Dear friends of Istituto Acton,
Capitalism is often the victim of its own success. The expansion of the division of labor and trade has resulted in many, many more people across the world being able to enjoy the benefits of wealth over the last two centuries. We are so used to these benefits that we take them for granted, thinking they ought to be available to everyone, everywhere, regardless of the political and economic circumstances, and are scandalized when we see otherwise.
Yet instead of spreading capitalism to those who remain outside the global economy, we blame it for not taking care of everyone equally, for producing too many good and services, for the spiritual shortcomings of materialism and consumerism. We’re then surprised at the resultant lower economic growth, the lack of innovation, and fewer opportunities. In the public imagination, capitalism loses even when it wins.
One example of our contradictory opinions of capitalism is the way we use the term “entrepreneur.” Entrepreneurs were originally considered socially disruptive, seeking new opportunities (and markets) when they hadn’t previously existed. They were restless visionaries, unable to settle down for long and never quite satisfied with past success. Little distinguished them from pirates. Higher profits were their due because of the many risks and failures they had endured.
Yet nowadays, entrepreneurs are simply creative, caring do-gooders who can be found at the most established corporations and NGOs. Judging from his recent chat in Genova, this is certainly how Pope Francis looks at them. They are cooperative rather than competitive. They invest but do not speculate. They cry when they have to lay off workers. They view their business as their family. The “good entrepreneur” sounds awfully like the Good Shepherd, otherwise known as Jesus Christ, who notably did not provide us much economic advice.
Normally sensible Vatican observers such as John Allen take the pope’s words as proof he is not an anti-capitalist, perhaps even “worthy of a graduate-level MBA program.” If so, it would help explain why we have many MBAs yet little innovation in today’s economy. In any given society, there will be many more managers and administrators than innovators. We want the benefits of growth and innovation without any of the risks or uncertainties of undertaking new ventures, which is essentially speculative. The pope praises entrepreneurs while denying them the very qualities that make them entrepreneurial.
How did the pirate become a schoolmarm? The taming of the entrepreneur is due to the success of capitalism in rescuing people from so much want and misery that had been considered their natural condition. Most of us in the West are simply too comfortable and have too much to lose to risk it all on some half-baked dream. In fact, the African immigrants crossing the Mediterranean in rafts show more entrepreneurial spirit than the native-born Europeans who protest cuts to their paid vacations or State-funded pensions. Quite understandably, most of us would not trade places with the immigrants.
The egalitarian nature of our liberal democracies is another reason we don’t like the excessive striving and ambition of the entrepreneur. Competition means there are winners and losers, but we prefer that everyone is a winner. It would make more sense to distinguish between healthy and unhealthy, fair and unfair forms of competition instead of blaming competition itself. As Milton Friedman used to say, capitalism is a profit and loss system, and the loss part is even more important so that firms can learn from their mistakes and become more productive in the future. A society without competition would be stagnant and listless, fit for sheep rather than human beings who want to improve their living standards.
The pope also attacked the concept of meritocracy, as if there were some morally superior alternative to judging people by their behavior. Of course, not everyone gets what they deserve. A Christian or humane society must help the weak, unfortunate and vulnerable, but in no way does this mean we cannot recognize a better or more efficient use of resources when engaged in a given task. This is, after all, what economics aims to do.
If speculation, competition and meritocracy are the bogeymen of capitalism, the centrality of the human person is considered the remedy. “The economy must serve man, not man the economy” is the oft-heard refrain in Catholic social teaching. While no one denies this in principle, how exactly would an economy that prioritized labor over capital be more humane if it meant keeping things the way they are? How would people ever escape poverty if new enterprises weren’t allowed to take risks, which obviously include the distinct possibility of failure? Where would the capital come from if not from those looking to place a bet against the odds?
The modern economy is often criticized by moralists for its depersonalized nature. Whereas a feudal or agrarian society strengthens local family ties, a market economy loosens them. (See Jeffrey Tucker’s “My Short Life on a Real Ranch” dispelling some romantic notions about rural life.) Modern producers and consumers don’t know or care whom they are trading with, so long as they are treated honestly. What we lose in personal relationships among those we already know is made up for by dealing with those we wouldn’t have otherwise known. Are these not opportunities for growth, economically as well as humanly?
We’d all rather deal with people who truly loved us for who we are and not what we do for them; this is what I take the pope’s economic message to be. So go ahead and be a caring entrepreneur! But we should also remember Adam Smith’s dictum: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." Humanity is a very noble but unreliable economic foundation.