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TGIF: The Pope Dabbles in Economics

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Pope Francis wrote in his recent apostolic exhortation, “Just as the commandment ‘Thou shalt not kill’ sets a clear limit in order to safeguard the value of human life, today we also have to say ‘thou shalt not’ to an economy of exclusion and inequality.”

He’s right — but not in the way he intends. Before I elaborate, let’s look at what else Francis said.

He complained that “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.”

Here he’s partly right and partly wrong.

“In this context,” he went on,

some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.

Again, he’s partly right, though again not as he intended, and partly wrong.

He further stated, “This imbalance [i.e., inequality] is the result of ideologies which defend the absolute autonomy of the marketplace.”

Here he has things precisely backwards.

“In this system,” he added, “which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.”

He’s got a point, to which I will return shortly.

When I say the pope gets some things right, just not in the way he intends, here’s what I mean: In an important sense, we do have “an economy of exclusion and inequality.” But it is not the free market; rather, it’s interventionism, corporatism, crony capitalism, or just plain capitalism — that is, the abrogation of the free market on behalf of special, mostly business, interests. The reigning system is riddled with exclusion and inequality, the victims of which are society’s most vulnerable people. It’s easy to overlook this because the system produces a great volume and variety of consumer goods that even low-income people can afford. (The system needs consumers, though without intervention we could expect prices to be lower.)

It is true that those we call the poor in this country have household products that most middle-class people lacked, say, 40 years ago, and many things that no one had less than 20 years ago because they hadn’t been invented yet. It is also true that poverty worldwide has been much diminished in the last few decades, thanks to the demise of central planning and the introduction of limited market-style reforms (that nevertheless fall short of Adam Smith’s “system of natural liberty,” which consistently applied would include land reform).

But these are not the only measures of well-being. People are excluded and treated unequally to the extent that governments prevent them from breaking away from traditional (and, in the present context, oppressive) wage employment and setting out on their own or in cooperative ventures with peers. The prospect of self-employment, particularly among low-income people with government schooling, is next to impossible due to taxation, product regulation, occupational licensing, zoning and other land-use restrictions and exclusions, building codes, maximum-residential-density and other sprawl-inducing requirements, street-vendor and taxi-cab limits, minimum-wage laws, “intellectual property,” and more. Government has myriad ways to make what’s been called a comfortable subsistence much more expensive. All this is decreed on behalf of vested interests who want to preserve their current advantages.

“The poorer you are, the more you need access to informal and flexible alternatives, and the more you need opportunities to apply some creative hustling. When the state shuts that out, it shuts poor people into ghettoized poverty,” Charles W. Johnson writes. (See his “Scratching By: How Government Creates Poverty as We Know It,” and Gary Chartier’s “Government Is No Friend of the Poor.”)

This is exclusion and inequality of a most vicious sort. And it is not ameliorated by cheap smartphones or big-screen televisions equipped with TiVos. Those things might take some of the sting out of working under someone’s arbitrary authority at a mind-numbing job, but they don’t rectify the injustice or knock down the tollgates the state erects on the road to individual advancement.

In other words, the pope is wrong when he says, “Today everything comes under the laws of competition.” It is precisely this legislated suppression and prohibition of competition that cause “masses of people [to] find themselves excluded and marginalized: without work, without possibilities, without any means of escape.”

There’s not too much competition, but too little, because suppressing competition is how those with access to political power keep potential rivals at bay. As noted, these restrictions make low-income people (and others) dependent on wage employment: government regulations largely destroy self-employment and cooperative ventures as alternatives to a job, which diminishes workers’ bargaining power and leaves them more vulnerable to the caprice of politically protected oversized and hierarchical firms, not to mention to dips in the economy and resulting structural unemployment brought on by governments’ central banks and bubble-inflating favoritism. (With the falling cost of computers and other capital goods, it is more and more feasible for people to start home-based manufacturing businesses. For details on what’s possible, see Kevin Carson’s The Homebrew Industrial Revolution.)

So when the pope writes that our social problems are “the result of ideologies which defend the absolute autonomy of the marketplace,” he’s got it exactly wrong. The autonomy of the marketplace was compromised from the beginning by those who used the state to secure privileges that could not be obtained in a freed market.

When he says, “In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule,” he is guilty of self-contradiction. One of the things that was devoured, long ago, because it stood in the way of (politically generated) profits, or rents, was the free market. (This has also had environmental implications, as when 19th-century courts chose to give priority to industrialization over common-law protections of property.)

Finally, the pope shows his confusion when in a single paragraph he equates the free market with the “sacralized workings of the prevailing economic system.” Whatever you wish to call the prevailing economic system, as I’ve demonstrated here, it is not the free market. A freed market would have no eminent domain (the victims of which are the economically disfranchised), subsidies, corporate bailouts, government debt-fueled speculation, and all the obstacles to individual advancement listed above. (This is not the first time I’ve brought free-market ideas to the attention of the Vatican. See this.)

The pope’s concern with the poor and excluded is well-placed. We should not tolerate their condition or its causes. But what the poor and excluded need are freedom and freed markets — really free markets, not “the prevailing economic system” — so they may be liberated from the oppression that holds them back.

When the pope laments that the prevailing ideologies “reject the right of states [i.e., governments], charged with vigilance for the common good, to exercise any form of control,” one must suppress the urge to laugh. When have states ever looked out for the common good? It is states and their elite patrons that preserve the exclusion and inequality that the pope abhors by squelching the social cooperation inherent in freed markets and the bottom-up — not trickle-down — progress they make possible. It is states that embody the worst sense of the “survival of the fittest” principle by defining “fit” in terms of prowess in navigating the halls of power. We know whom that includes and excludes.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.