Practical subsidiarity

Practical subsidiarity May 31, 2011

Too often, we don’t think through the implications of the principle of subsidiarity. Our friends on the right seem to equate it with small government and free market individualism. This is fundamentally misguided. But many on the left almost cede the point, stressing that it must always be twinned with solidarity (as Pope Benedict says clearly in Caritas in Veritate) and leave it at that. Few grapple with the implications of the doctrine itself. But it is quite a powerful concept in its own right, and I think we all spend more time teasing out its implications. 

The most formal statement of subsidiarity comes from Pius XI’s Quadragesimo Anno from 1931, in which he says: “Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them”.

In other words, it’s about letting human dignity flourish. It’s about a social order centered on the person, not the individual. This is important, for Pius sees subsidiarity as a bulwark against not only excessive centralization, but also excessive individualism (the “poisoned spring” of the “evil individualist spirit”). This is too often forgotten. Indeed, throughout the encyclical, it seems that the individualism is more directly responsible for the problems of the day. As he says: “things have come to such a pass through the evil of what we have termed “individualism” that, following upon the overthrow and near extinction of that rich social life which was once highly developed through associations of various kinds, there remain virtually only individuals and the State”. In other words, aspects of modern liberalism seek to obliterate or neutralize a whole variety of subsidiary mediating institutions between individual and state. And that leaves people adrift, lacking any organic connection – swimming alone in a vast ocean, vulnerable to all kinds of predators. As Pius XI is well aware, that is not the way it used to be. One way to read Quadragesimo Anno is as a nostalgic call to rectify the injustices of the modern industrial era, an authentically conservative manifesto. It is no coincidence that secular leftists like Tony Judt make similar arguments, from a completely different philosophical perspective.

What, then, is the proper role of government? Pius is emphatic that “the right ordering of economic life cannot be left to a free competition of forces” and cannot “be considered and treated as altogether free from and independent of public authority”. Rather, economic life should be “subjected to and governed by a true and effective directing principle”. In other words, the government cannot just withdraw from the economy. It must pursue the common good – actively.

Sometimes it has a direct role. As Pius noted: “On account of changed conditions many things which were done by small associations in former times cannot be done now save by large associations”. In the modern state, this often justifies a direct role for government in a number of areas, including defense. But more than this, the government must always provide the space within which subsidiary institutions can flourish – always “directing, watching, urging, restraining”. As John Paul II said much later in Centesimus Annus, while the principle of solidarity justifies a direct state role in economic affairs, the principle of subsidiarity justifies an indirect – but no less important – role, to  create “favourable conditions for the free exercise of economic activity”. Often, this is a watchdog role that protects small groups from being dominated and swallowed up by larger and more powerful ones. The state is called upon to guarantee a level playing field. Again, it is about protecting human dignity.

What then are the practical implications of all of this? I can think of five off hand, all relevant in current debates.

1. The financial sector. The dangers of a large and out-of-control financial sector were very much on the mind of Pius XI, as be wrote during the turbulent 1930s. Consider his words: “In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure. This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will”. These words ring uncannily true today, as we struggle to recover from the greatest financial crisis since the days of Pius XI, brought about by the very same causes – a runaway financial sector driven by greed to seek short-term profit above all, and record levels of wealth inequality.

A key problem is the idea of too-big, too-important, or too-interconnected to fail. These kinds of financial institutions know that it is highly unlikely they will be allowed to fail, as the implications could be catastrophic (it was tried with Lehman Brothers – remember what happened?). But because the financial institutions know this, they borrow excessively, pile up leverage, and take too many risks. When the going is good, it’s really good. But when it’s bad, they can walk away and send the bill to the taxpayer.

 This is not conducive to a just social order. Financial institutions should ultimately be in the business of bringing together borrowers and lenders, of intermediating capital to where it is most needed. Subsidiarity tells us that the personal level is important. With a small bank, the borrower and lender know each other, trust each other. Today, loans are packaged, securitized, sold off, and dissipated. Financial institutions put their own short-term interests ahead of their own investors, and use complex financial engineering to hide what is often nefarious behavior. But these are the incentives built into the current system, and it needs to change. We need to cut the financial sector down to size, regulate it heavily, stop it gambling with its own money, and put it back in the service of the real economy. This is in accord with subsidiarity, but it goes up against some of the most powerful vested interests out there.

2. Health care. Many American Catholics on the right invoke subsidiarity to attack the Affordable Care Act and other attempts at health care reform. This is a wrongheaded approach, which seems to equate subsidiarity with keeping the government away from private activity. But this is simply and demonstrably wrong. For a start, it might well be the case that health care is one of those areas more suited to “large associations” than “small associations” as the pooling of risk over as many people as possible benefits the common good. Does this matter if this risk is pooled by government (single payer) or by regulated private insurers (the Affordable Care Act)? Not really. For sure, it is possible that medical decisions taken by government bureaucrats can go against human dignity, but the same is true for private insurance offered by large faceless insurance companies. The latter is certainly the key problem in the United States, at least before the Affordable Care Act, with so many millions denied insurance, or forced to pay large amount out-of-pocket. This extensive rationing of health care by cost is a scourge on American society.

