Pope Benedict proposes a “principle of gratuitousness” and the “logic of the gift” — concepts which would transform the potential for development in his view. “Gratuitousness” and “gift” encourage people to think not only in their self- interest, but also about how they can be of service to others. This would mean that labor unions should go beyond thinking only of their own members to include the well being of all workers, including those who are employed by other companies and even foreign workers who often compete with organized labor. More far-reaching, Pope Benedict endorses the idea that corporations should answer to shareholders as well as to the “stakeholders” — all those who have an interest in a company’s activities. This would include customers, workers and even its competitors.
The last papal encyclical dealing with economic matters, “Centesimus annus” was written in 1991 by Blessed John Paul II. He made a significant break with his predecessors in emphasizing the positive role of business, free markets and the role of creativity in the economy. John Paul II went so as far as to say that economic liberty is an essential freedom alongside religious liberty, political liberty and legal liberty. But he wasn't talking about a deregulated market that exploits the majority for the benefit of the few. The Compendium of the Social Doctrine of the Church contains an entire chapter on economic life and its proper ethics. Here's what it says about profits, "It is essential that within a business the legitimate pursuit of profit should be in harmony with the irrenounceable protection of the dignity of the people who work at different levels in the same company." This was not the standard practise at Goldman Sachs, JP Morgan, Citigroup, American International Group and other big banking institutions that brought us to the brink of a financial collapse.
Since the world economy has changed since 1991, Pope Benedict has taken another step and added to that analysis by maintaining that true economic freedom must be infused with the virtues of justice and charity. Too much attention has been paid to the role of the entrepreneur and the potential for wealth creation. This aspect of business ought to come second. The primary focus should be on fair redistributive solutions to economic disparities. This essentially means that rich nations need to take seriously the idea of poorer nations having opportunities to develop their economies and thus be capable of promoting the Common Good. How to properly reconcile the free market economy with the principle that we’re all responsible for our neighbors’ economic progress remains a task for theologians, economists, government leaders and all of us to work out. However the point is clear:
“Economic activity cannot solve all social problems through the simple application of commercial logic. This needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility. Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.”(Chapter 3, 36) Pope Benedict, also, deals with world issues relating to law, politics and culture, but he makes his main points regarding the world economy.
The Church’s social doctrine has always focused on the question of justice. This entails giving people what is ethically owed to them. Workers, for example ought to be paid a fair wage for their work. In addition, we’re obligated to examine the larger societal issue as to whether a nation’s gross domestic product, GDP (or gross domestic income, GDI) is being distributed among its citizens in a fair and just way. The financial crisis has shown that this sense of fairness and justice wasn't taking place. Instead the evidence proves otherwise: It has been mostly about profits, human exploitation as in predatory loans and mortgages and huge bonuses for CEOs of companies that were bailed out by government funds. The majority of the world's population is currently paying the price for the economic slump and the high rates of unemployment.
Pope Benedict puts it this way: “In a climate of mutual trust, the market is the economic institution that permits encounters between persons, inasmuch as they are economic subjects who make use of contracts to regulate their relations as they exchange goods and services of equivalent value between them, in order to satisfy their needs and desires.”(Chapter 3, 36) But to merely follow the letter of economic rules is not enough. The Pope adds, “In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. Without internal forms of solidarity and mutual trust, the market cannot completely fulfill its proper economic function.”(Chapter 3, 35)
To build a proper and truthful foundation the economy must be built on justice and charity. Pope Benedict urges the world to adopt this approach in Caritas in Veritate. “Old models are disappearing, but promising new ones are taking shape. Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value.”(Chapter 3, 40) When we consider the global crisis that has resulted because of subprime mortgages, and the selling of “structured products” which in many cases were packaged to mislead investors, we can see why the Holy Father is advancing a different and more equitable way of doing business and of governing. Leaders, in the private and public sectors, must think about the long term stability of a company, of a nation and the entire world.
When companies are run in the interests of all citizens rather than just the shareholders, then what emerges is a new business model. It’s also an opportunity to re-examine our way of doing business. “When we consider the issues involved in the relationship between business and ethics, as well as the evolution taking place in the methods of production, it would appear that the traditional valid distinction between profit based companies and non-profit organizations can no longer do full justice to reality.”(Chapter 4, 46) Essentially Pope Benedict is telling the world that business activity and charitable activity ought to be more closely aligned. Profits must be seen as a way to return some profits to investors, but returns should also help to make for a better society and a market which does not forget the dignity of the human person. A good economy is one in which there is justice for all people, but a justice working hand in hand with love. Caritas in Veritate tells us clearly that we cannot have a stable economy if we forget to love each other as well as our work. This means that the work we do should not harm or take advantage of others.
My humble recommendation would be for the world’s business schools to make Caritas in Veritate and the social doctrine of the Church part of their mandatory curricula. Government officials and the CEOs of all the major investment banks should also study it. Then, perhaps one day, God willing, we will have new economists, new government leaders and CEOs with an altruistic world view--a new vision in which governments, unions, bankers and economists would organize their work and promote the issues of justice, charity and the Common Good. Only by living out these virtues can we hope to ever have stability in the financial system and the betterment of the entire planet. By bringing ethics to the marketplace, we can create an economy and protect the environment to serve all citizens and avoid any future financial and moral collapse.