Economic ignorance affecting the Church

Call me a Johnny One Note, but the primary reason I became an economist was to help demonstrate to others the human suffering that results from socialism and the incredible material progress that results from free markets. The better material progress we make, the more time and energy we can devote to leisure pursuits, including prayer, spiritual reading, going to daily Mass, etc.

This message isn’t difficult to sell to some audiences; those who are entrepreneurially-minded, those who have lived in repressive regimes, those who casually observe the history of standards of living, all easily recognize the benefits of free trade. The message is much harder for others, who knowingly or unknowingly remain committed to mercantilism or Marxism. The Church isn’t exempt either; whenever greed is spoken of as a deadly sin, the unspoken suggestion is typically that those guilty are the rich, as if poor folks can’t be greedy. Whenever public policy is debated, Catholics speak in simplistic terms about “helping the poor” and support legislation that is thus phrased but whose actual effects are virtually always the opposite (yes, a higher minimum wage hurts many more poor, inexperienced workers than it helps). Despite the bulk of academic research supporting the benefits of free trade, and despite the economic malaise of “middle-of-the-road” countries who pay lip service to capitalism but are hugely regulated and heavily taxed, many in the Church seem willing to let Caesar engorge itself, thereby requiring us taxpayers to forcibly render increasing shares of the fruits of our labor to him.

Bread line in Gaza. Breadline - Flickr - Al Jazeera English.jpg at wikimedia commons

Bread line in Gaza. Breadline – Flickr – Al Jazeera English.jpg at wikimedia commons

Venezuela should be a test case. Full of natural resources, and boasting a good standard of living in the 1960s, its per capita income has stayed flat since. The “progressive” socialism under the late Hugo Chavez seemed to have all the right solutions: when people are poor, of course the solution is to prevent high prices, right?

The government of oil-rich Venezuela has kept in place price and currency controls introduced under the government of President Hugo Chavez, who died in March after a prolonged battle with cancer. Those restrictions have limited the availability of products to consumers. “They have kept the prices down with controls, and that has kept inflation relatively low, but it can’t last,” said economist Robert Bottome, who runs a consultancy in Caracas. “Things are going to get worse.” Chavez’s successor, Nicolas Maduro, has tried to ease some of the pressures by making the dollar more available to some businesses, thereby allowing them to import more goods, but shortages have persisted.

What kinds of shortages, you ask? The kind that hopefully will be a clear signal to those in the Church that meddling in markets always leads to bad results:

In Venezuela, shortages include bread for Communion, sacramental wine

In his small parish outside of Venezuela’s capital, Caracas, Father Maximo Mateos is filling his chalice with less than half the amount of wine he formerly used. The priests at Our Lady of the Rosary Parish in Caracas are precariously close to running out of sacramental wine. And for the Sisters of the Adoration, finding good wheat flour to make Communion wafers is becoming harder and more expensive. In Venezuela, sporadic shortages of basic goods can turn a roll of toilet paper into a rare commodity; add bread and wine to the list of scarce products.

There is a clear reason why the shortages are occurring. Of course, the government has its own opinion of why:

The Venezuelan government announced in early June that it would start testing a program designed to prevent hoarding. The program will digitally track shoppers in the state of Zulia, which includes the country’s second-largest city, Maracaibo, and will limit the amount of basic goods they can buy in one day.

Yup, hoarding by Venezuelans. The government steps in, presuming to know the “right” price of things and forcibly pushes prices downward. The shortage is guaranteed as an artificially low price encourages consumption and discourages production. The government’s price control is directly to blame, but you can’t expect it to admit fault. So, it does what it does best: intrudes once again on individual liberty by tracking your purchases and telling you when you’ve had enough.

You’ll forgive me for not being surprised at the situation there. Experiments in price controls have happened for thousands of years with exactly the same results. But, and people in the Church deceived into thinking that the state can fix any problem, maybe this time will be different…

You’ll forgive my frustration; it’s bad enough when stupid government policies keep bread out of the hands of the poorest people on earth. Now stupid government policies are preventing poor people from being able to receive the Bread of Life.

  • Doran

    First, as an economist, you should know that real wages have stagnated and fallen since the early the 1970s, a phenomenon that has coincided with deep tax cuts for upper income levels and the destruction of the labor movement. It is the direct result of forces within the free market, namely the importing of immigrant labor, women entering the workforce in large numbers, technological advances geared toward ever-increasing productivity (versus, say the improvement of the lot of the average worker), and the outsourcing of production to foreign countries. Moreover, we have seen massive redistribution of wealth to the already-rich, a direct result of tax policy, free market ideology (undoing of Glass-Steagall, with predictable results in 2007, e.g.), and the undermining of the middle and working classes. It’s pretty hard to get excited about the free market under these conditions.

