The Free Market Message of Pope Francis

“I ask you to insure that humanity is served by wealth and not ruled by it.”

                           Pope Francis’s Message to World Economic Forum in Davos

 

Pope Frances’s remarks about economic injustice have engendered quite a bit of heated debate. Most of it is within the political sphere with one side co-opting the Pope’s moral authority to justify wealth redistribution while the other offers a spirited defence of free market economics.

Some free market acolytes, trying to divine the Pope’s economic thinking, went on the attack accusing him of Marxism – a charge the Vatican denied. Subsequently, when the Pontiff spoke of “unbridled capitalism”, a cacophony of voices arose pointing out that capitalism is already over-regulated with far-reaching state controls.

Still others took a more tempered, and perhaps a more condescending approach, by explaining that crony capitalism in Argentina influenced the Pope’s ‘limited’ understanding of economics. Yet it seems clear that the Pope knows free markets have lifted more people out of poverty than any other economic system when he praised the fundamental role of modern business in helping to improve healthcare, education and communications.

The basic ingredients for a free market are, well, freedom for one (incentive based – deciding what is in your best interest), willing consumers, producers entering into unforced transactions, and capital that flows to where it will be most efficiently used. All three must occur without the undue external influence of government controls or private interference.

The only legitimate justification for government control is rooted in the basic economic theory that posits regulations protecting the public space are commensurate with free market capitalism. One example often cited is the public’s mistrust of factory owners that pollute the air and water, and since the air and water is a public resource, their activity must be monitored and governed by using disincentives and punishments should they violate the public trust.

For this to work it must be applied equally and fairly. Yet businesses respond to these controls by aligning themselves with politicians, giving rise to corruption. Government representatives increasingly tell companies what they can sell or manufacture; how they must make their products and, in some cases, invest taxpayer dollars in companies that have favor with their political base. The relationship of employee to employer and the management practices of corporations are all subject to regulations. Even regulations restricting a consumer’s choice (like what light bulbs to buy) are construed to be a public space issue. All these actions perturb the free market.

In 2010, before his elevation to pope, then Cardinal Bergoglio said, “…it is very important that governments of all countries, through the relevant ministries and departments, cultivate a culture of work, not of charity….” It is well settled among most economists that the best way to achieve this goal is for governments to remove employment barriers by reducing their size, regulatory burden, and footprint. In a companion statement he calls us to “…move beyond a welfare mentality for dealing with hunger and poverty.” The pontiff’s statements sound pretty supportive of a free and open marketplace.

Recently, the Pope issued a cautionary note to the World Economic Forum. His statement is not a condemnation of wealth, but a condemnation of greed and the idolatry of wealth, which is consistent with his faithfulness to the mission of Christ.

Last but not least, the Pope’s use of the term “unbridled capitalism” was not directed at the secular sphere of economics or government regulations but towards, what he refers to as, “the moral sphere.” The “bridle” to which the Pope refers is the governance of morality. Imagine a moral-based society where businesses compensate employees, from the CEO down, fairly and in proportion to their contributions to the company. Imagine moral-based businesses that don’t cheat their shareholders or investors, and wouldn’t think of selling their customers substandard products or engaging in misleading advertising. Picture for a moment, a culture where people don’t lie, cheat or steal and do a fair day’s work for a fair day’s pay instead of surfing the Internet. It may be an anachronism, but there was a time when an individual’s word was the only contract two parties needed. They trusted each other to do the right thing.

Trust is the first casualty of moral decline. What if we could trust those factory owners in the example above not to pollute the environment? Wouldn’t all those regulations be superfluous? Isn’t improving and enriching peoples’ lives one of the Pope’s goals, and wouldn’t a moral-centric culture do just that?

Whenever there is a decline of moral values in a culture a vacuum is created and filled by a proportional increase in government regulations and law enforcement. If the primary ingredient for free markets is freedom and the essential condition for freedom is a moral and values-based society; then Pope Francis’s message couldn’t be more timely; morality is not only essential for free markets, it is essential for freedom itself.

Tom DiCarlo