JUNE 6, 2016
"Che" Guevara in the Vatican, Part II
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In my column last month, I charged Pope Francis with trying to renew class warfare. The papal 'doctrine' of today holds much in common with that of another Latin American 'revolutionary,' namely Ernesto "Che" Guevara. This month, a closer look.
Overlooking the Unintended Consequences
In our recent past, we have suffered the effects of two pairs of events, two doctrines and two executions which they demanded. The first one was Soviet socialism and the party state designed to put it into effect. The other was National Socialism and the state which sought to put the Germanic state above the others. In both the Soviet and the Nazi incarnations, the doctrine came first and the monopolistic executive hoping to put it into effect soon followed. We all know the awful consequences.
The Roman Catholic Church long ago resigned to function with an executive arm leading by pure doctrine, and the 'new direction' of Pope Francis seems to have no ambition toward an executive arm either. The doctrine is a revolutionary rejection of what the Church judges to be an anti-social order on this earth. The question this doctrine raises is whether this revolutionary refusal can succeed without severe unintended consequences.
In a 2015 visit to Santa Cruz in Bolivia, Pope Francis gave a radical address that is as close as it can come to being his central doctrine. "The new colonialism takes on different faces. At times it appears as the anonymous influence of mammon: corporations, loan agencies, certain 'free trade' treaties, and the imposition of measures of 'austerity' which always tighten the belt of workers and the poor." "Behind all this pain, death, and destruction there is the stench of what Basil of Caesarea called 'the dung of the devil.' An unfettered pursuit of money rules, and the service of the common good is left behind. Once capital becomes an idol and guides people's decisions, once greed for money presides over the entire socioeconomic system, it ruins society, it condemns and enslaves men and women, it destroys human fraternity, it sets people against one another, and, as we clearly see, it even puts at risk our common home."
In his Santa Cruz address Pope Francis called upon labour unions to press for higher wages and small farmers for better prices for their products,- hard to justify in the country of President Evo Morales, whose government is making Bolivia a country where labour unions and small farmers get 'social justice' as a matter of policy. President Morales, who attended the mass meeting, wore a jacket adorned with the face of Argentine revolutionary Ernesto "Che" Guevara and gave a gift of a hammer and sickle to the Pope, signifying that on these matters they see eye to eye.
"If there is a constant leitmotif in the papal discourse, it is the notion of the dangers of 'unbridled capitalism' and the demand that it should serve 'men and not profit.'"
If there is a constant leitmotif in the papal discourse, it is the notion of the dangers of 'unbridled capitalism' and the demand that it should serve 'men and not profit.'
People and Profit
It is a matter of personal opinion what we should understand by 'unbridled capitalism' instead of capitalism proper, of how the capitalists should behave when they put profits against people, and how we obtain a 'new model' of a just society. All these notions are immensely attractive but run the danger of meaning nothing much. When they translate into objective facts, they lose much of their attractions. They become arbitrary rules, uneasy compromises, regulations which turn out to be requirements for more and more regulations in an endless sequence, and bureaucracy that calls for more and more of the same. The total result is very difficult to evaluate. It is even difficult to understand it at all. As the Soviet economy demonstrated, it is something full of surprises, most of them unpleasant, such as factories with a 'negative value added' and the production of shoes for the right foot with no production for the left one.
It is interesting, to put it no higher, to take a very sympathetic view of Pope Francis's revolutionary image, and to imagine that there is no unpleasant surprise, no bureaucracy, no regulation unless it is universally approved by everybody, and the 'new model' is at least as efficient as the old one. Would such a sympathetic post-revolutionary world be better than the actual one we have to like or dislike? Alas, we cannot just imagine that it would be a world of justice and 'rights' where everyone earns a living in exchange for a decent day's work and where production is not for maximum profit, but for what people need and deserve.
Whether we call it capitalism or just economics, production that employs two factors, labour and capital, would be at its optimum if the marginal products of the two factors were equal, so that the withdrawal of a unit of one factor could not be fully compensated by the addition of a unit of the other factor. The wages of the factor labour would be in the same proportion to the rate of profits as their marginal products, so that the employment of labour at the margin would be no more or no less profitable than the addition of capital. We are told that this is the case when profits are maximised, a condition that we can either approve or condemn. If we choose to condemn it, we can at the same time pay the price by accepting a consequence of profit maximisation—that the product will be of the optimum quantity permitted by the employment of the available labour and capital. Putting it differently, we can remunerate labour by a wage rate that is more than proportional to its marginal product, and give a remuneration to capital that is less than proportional to its marginal product. If we do this, some people would follow Pope Francis and approve of the move, considering that it was a move for greater social justice, but we would also have to accept that production would be lower and may be even inadequate. Some people on the margin of society would invariably go hungry thanks to this 'bridled' capitalism.
The major 'unintended consequences' of such a move would manifest themselves over a number of years, and even then they may not be recognised. The Vatican, as we have learned, uses its influence to help the poor. This has significant influence in Latin America and Southern Europe. It assists marginal enterprises, enabling them to survive. It encourages public opinion and Christian politicians, to use their influence toward industrial wage negotiations, and government subsidies for artisans and small farmers. Thanks to all these influences, the part of wages and associated national incomes will increase to some extent and the share of profits will correspondingly decrease. The effect will not be large, but it will be lasting. With the share of wages permanently higher and that of profits lower, saving and investment as part of national income will be lower and consumption higher. Other things being equal, higher investment provides a higher rate of growth. Such growth, if it persists, does wonder to a country's riches. South Korea, Taiwan, China, and Vietnam are the textbook examples of this effect that has made them prosperous by practicing a high rate of investment.
Manifestly, the Vatican under the guidance of Pope Francis over the last two or three years has had the opposite effect. It helped the share of the poor, agitated against 'unbridled' capitalism and reduced investment without being apparently conscious that it is doing so. The uplifting effect on the poor and its opposite effect on the rich in the countries where the Catholic Church is one of the major social influences is in some sense unintended. Nobody in his right mind would accuse Pope Francis of working for the impoverishment of poor Latin American people because he calculated that moderate poverty will make their way to Heaven easier. However, much of the time, he really behaves and teaches as if he was doing so.
Anthony de Jasay
is an Anglo-Hungarian economist living in France. He is the author, a.o., of The State
as well as other books, including Social Contract, Free Ride
, Political Philosophy, Clearly
, Political Economy, Concisely
, Economic Sense and Nonsense
, Helmut Kliemt, ed., and Justice and Its Surroundings
. His books may be purchased through the Liberty Fund Book Catalog
. The State
is also available online on this website.
For more articles by Anthony de Jasay, see the Archive.