    Next, you mention Venezuela, and I’m glad you did, since it’s a perfect counterexample to the claim that capitalism is preferable to all forms of socialism. Under Hugo Chavez, poverty was cut in half, extreme poverty by two-thirds., remarkable achievements by anyone’s standards. In that short time, so many more people have had access to wealth that demand has far outstripped supply of consumer goods, which is not a bad problem to have, and one that we ought to hope the government can solve versus rooting for the country’s failure. We might well compare the case of Venezuela and the Bolivarian Revolution to third-world countries that have adopted the neoliberal model and see how they compare–Mexico, a near-failed, almost narco-state, comes to mind.

    Then we have the pronouncements of the popes themselves. I presume you’ve read Caritas in Veritate, wherein the Holy Father calls for strong government control of the economy and wealth redistribution–he has also called for universal healthcare, and I wonder who free marketeers propose to achieve universal healthcare through the free market? I would urge you to look at the costs of our private healthcare system versus its outcomes and compare this to the experience of other advanced nations.

  • Brian

    I am not here to deny the Free Market’s ability to deliver material wealth and lift people out of poverty, however I find the opposite of the following to be true:

    “the better material progress we make, the more time and energy we can devote to leisure pursuits, including prayer, spiritual reading, going to daily Mass, etc.”

    This is just not the case.

    • Tim Shaughnessy

      Well, do the counter-argument then; would you or most people like to have the standard of living of 20, 50, or 100 years ago? Do you think people in the 1800s had more free time than today? Most people today do work a 40-hour week, but technology has permitted much more leisure time. Whether they use that time in prayer, or in writing or commenting on blogs, is another matter… for one example of how hours worked has dropped over time. Also check the OECD for data on “average annual hours actually worked per worker” since 1950; the decline is dramatic.

  • Kyle

    What Kevin said.

  • Kevin

    Not a single word from a single Church document to support this position…on a Catholic blog. Incredible! This fawning over unbridled free markets is opposed squarely by every Pontiff from Leo XIII to Francis I.

    • Tim Shaughnessy

      Fawning over the state has a longer history of papal opposition. If by “unbridled” you mean that I support prices that actually reflect market conditions, then I will plead guilty. If the “bridling” that is desired leads to predictable shortages and a lack of proper matter for the Mass, then I wonder how that squares with the common good.

      • Robb

        Look at quinoa, for an example. The market conditions are setting the price–at a level that is making the product basically unavailable to Peruvians, because quinoa is now a health-fad food in the developed world. Quinoa is basically “nutrition perfect,” and now is inaccessible to those who need such nourishment most.

        Unbridled also leads to critical, life-altering shortages.

        • Tim Shaughnessy

          I don’t know anything about quinoa, but since you describe it as a fad, then I presume its popularity is relatively recent. Have suppliers had the time to respond to higher market prices? Is it easy to make quinoa? High airfare might make flying inaccessible for a while but it also entices new entrepreneurs to supply the product. I imagine the same will happen with quinoa unless the state steps in to push the price down (which will only increase demand more and exacerbate the shortage).

    • Jeff

      Here, Kevin, try this:

      Quod Apostolici Muneris ~ Pope Leo XIII

      “While the socialists would destroy the ‘right’ of property, … the Church, with much greater wisdom and good sense, … holds that the right of property and of ownership, which springs from nature itself, must not be touched and stands inviolate.” – 1878

    • Jeff

      Kevin, here’s another:

      Centesimus Annus ~ Pope John Paul II

      By intervening directly and depriving society of its responsibility, the Social Assistance State leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and which are accompanied by an enormous increase in spending.” – 1991

    • Jeff

      And another:

      Centesimus Annus ~ Pope John Paul II

      “Economic activity, especially the activity of a market economy, … presupposes sure guarantees of individual freedom and private property…. Hence the principle task of the State is to guarantee this security, so that those who work and produce can enjoy the fruits of their labours and thus feel encouraged to work efficiently and honestly.” – 1991

  • Tom Galia

    Great article.

  • Michael

    So glad to have read this piece. Allow my two cents in please. Market based economies at the heart are individuals dealing with one another a process that I feel has a spiritual quality to it. The alternative is a politician imposing their choices on society.



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