New York’s Cardinal Timothy Dolan recently penned an op-ed in the Wall Street Journal on Pope Francis and economics. The op-ed was deeply flawed.
As we know, the American libertarian rear guard has been attacking the pope for a whole now on what they regard as his deficient understanding of economics. This would have been a perfect opportunity to push back, on their home turf no less. But Dolan doesn’t do that. What Dolan does—with the apparent help of notorious libertarian and critic of Pope Francis, Larry Kudlow—is provide support to these arguments. In doing so, he pulls the rug from under the pope—at the same time that Cardinal Oscar Rodriguez Maradiaga came to the United States to give an impassioned call to reject libertarianism and free market zealotry.
Basically, Dolan’s op-ed is a combination of Actonism and Americanism. Since its publication, there have been a number of good, thoughtful, responses to it—including by David Cloutier and Robert Christian. Fr. Tom Reese has a good summary of the responses.
I would like to offer my own humble thoughts on this unfortunate op-ed, mainly from the economic perspective. I will do so by addressing three main economic claims made by Cardinal Dolan.
Dolan’s main points
As far as I can tell, Dolan makes three main claims:
- A point on principle: We should not “reject economic liberty in favor of government control”. The Church has always rejected socialism and collectivism, because they violate “inherent human rights to economic freedom and private property”. And while it is certainly possible to go too far in the other direction, there are very few who support the “inhumane philosophy of radical economic liberalism”.
- A point on practice: The free market has increased wealth and wellbeing all over the world. We should carefully distinguish the virtuous capitalism practiced in the United States, and the capitalism practiced in other countries (especially in the developing world), which is more of an “exploitative racket for the benefit of the few powerful and wealthy”.
- A point on personal virtue: The value of an economic system rests ultimately on the personal virtue of individuals who take part in it—on the “morality of their day-to-day decisions”. It is about “virtuous people, acting justly, compassionately, and honestly”.
Let me now try to highlight some of the flaws in these arguments.
Response to the point on principle
Cardinal Dolan argues, correctly, that the Church condemns collectivism. What he doesn’t say, though, is that the Church equally condemns its polar opposite—what the Church calls economic liberalism, and what today is more familiar to Americans as libertarianism. The timing of the op-ed was ironic, give the major conference at Catholic University last week on the utter incompatibility of Catholicism and libertarianism.
In Catholic understanding, collectivism and libertarianism are really two sides of the same coin, what Pope Pius XI referred to as the “twin rocks of shipwreck”. They are both based on a false anthropology. Neither extreme upholds the truth of the human person as understood by Catholic teaching—possessing innate human dignity and finding true meaning in relationship.
In reality, each error is the mirror image of the other. Collectivism suppresses private ownership of property in favor of common use, while libertarianism suppresses common use in favor of private ownership. Collectivism suppresses rights and upholds duties, whereas libertarianism suppresses duties and upholds rights. Collectivism treads on individual dignity, while libertarianism treads on social duty and responsibility.
Why do I belabor this point? Simply to point out that collectivism and libertarianism pull equally in different directions, and so—from the Catholic perspective—are equally condemned. But Cardinal Dolan’s op-ed only looks at one side of the picture, and so gives an incomplete account.
Many will say that this is a strawman argument—those who support free market policies do so on prudential grounds, not because they embrace a flawed anthropology. Yet it is it next to impossible to separate principle from practice here, not least because the advocates of laissez-fare policies keep bringing everything back to the principle of “economic freedom”. This certainly is the guiding star of the Acton Institute. It seems to be what Cardinal Dolan is doing too, when he defends not only the practical outcomes of a market economy, but the very principle of “economic liberty”. His ghost-writer Larry Kudlow is on record saying that the pope simply doesn’t understand freedom.
Of course, Dolan understands that this argument can be pushed too far. But even here, he argues that few people are guided by “radical economic individualism”. I think he is wrong about this. In other countries of the world, he might be right, in the sphere of economics at least. But not in the US, and especially not today.
Indeed, I would argue that the prevailing philosophical mindset in the US today is one of libertarianism—the enshrinement of self-ownership and freedom from coercion as overarching principles. This transcends the political divide. On one side, we are told that the person has an near-absolute right to do what they want with their bodies. On the other side—the near-absolute right to do what they want with their money. Absent from both is any idea of the common good or any conception of the good life. This is false freedom, or as Pope Paul VI put it, “erroneous autonomy”.
I would actually turn the tables on the cardinal’s argument. Where are the calls today for an abandonment of the market economy in favor of collective ownership? They do not exist. The appeal of collectivism lies buried under the rubble of the Berlin Wall. The left has long come to terms with the market economy.
