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.

  • Tommy

    Good point, Tim. I can’t think of too many regulated economies that either went the distance or managed to improve a the common prosperity of any country….for long.

  • Daniel Nichols

    Quite an accomplishment; an article on economics that manages to contradict just about every principle of Catholic social doctrine. Yes, of course the Church defends private property. No, of course it does not teach that private property is an absolute right; indeed, confiscation of such may be required when it is not serving the common good. And yes, the Church has always condemned the idea that an unregulated market is desirable or will bring about justice. A market economy can be just only if it is strongly regulated.

  • Vincent

    There are many benefits to a free market, but the one-sided rosy view presented in this post and by many political conservatives is naive. It is also dismissive of the Church’s magisterium. Blessed Pope John Paul II warne din Centisimus Annus that unregulated capitalism only repsonds to those needs that are marketable, and that there are many genuine human needs that are not marketable. The free market tends to reward some activities that are genuinely harmful to humans (slashing of wages and worker protections, overconsumption of nonrenewable resources, etc.) and fails to reward some activities that genuinely promote the human good (teaching inner city kids). Pope Francis recently spoke forcefully about the obligation of governments to regulate the economy to ensure the common good. (He decried “ideologies which uphold the absolute autonomy of markets and financial speculation, and thus deny the right of control to States, which are themselves charged with providing for the common good.”) Regulating the market is not socialism; it is a core part of Catholic social doctrine.

    • James

      Hi Vincent!
      Having read several of Dr. Tom’s posts, I think you are correct in believing him to have an either/or view of economics. If he has upheld the virtue of moderation, I have not seen it.

      However, I do not think your criticism in this instance is warranted. Dr. Tom is using Venezuela as his example. Such an extreme example would clearly be a straw-man if applied to any and all government regulation. Rather, I think he is simply striving to express that not all government regulation is a good thing, that it can backfire.

      He very well may believe that all government regulation is bad and that the market should be completely free, but I do not feel such can be inferred from this article alone.

      TL:DR – The only logical conclusion of Dr. Tom’s article is that too much government regulation is bad. This is a true and valid point. You are arguing that some government regulation is good. This is a true and valid point.
      Your conclusions are not in conflict.

      God Bless!

  • Robb

    How did the unregulated trading of mortgage-backed derivatives in the 2000’s add to the common good? Did this not basically destroy the common good?



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