Papal Bull

Why Pope Francis Should Be Grateful For Capitalism

By Louis Woodhill

Progressives are gleeful over Pope Francis’ recent “Apostolic Exhortation,” Evangelii Gaudium.  And, why shouldn’t they be?   The Pope’s passages on economics sound like they were copied and pasted out of The Nation or Mother Jones.  Here is an example:

“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.”

Rather than as an “Apostolic Exhortation,” Evangelii Gaudium, should have been issued as a Papal Bull, because, at least when it comes to economics, that is what it is a load of.

While his great predecessor, Pope John Paul II, helped defeat a real tyranny, communism, Pope Francis has lent the prestige of the Catholic Church to leftist/socialist whining about the “new tyranny” of “inequality,” “exclusion,” and “marginalization.”  Obviously, the Pope is counting on the media not reminding the public about the Catholic Church’s track record in the area of economics.

For the better part of 1000 years, the Catholic Church was the government of the western world.  And, during this period, the world remained firmly mired in absolute poverty.

Absolute poverty is considered to be an income of $2/day.  This is just barely enough to buy the food necessary to sustain life.  In 1 A.D., real GDP per capita ($2012) was about $2.50/day.  By 1000 A.D., when the Catholic Church was approaching the zenith of its temporal power (which it reached circa 1200 A.D., under Pope Innocent III), real GDP per capita had declined to about $1.85/day.

In 1500 A.D., right after Pope Alexander VI granted Spain exclusive colonial rights over most of the New World, real GDP per capita was $3.32/day.  The world economy did not really get moving until the Reformation, which started when Martin Luther posted his 95 Theses in 1517.

As Jude Wanniski outlines in his classic book, The Way the World Works, the driving force behind Protestantism was economics.  The world had just grown weary of the poverty imposed upon it by Catholic economic doctrine.

Catholic economics has always stressed redistribution, rather than economic growth, as the solution for the problem of poverty.  Although arithmetic has been in use since 2000 B.C., it didn’t seem to occur to the Church that redistribution can’t do much about poverty when real GDP per capita is only $3.32/day.

Because of its love of redistribution, the Catholic Church evolved into a government that imposed high taxes upon its subjects.  The Reformation allowed nations to achieve tax cuts by breaking away from the Church, like England did under Henry VIII.  The French Revolution (circa 1800) finally put an end to the role of the Catholic Church as a tax collector.

High tax rates were not the only failing of the Catholic Church in its role as the world’s government.  It also banned lending at interest (which suppressed capital formation), put Galileo on trial (which suppressed science) and gave the world the Holy Inquisition (which suppressed, well, pretty much everything).

Protestantism was a doctrine that was friendlier to economic growth.  After the Reformation, the world economy started to expand somewhat faster.  By 1820, which could be considered the beginning of the age of capitalism, real GDP per capita had risen to $5.14/day.

So, let’s recap.  From the inception of the Catholic Church up until the Reformation (1500 years), GDP per capita grew at an average annualized rate of 0.02%.

During the 320 years of the Reformation period, real GDP per capita increased at 0.14% annually.  Not great, to be sure, but seven times higher than what the Western World had been able to achieve while under the political thumb of the Catholic Church.

And, how has the economy done, since 1820, under the evil capitalist system?  Real GDP per capita has increased at an annual rate of 1.19%.  In other words, capitalism has produced a real economic growth rate per capita that is almost60 times greater than what the Catholic Church could manage when it was running the show.

Yes, it is clear why we should be taking economic advice from the Pope.

Not having the power to directly impose taxes in the modern era, the Catholic Church has been reduced to calling upon governments to raise taxes.  In Evangelii Gaudium, Pope Francis declares:

“I beg the Lord to grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor! It is vital that government leaders and financial leaders take heed and broaden their horizons, working to ensure that all citizens have dignified work, education and healthcare.”

And what would the Pope expect these disturbed politicians to do?  Well, Francis says:

“As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems. Inequality is the root of social ills.”

Pope Francis lays out the justification for forced redistribution to redress inequality by quoting approvingly from St. John Chrysostom:

“Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs.”

By this standard, the amount that Bill Gates and Steve Jobs stole from the poor by creating Microsoft and Apple is simply mind-boggling.

Jesus Christ was the greatest teacher in human history.  For example, it was Jesus that created the vital principle of separation of church and state when he said:

“Render unto Caesar the things that are Caesar’s, and unto God, the things that are God’s.”

Jesus spoke many times of the virtue of helping those less fortunate.  However, Jesus saw charity as a personal obligation and opportunity.  If you look in the Bible, you will find that Jesus did not say:

“Whatever you had the government force other people to do for any of these, the least of my brethren, this you also had the government force them to do for me.”

European experience has shown that as the welfare state expands, private charity recedes.  And, private efforts are much more effective per dollar spent than government programs.

It is not clear that Jesus would approve of what his church has become.  After all, He also did not say:

“Thou art Peter, and upon this rock I shall build my church, and its real estate holdings and its art collection shall be worth hundreds of billions.”

So, should the Catholic Church sell all of its worldly assets and give the money to the poor?  No.  This would just divert capital from productive investments to the purchase of existing buildings and paintings.  The net effect would be to make the plight of the poor, who need jobs far more than they need alms, worse.

What the Catholic Church should do is to look at its own history, and stop preaching its destructive redistributionist economics.  Pope John Paul II had it right when he took on the socialist/redistributionist Evil Empire.  Pope Francis simply has it wrong.