On the other hand, it is pellucid that the modern American right has been infected by radical individualism. We know this from simply listening to their rhetoric, which has become more strident with each passing year, diverging more and more from any global consensus.
We know this from the Paul Ryan budget, where 69 percent of the cuts come from programs designed to protect the poor. We know this from the incessant attacks on all attempts to expand healthcare, including for the very poor. We know this from the razor-sharp focus on reducing taxation on the wealthy. The common factor: a belief that individual freedom and personal responsibility create both value and virtue.
If this isn’t “radical economic individualism”, then I don’t know what is.
Response to the point on practice
The main thrust of Cardinal Dolan’s op-ed is practical rather than philosophical, however. He makes two empirical claims. One: the free market delivers, in terms of wealth and wellbeing. Two: American capitalism is more virtuous than elsewhere—especially the developing world, where the economic system is akin to an “exploitative racket for the benefit of the few powerful and wealthy”. We need to unpack this.
It is a grave mistake to give a hearty bear hug to the free market. Why? Because left to its own devices, the market economy contains two major design flaws. First, it is associated with crescendos and crashes, periods of excess followed by periods of austerity—and these waves inundate ordinary people, especially the poor.
Just look at the recent financial crisis, the worst since the Great Depression, which was caused directly by light-touch regulation and blind-eye supervision of the financial sector. And it was ordinary people who indeed suffered on a massive scale. The World Bank estimated that the crisis pushed an additional 64 million people into extreme poverty. The International Labor Organization estimated that there would have been 62 million more jobs in the world today, had the crisis not occurred.
The second dysfunction relates to inequality. And here, we are all indebted to Thomas Piketty’s careful analysis of economic history. Piketty shows that, if unchecked, capitalism will lead to wealth disparities that are “potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies”. He notes that we are returning to levels of inequality not seen since the Gilded Age and that—if we are not careful—the 21st century could look like the 19th century.
We are now more aware that excess inequality can lead to economic pathologies. Economic growth is more sustainable in more equal countries, and the doors to economic flourishing open wider. Excess inequality holds back economic progress in regions like Latin America, precisely because it contributes to economic exclusion and cuts off networks of solidarity. Opportunities for advancement are greater in more equal countries. Happiness, contentment, and levels of trust are all higher in more equal societies. Pope Francis certainly has it right when he calls inequality the root of social evil.
So, an unchecked free market can lead to both instability and exclusion. To see this clearly, we need look no further than the economic record of the major advanced economies since the 1980s—three decades of rising inequality and increasing financial fragility, traced directly to the resurgence of laissez-faire policies.
Contrast this with the period after World War II, with the period the French call the “thirty golden years”. This era gave us some of the highest rates of economic growth in recent times, alongside some of the lowest levels of inequality and financial dysfunction. Yes, some of this was due to catch-up and convergence from a low base after the war—just like China in the post-collectivist era, by the way. But it was also due to deliberate policies—strong oversight of the financial sector and efforts to even out the distribution of income.
I have spoken so far in generalities. Let me now turn to the US, which Cardinal Dolan holds up as a paragon of economic virtue.
It’s not a great story. The dysfunctions of instability and exclusion I have talked about are especially pronounced in this country. The global financial crisis started here. The rise in inequality has been especially stark here. The share of income going to the top 1 percent has doubled since the 1980s, returning to where it was on the eve of the Great Depression. Since 2009, this top 1 percent has captured 95 percent of all income gains, while the bottom 90 percent grew poorer. So, yes, the US grew and created wealth, but this only rewarded a select few.
It doesn’t have to be like this. Just consider the economy of France, which many Americans are inclined to reflexively dismiss. Yet if we strip out the top 1 percent, income growth has been faster in France than in the US since the 1980s.
Indeed, it makes sense to look at continental Europe, the heartland of the postwar Christian Democratic movement—which remains the best attempt at putting the principles of Catholic social teaching into practice. In this region, productivity per hour—the key driver of long-term growth—is no worse than in the US. Employment rates of prime-age workers are no worse than in the US. Income is lower largely because people work fewer hours—surely this is something to welcome, not dismiss? And yet poverty and inequality are lower, and intergenerational mobility is higher. This is not to say that everything is right with Europe, but it is to say that there is much for the US to learn.