What does Catholic social teaching say? Solidarity calls for universal health insurance, for the healthy to subsidize the sick. Subsidiarity calls for health care decisions that reflect human dignity, especially through a personal relationship between primary care physician and patient. In the field of insurance, it calls for protections against exploitation. It calls for a level playing field between patients and insurers. The Affordable Care Act does this by regulating minimum benefits packages, forbidding discrimination based on pre-existing conditions, and setting up exchanges to give more bargaining power to patients versus insurance companies. It is perfectly compatible with subsidiarity. Those who claim otherwise have never really made a case that goes beyond rhetoric.

3. Trade unions. As has been long recognized by Catholic social teaching, unions are primary examples of subsidiary mediating institutions. Governments must therefore support collective bargaining, and lay down frameworks that allow unions to flourish. As the Church teaches, unions are “a positive influence for social order and solidarity, and are therefore an indispensable element of social life”.  This is even more important today than in the past. Unionization rates are at an all-time low in the United States, and are falling in many countries. Expanding sectors of the economy disdain unions, there is an ideological onslaught on collective bargaining, and the forces of globalization push governments to lower labor standards. As Pope Benedict XVI said in Caritas in Veritate: “Through the combination of social and economic change, trade union organizations experience greater difficulty in carrying out their task of representing the interests of workers, partly because Governments, for reasons of economic utility, often limit the freedom or the negotiating capacity of labour unions”. Because of this, “The repeated calls issued within the Church’s social doctrine, beginning with Rerum Novarum, for the promotion of workers’ associations that can defend their rights must therefore be honoured today even more than in the past, as a prompt and far-sighted response to the urgent need for new forms of cooperation at the international level, as well as the local level”. How many Catholics pay lip service to subsidiarity and never even think about the importance of unions in the social order?

4. Monied interests. It is a grave injustice that money can so easily buy influence. This scourge is an old one, and one that has infected the Church over the years, but it is a particular problem in American politics today. This poisons political and social life. Over the past quarter century, the dominance of large corporate interests – combined with a dysfunctional political system – has fueled a massive increase in inequality. As wages stagnate, the wealthy gain from ever-lower top marginal tax rates, excessive deregulation, a runaway financial system, the gutting of social safety nets, and curbs on union power. Small, poorly-funded consumer advocates are frozen out; large, wealthy, corporate advocates are welcomed with open arms. Prudential stewardship of the environment is scorned. And much of this is hidden behind closed doors and effective propaganda.

Pius XI’s “economic dictatorship” is not only alive and well today, but thrives on steroids. What he wrote eighty years ago is just as true today, if not more so. As he noted, the “bitter fight to gain supremacy over the State” by industry has terrible consequences – “economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain”. He condemned “the virtual degradation of the majesty of the State, which although it ought to sit on high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is become a slave, surrendered and delivered to the passions and greed of men”. This all violates justice, dignity, subsidiarity.

5. Social safety nets. The Church recognizes social safety nets as important. Rights recognized by the Church include subsidies for unemployed workers and their families; pensions and insurance for old age, sickness, and work-related accidents; and social security connected with maternity. As noted by Pope John Paul II in Laborem Exercens: “The obligation to provide unemployment benefits, that is to say, the duty to make suitable grants indispensable for the subsistence of unemployed workers and their families, is a duty springing from the fundamental principle of the moral order in this sphere, namely the principle of the common use of goods or, to put it in another and still simpler way, the right to life and subsistence”.

This seems pretty clear. And yet, many Catholics who veer toward the right like to quote the same pope who, in Centesimus Annus, criticized the “social assistance state” which “leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients”. How can these two statements be reconciled? Quite simply, the legitimate attempt to provide social safety nets can backfire, if subsidiarity is insufficiently respected. Strangely, many on the right see this as an argument for paring back state efforts to guarantee security. Clearly, this is not in accord with solidarity.

So what is the solution? There are any number of approaches that work well. In-work benefits, providing subsidies to low-income wage earners, are quite effective in reducing poverty (think of the earned-income tax credit). The famous “Danish model” insists that everybody who receives unemployment benefits enrolls in training or reduction. But more fundamentally, welfare states can be constructed entirely around the principle of subsidiarity, as happened in many postwar European Christian Democratic states. This means a welfare system funded by the state, but managed by subsidiary mediating institutions in a fully autonomous manner, by bodies that are legally independent in the targeting and execution of their functions. Of course, this costs money, but then again, subsidiarity is more concerned with what a government does than how much it spends. Too many on the American right, overly influenced by the individualism that so concerned Pope Pius XI, seem to lose track on these distinctions.

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