Getting Global Markets Wrong

Editor’s note: This essay appeared in Capitalism and the Common Good According Michael Novak: A Law and Liberty Symposium on First Things

First Things editor R.R. Reno, a good friend of 25 years, is surely right that Michael Novak’s classic book, The Spirit of Democratic Capitalism (1982), is a work birthed in response to intellectual trends of the 1960s and 1970s. Novak’s book supplied a critical entry for many of his coreligionists into a moral case for capitalism.For Novak, not only is capitalism an economic system that feeds the belly (a particularly good thing for people with empty bellies), but the system’s call for economic freedom, properly understood, uniquely provides for and supports human dignity. “Human dignity” is a critical concept in Catholicism’s, indeed, in Christianity’s, social thought, a necessary implication of the Imago Dei, that is, the creation of humanity in the image of God.

The thrust of Catholic social thought in the 1960s and 1970s, both in the abstract and as evidenced in the day-to-day culture of priest and parish, was that capitalism might need to be tolerated, but that it was in principle an exploitative system in tension with the faith’s commitment to human dignity. Novak’s book shattered that consensus. This is not to say that his position became the new reflexive dogma, but it did open intellectual doors, in Catholicism and more broadly, to the idea that capitalism can itself directly promote human dignity.

In particular, Novak’s argument in The Spirit of Democratic Capitalism influenced John Paul II’s important papal encyclical, Centesimus AnnusCentesimus Annus, however, was not simply The Spirit of Democratic Capitalism writ in the distinctive accent of Catholic social thought. It also expressed caution about some of the consequences of free markets, particularly when commitments to markets start to run roughshod over commitments to other humans. Centesimus Annus nests the market within a firm social context. (To be sure, Novak did as well, but with a lighter touch.)

Drawing on this, in recent years, and particularly with the candidacy and election of President Trump, Reno has sought to sharpen criticism of capitalism by focusing, first, on the economic tradeoffs created by the market—that is, the fact that markets produce economic winners and economic losers—and secondly, identifying what he considers to be deleterious social effects that can be caused by markets.

Reno’s discussion of his revisitation of The Spirit of Democratic Capitalism misses the mark in at least two important respects. First, he in fact ignores the tradeoffs of the globalization process, emphasizing the American experience as if that were the entire experience. Second, he approaches a kind of economic determinism, blaming globalization for spiritual problems that must more accurately be traced back far before globalization’s advent.

Reno paints the economic consequences of globalization as uniformly grim, as a phenomenon that causes “dwindling manufacturing jobs [and] technological displacement.” But it affects different parts of the world differently.

There are at least two aspects of globalization. The first is dramatically lowering the costs of labor and capital mobility, and of international trade more generally. The second is the bringing of new peoples and regions into the market system.

This is a disruptive process that hurts some people while helping others. We need to be careful, however. For example, overall, “manufacturing jobs” have not dwindled. They’ve moved. To be sure, that is cold comfort for U.S. manufacturing workers who lost their jobs. How to respond to that problem is a pressing political, economic, and social issue for the United States. At the same time, it is unfair for Reno to paint the consequences of globalization as uniformly grim when the same process has helped one billion other souls in the world move out of “extreme poverty,” defined as people who live on no more than a dollar or two every day. Further, the same process allows consumers everywhere to pay less for the same set of goods, thereby freeing up money for other goods and services, creating new jobs in new markets.

Without at all seeking to minimize the impact on American workers, the near invisibility of the rest of the world in Reno’s analysis—the billion people no longer living in extreme poverty—is a significant oversight, particularly for one seeking to articulate a moral (if not a religious) criticism of globalization.

Contrary to Reno as well, market freedom is presented almost nowhere as something about which people do not have a choice. In the United States, for example, the government’s ability to regulate economic liberty in ways it would not dream of regulating social liberty is enshrined in constitutional law. Justice Frankfurter dismissed concerns about protecting economic liberty that “derive merely from shifting economic arrangements.” To state the obvious, there’s a lot of economic regulation in America and in other countries. Whether each of those regulations creates more benefits than costs is an important policy issue for society. Free markets don’t reflexively win those arguments.

Even with globalization itself, the issue isn’t one of having no choice; the issue is whether domestic costs for each nation are worth domestic benefits. I know of no economist who suggests that autarky, or numerous less dramatic choices, is not an option for any nation willing to accept the cost of opting out of the global economy in whole or in part.

Finally, Reno seems to hold globalization partly, albeit significantly, responsible for the moral and spiritual crisis of the age. I am doubtful. As the Preacher in Ecclesiastes puts it, “There is nothing new under the sun.” Look throughout the centuries, look in the Scriptures. Spiritual crises transcend economic systems because human nature transcends economic systems.

In his discussion, Reno comes close to identifying globalization as a one-size-fits-all explanation for all the ills of modern society—economic, political, social, and spiritual. The problem with misdiagnosing the illness, however, is that the ostensible cure is not really a cure. I don’t know exactly what Reno advocates as the cure for globalization, but I am pretty sure that cure won’t solve the immense spiritual crisis that worries him most of all.