The flip side of Dolan’s coin is that capitalism in the developing world is an undesirable “exploitative racket for the benefit of the few powerful and wealthy”. This is possibly the most infuriating claim in the whole op-ed. It simply reeks of the arrogance of American exceptionalism. Yes, cronyism is easy to find, all across the world. We don’t need to go to Argentina to find it—we just need to look in our own backyard.Just look at some egregious example. Look at the enormous power wielded by the financial sector. Let’s start with the “too-big-to-fail” megabanks which have both outsized political influence and an uncompetitive funding advantage over smaller banks—surely a major violation of subsidiarity. Apparently these banks are also “too big to jail”—attorney general Eric Holder has admitted that pursuing criminal charges could hurt financial stability.
Look also at the purely rent-seeking behavior undertaken by the financial elite, which adds no value whatsoever to the economy. Look at the cozy club of elites who dominate boards of directors and top corporate management, who give themselves outsized rewards at the expense of workers and other stakeholders. There was once a time when excessive CEO pay violated an important social norm, but that day is long gone.
Look at the whole host of protections that entrench vested interests—in areas from cable and telecommunications to pharmaceutical patents. Think about the companies that benefit from war and the war machine.
Look at the influence of money on politics, and the ability of elites to twist policies in their favored direction—think, for example, of the fact that unearned income is taxed at lower rates than earned income. Look at the revolving door between government and the private sector. Indeed, the situation is now so bad that a recent academic study found that the US is now more of an oligarchy than a democracy—dominated by a rich and powerful elite.
Cardinal Dolan simply glosses over all of this to give American capitalism a huge pat on the back. He also ignores the dirty little secret of cronyism and patronage—that it is directly related to economic disparity and social exclusion.
The greatest irony of all is that crony capitalism, the mortal enemy of libertarians, is actually given sustenance by the kinds of unregulated markets that these same libertarians adore. It is certainly no accident that the rise of cronyism in the US comes at the same time as rising inequality and more liberated financial markets.
I must make one more important point here. Our modern global economy is more interlinked and interconnected than ever before. We cannot simply isolate the American economic system from the global economic system. We cannot simply say “US economy good”, “developing economies bad”, because it’s all part of the same single global economy.
Remember, the crisis began in the US, one of the richest countries in the world, but it ended up hitting the poorest people in the world the hardest.
And many of the material advantages enjoyed by American capitalism are intrinsically linked to injustices in the developing world.
Think about large corporations that deliberately seek to locate in regions with low taxes, low wages, low labor standards, and low environmental protections. When a garment factory fire kills hundreds in Bangladesh, the blame spreads far and wide—to the multinational corporations who tacitly endorse this kind of injustice, to the shareholders who prize returns over all else, to the consumers who refuse to ask questions about the source of their cheap clothing.
Think also about the how the US destabilizes vast regions of Latin America, through mass import of narcotics and mass export of weapons. This might be the dark underbelly of the global economy, but it is still part of the global economy.
Cardinal Dolan’s op-ed completes discounts any sense of global connections and global responsibility.
So what could Cardinal Dolan have said? He could have started by noting that the Church does not reject the market economy, but that its support is strictly conditional—based on the market meeting the needs of all and embodying justice.
And here, he could have talked about the vital complementary role of the state instead of dismissing “government control”. As Saint John XXIII put it, the function of state is…”is the realization of the common good in the temporal order. It cannot, therefore, hold aloof from economic matters.”
He could have noted that the role of the state goes beyond merely enforcing the rules of the game by upholding property rights and equality before the law. Justice must extend beyond commutative justice—the justice of contracts and exchange—to encompass both distributive justice and social justice.
And from the perspective of Catholic social teaching, one of state’s jobs is to even out some of the imbalances in the market economy, in number of different ways.
First, by providing the essential regulatory oversight to lessen the dysfunction and injustice that comes with unfettered markets. As Pope Pius XI put it, “economic life cannot be subject to a free competition of forces” and instead needs “a true and effective directing principle”. In particular, as Pope Francis says, the financial sector must serve, not rule.
Second, by protecting protect people from the economic gyrations that come with living in a market economy—especially by providing decent safety nets. This means an appropriate level of redistribution.
Third, by providing those goods and services that, in the words of Saint John Paul II, “by their very nature cannot and must not be bought or sold”.
Finally, the increasing interconnected nature of the global economy and the increasing power and reach of global corporations and financial institutions calls for public action beyond the level of the nation state—toward the kind of global public authority envisaged by Saint John XXIII and Pope Benedict XVI.
By glossing over this wealth of wisdom, Cardinal Dolan leaves us with the mistaken and dangerous impression that the market alone can achieve good and just outcomes.
