An egocentric refrain that found a ready audience in the 20th century via the likes of Austrian economist Ludwig von Mises (1881-1973), and the novelist Ayn Rand (1905-1982), among many others.
The celebration of rugged individualism reminds us capitalism is a system of economic exchange that favors the clever and advantaged, while failing to take into account many people are neither. Yes, welfare and other programs meant to lift up the poor often inadvertently trap them in a kind of permanent dependency and poverty. Yet all we ever seem to get out of libertarians on this topic is an unlimited supply of cockeyed optimism that more “trickle down” will eventually solve our social ills.
Shouldn’t the most talented and productive among us be expected to look out for those who are less-talented? And figure out organizational systems and employment opportunities that can help them be more productive? Isn’t that the definition of a humane society?
The best and brightest obviously thrive under James Madison’s legendary “absence of obstacles” approach to economic life. But in many cases the average citizen is prevented from experiencing all that life has to offer by dire economic circumstances that define his or her existence, and over which he or she has no control. You may not notice this unpleasant reality where you live or work, but drive a mile or two in the right direction and chances are you can’t miss it. The closest many of our fellow citizens ever get to the American Dream is an unmanageable portfolio of soul-crushing consumer debt.
If no longer physically exploited as in the past, the average employee has certainly been marginalized by all the mergers and acquisitions, and by the excessive financialization (for lack of a better word) of today’s economy. They have no way of entering the sophisticated networks of knowledge and communication that have come to dominate, so they are unable to participate in either an effective or dignified way. They have, for all intents and purposes, been excluded from “the circle of exchange.” The dazzling economic development we are witnessing is taking place over the heads.
These are not my words or my analysis. It’s the insight of Pope John Paul II, writing in Centessimus Annus (no. 33 and 34) to describe the employment situation of the average worker.
There is a simple, straightforward way to improve the plight of non-managerial employees, and its effectiveness has already been established. But we decided sometime during the Reagan administration this particular employment policy was getting in the way of maximizing investor return. I am referring here to the concept known as collective bargaining.
Much has been written about the loss of manufacturing jobs that once enabled simple production line workers to buy a house, send their kids to college, and enjoy modest vacations. But there was nothing magical about those jobs that yielded such positive results. Rather it was the introduction of collective bargaining into the financial equation that created what became the dramatic post-WWII rise of the American middle class.
This golden age of employment was an anomaly in our nation’s history, by the way, the only period when those without an ownership stake in a business were treated as something more than replacement parts, and were allowed to share in the financial windfall their labor helped generate.
The very same concept could be applied to today’s service industry jobs and the entire gig economy, along with all those new fulfillment center jobs. Taken together these represent the lion’s share of employment opportunities for regular folks. We could achieve the same results we got after the Roosevelt administration passed the National Labor Relations Act in 1935. Namely, widespread prosperity up and down the economic food chain.
The one thing standing in the way of re-introducing collective bargaining into the economic equation is the imperative to prioritize investor return. Our country’s long-standing bias against unions was revived in the early 1960s, when Milton Friedman announced the only social responsibility of a corporation is to be profitable. The final nail in the coffin came in the 1980s during Ronald Reagan’s second term as President. That’s when hard-won anti-trust (anti-monopoly) legislation enacted during the first half of the 20th century was rendered null and void in the name of “lower consumer pricing.”
This turned out to be a ruse, a clever marketing ploy. It gave corporations a new rationale to corner markets, keep a lid on wages, and increase profits.
Not that any of this is breaking news, mind you. There has always been a tug of war between the interests of capital (return on investment), and those of labor (securing food and shelter). The only difference these days is how the interests of capital have been granted an overlay of social responsibility for its role in “creating jobs.” The rank-and-file are supposed to be eternally grateful, despite the fact many of the jobs being created are downright crummy and aren’t worth having.
Sadly, the rise of the conservative/libertarian mindset in our time has made any discussion of organized labor verboten.
My second and last concrete suggestion to improve the economic status quo is much broader in scope and more philosophical in nature. It involves movers and shakers being more compassionate and empathetic in chasing their economic dreams. When it comes to tweaking the tone of our commerce to be more considerate of others, especially those others who toil for their daily bread, this is one reform that will have to start with the kingpins, rather than progressing through a more traditional from-the-ground-up grassroots movement.
It is the swash-buckling entrepreneurs and daring disrupters, the senior executives and upper management at our corporate behemoths, the ivory tower money managers who decide which ideas will live and which ones will die, who must embrace an operating principle other than the limited distribution of short-term profit.
And believe it or not, there is already some positive development in this direction, so the proposition is not as hopelessly farfetched as it sounds. In August 2019 an influential think tank known as the Business Roundtable (BRT) announced its new “Statement on the Purpose of a Corporation.” It boldly redefines that purpose as “promoting an economy that serves all Americans.”
While you may not have heard of this group, since 1978 the BRT has periodically issued Principles of Corporate Governance. Each version since 1997 has endorsed shareholder primacy, echoing Milton Freidman from 1962 in stating corporations exist primarily to serve investors.
Which makes their August 2019 Statement a real game-changer. It was signed by 181 CEOs who are now committed to lead their organizations for the benefit of ALL stakeholders: customers, employees, suppliers, communities, and investors. What a beautiful concept.
Of course, 181 CEOs is a drop in the bucket and does not represent any sort of critical mass. Many of our most powerful corporate masters of the universe have not yet gotten this particular memo. But the BRT has made a good start, and the leaders of big-time operations like the Ford Foundation, Johnson & Johnson, JP Morgan Chase, Progressive Corporation, and Vanguard Investments have signed on.
The full list of signatories is available at https://opportunity.businessroundtable.org/ourcommittment.
Needless to say, attempting to transform our economic model into one based on what Catholic social teaching refers to as “an economy of justice and charity” will be a long and arduous process. No doubt the effort will find itself beset with well-intentioned missteps and outright mistakes. If human beings are involved, you know it’s going to be messy.
The drive toward avarice is hard-wired into our fallen nature and is not easily overcome. Just as the road to hell has always been paved with good intentions. This is where outside oversight can help keep things on track. But so many of our regulatory agencies have been gutted, and legislation designed to rein in the worst excesses has either been repealed or shrewdly worked around.
Today’s battle in the courts to break up the tech giants and other monopoly enterprises, and Congress’ attempt to close tax loopholes and clamp down on widespread tax avoidance, are things that can help bring into being the Business Roundtable’s vision of an economy that serves all Americans.
If only the devout intellectuals at First Things magazine and the current crop of conservative/libertarian Catholics would consider the viability of such judicial and legislative activity. If only they could envision a different sort of political paradigm than what they are wedded to now.
Infusing free-market capitalism with an ethos that prioritizes the common good is the key to restoring a sense of moral clarity among the general populace. If our conservative Catholic brothers and sisters are to help with this restoration, the first step will be extricating themselves from the libertarian pipe dream they’ve been living in since the glory days of the 1980s.
Robert J. Cavanaugh, Jr
September 27, 2022