Free markets free people

March 27, 2006

Read: Compendium of the Social Doctrine of the Church, nn. 346-360

In North America, we tend to see a free market economy as being as natural as the birds in the sky. We also tend to identify it with the economic system we today have in place. Both assumptions are perilous.

Rocco Buttiglione, a philosopher, politician and collaborator with Pope John Paul II, writes that the free market is a social institution that must be created and defended. It requires laws that protect property and that define and protect contracts. It requires efficient communications and transportation.

The free market depends on a skilled workforce made up of people who are reliable, responsible and productive. Entrepreneurs need access to an ample supply of capital to develop and market their ideas.


Buttiglione, in a 1991 article in Crisis magazine, notes that in North America, free markets grew organically out of the more general spirit of freedom. In Europe, however, the industrial revolution was often due to the actions of small groups of people and led by bankers rather than entrepreneurs. From the beginning, capitalism was monopoly capitalism.

In many Third World countries, foreign companies and corrupt local elites control the wealth.

The Compendium of the Social Doctrine of the Church lauds the competitive market economy as the most efficient use of resources. It says the market helps to promote justice in these ways:

To be sure, we can see these qualities in North American economies to some extent. Also evident, however, is the tendency of free markets to morph quickly into near-monopolies, to concentrate wealth among the few and to marginalize significant segments of the population.

As a society, we need to find ways to enable us to look to the future and be people of initiative.

– Design Pics photo

As a society, we need to find ways to enable us to look to the future and be people of initiative.

The computer software industry in the late 20th century reveals this rapid transformation. From a highly competitive industry in the 1980s, it moved from enterprise to near-monopoly in record time as Microsoft cornered the market on operating systems and then established itself as the main producer of most popular types of applications.

Further, as our economy has become increasingly information based, people lacking in education and technical skills have had fewer and less desirable job options. The main human problem in our economy is no longer unemployment but the unemployability of millions.

Those who do have desired technical or management skills often end up working inhuman hours with little time for family and recreation.

We have an economy composed of at least four groups: the unskilled who are often in a relationship of dependency upon the state; those few who have previously unimaginable wealth; an overworked, highly educated minority; and the middle class who are urged and enticed to buy into a libertarian and consumer mentality.

It's not a recipe for a human society. That's why the Compendium's endorsement of the free market comes with a string of qualifiers.

While the market is "irreplaceable," it has a "proven inability to satisfy important human needs" (n. 349). The Compendium does not list those human needs, but one might argue they include such things as world peace, universal health care, protection of the natural environment, universal education, law enforcement, and universal food and shelter. A rather significant list of needs!

The Compendium also calls for the defence of those who are weaker without government degenerating into a welfare state. The state should be "neither invasive nor absent."

A free market also "presumes a certain equality between the parties" (n. 352) - a major presumption in a world with gross disparities of wealth and education.

Further, the free market can have "a beneficial influence . . . only when the state . . . defines and gives direction to economic development" (n. 353).

Finally, "consumerism maintains a persistent orientation towards 'having' rather than 'being'" (n. 360).

By the time the Compendium is finished listing all those qualifiers, one might be unclear as to what sort of free market is actually being endorsed.


Nevertheless, there is something of real value in a market-oriented economy, even with all those restrictions. Catholic social teaching has long been more interested in the distribution of wealth than in its creation. Pope John Paul, especially in his 1991 encyclical Centesimus Annus, establishes some balance.

In traditional societies, it was human labour that created wealth. Today, more and more, it is entrepreneurship and innovation. Pope John Paul emphasized the subjectivity of work - the dynamic expression of the self through work.

If there is a lesson in the Compendium's enthusiasm for free markets, it lies in this encouragement of human initiative. As a society, we need to find ways to enable all people to be people of initiative. We must eliminate cultures of dependency, put reins on the passive consumerism that will stifle the development of personal virtue, and educate people in the virtues and skills of entrepreneurship.