Response to point on virtue
The third main point made by Cardinal Dolan is that personal virtue matters. At a basic level, he is surely right. We need good rules, and we need just economic systems, but we also need virtuous people to breathe life into the market economy. After all, people hell bent on gaming the system will always find ways of doing so.
This is another lesson from the crisis. The financial sector engaged in socially destructive behavior not just because the watchdogs were looking the other way, but because some of the most basic ethical norms were being violated. Think about some of the scandals: conning clients into buying crummy securities, rigging financial benchmarks, engaging in illegal foreclosure, laundering money, enabling tax evasion. The list goes on.
But this is just the tip of the iceberg. It’s not just about personal honesty, as Cardinal Dolan seems to imply—it’s also about purpose, about telos. Virtue without telos is hollow virtue.
So we need to understand—and rediscover—the true purpose of business. Catholic social teaching has a lot to say about this. Understood properly, business is a noble vocation, but only if it serves the common good and supports human flourishing—in the words of Vatican’s Vocation of the Business Leader, by producing goods that are truly good and services that truly serve. The goal cannot simply be to make as much money as possible, whatever the consequences.
One of the most pernicious business strategies to gain favor over the past few decades is the idea that the sole goal of business is to maximize shareholder returns—in doing so, discounting other stakeholders like workers, suppliers, consumers, the natural environment, and society at large. This was a major theme of Pope Benedict XVI’s post-crisis encyclical, Caritas in Veritate.
Think of it this way. It’s not enough for a business leader to be honest and personally above reproach. It’s not enough that they treat people well and engage in philanthropy. Ultimately, the virtues needed to run a business cannot be divorced from the social purpose of business.
So if a private equity firm is maximizing short-term profit by loading up companies with debt and firing workers, then something is wrong. If a vulture fund is buying up cheap debt from some of the most impoverished countries in the world and simultaneously seeking legal ways to make the country repay the full face value of the debt, then something is wrong—deeply wrong.
If a retailer like Wal-Mart refuses to pay its workers a living wage at a time it is earning record profits, then something is wrong. On this point: a recent study calculated that raising wages of Wal-Mart workers to the bare minimum needed to escape poverty (simply defined as no longer being eligible for food stamps) would cost the company $4.8 billion—at a time when annual profits were $17 billion. This is not virtuous, and yet it is socially acceptable—because people think the job of business is solely to maximize profits, leaving the state to take care of the poor.
This is where Dolan takes a wrong turn. Instead of very real injustices perpetuated by top-tier institutions like Wal-Mart or Goldman Sachs, he instead singles out the comical amorality of the “Wolf of Wall Street”. His point is that very few hold this up as a role model. But this is a dishonest and disingenuous argument. The real problems on Wall Street do not lie with a small number of venal libertines trying to crash the party. The real problems lie with the respectable firms, filled with people who are earnest and honest in their day-to-day dealings. For the folks in Acton, this should be enough.
But it’s not enough, because Wall Street has lost its way, its telos, its sense of purpose. It has lost that vital sense of service, and instead devoted its energy to maximizing short-term profit at any price and accumulating wealth for its own sake. It put narrow self-interest above the common good.
And just as it rejects profit as the sole aim of business, Catholic social teaching also rejects self-interest as the sole motivating principle of the market economy. Instead, in the words of Pope Benedict XVI, “human relationships of friendship, solidarity and reciprocity can also be conducted within economic activity, and not only outside it or after it”. Or as David Schindler put it, mutual selfishness is not the same as mutual generosity.
I will end where I began—with the fundamental anthropological distinction between how Catholics and libertarians view markets. For the latter, self-interest is a virtue, as it leads to more effective and efficient outcomes. But for the former, service is the starting point. A humane economy that supports human flourishing is an economy of communion, linked by the iron-clad bonds of reciprocity; not an economy of autonomy, linked only by the ephemeral grip of the invisible hand.
Cardinal Dolan is certainly not oblivious to this dimension, as he calls for an element of generosity to accompany self-interest. But he certainly fails to tease out its implications for the conduct of modern business—and these implications are quite radical.
In conclusion, this was a deeply disappointing op-ed, profoundly misleading in so many ways. At a time when so many American Catholics know so little about Catholic social teaching, this kind of treatise only muddies the waters further. It was a missed chance for a real teaching moment, especially in the hostile territory of the Wall Street Journal editorial pages.
It’s too bad, really, as Cardinal Dolan is a well-meaning man and a fine shepherd. It’s unfortunate that he didn’t seize the opportunity to bring the gospel down to Wall Street, rather than try to bend the gospel to please Wall Street.