The Surprising Tone of Oeconomicae et Pecuniariae

Last Thursday, May 17, two Vatican offices released the document Oeconomicae et pecuniariae quaestiones. The title, taken from the first words of the document, pertains to “economic and financial issues.” It specifically aims to address the role of finance in the global economy, but, as one would expect, nests its analysis in Catholic social thought more broadly.

First, a methodological note for how classical liberals and conservatives might profitably approach documents of this sort that seek to apply Catholic social thought to current events. (I might add that I say this as someone who’s not a Roman Catholic, although one who follows, after a fashion, Catholic social thought.) A useful point of intersection might start with Wilhelm Röpke’s work, particularly A Humane Economy: The Social Framework of the Free Market. While coming from a Lutheran family, Röpke respected and drew on Catholic social thought in his work. He did so constructively, however, styling his own claims, usually in implicit dialogue with Catholic social thought, both as to principles as well as specific applications.

To be sure, while even the more “conservative” expressions of Catholic social thought, think of Rerum Novarum or even Centesimus Annus, might be considered Röpkeism tilted a bit more to the left than he would choose, nonetheless, entering Catholic social thought via Röpke can provide a helpful perspective on its principles and purposes, and help one read the documents sympathetically. (After reading Centesimus Annus, a distinctly unimpressed Milton Friedman quipped that now he understood the derivation of the word, “pontificate.”)

While several press reports have styled the agenda of Oeconomicae et pecuniariae quaestiones as providing intellectual support to Pope Francis’s criticisms regarding global finance and economic inequality, I read it as much aiming to cabin some of the more vituperative comments made by the Pope. The document is careful to frame its criticisms as a response to deviant expressions of entirely appropriate and acceptable activities. Indeed, the document presents some points with implications that cut against the grain of some developing lines of anti-liberal market criticism.

Thus, for example, in Paragraph 8, the document fully accepts the underlying appropriateness of markets in general, and financial markets in particular.

Every human reality and activity is something positive, if it is lived within the horizon of an adequate ethics that respects human dignity and is directed to the common good. This is valid for all institutions, for it is within them that human social life is born, and thus it is also true for markets at every level, including financial markets.

It must be noted that the systems that give life to the markets . . . are in fact founded on relationships that involve the freedom of individual human beings.

There’s nothing particularly novel about the claim or its expression, but, following Catholic social thought more generally, it reiterates a strong commitment to market activity as an appropriate expression of human freedom.

The clause I ellipsed out in the quotation above is an interesting parenthetical comment, “before deploying the anonymous dynamics made possible by ever more sophisticated technologies.”

What is of interest here is the document’s ascription of anonymity (presumably between producers and consumers) to the nature of modern production rather than to the market. This is a subtle but important point given some criticisms of modern markets misdiagnose the anonymity of many (most?) modern market transactions as stemming from the market rather than stemming from the nature of modern modes of production.

This anonymity, however, is not unique to modern market production. Production on anything close to the scale of today’s modern economies, whether it’s production via the market or via command, requires a high degree division and specialization of labor. It is that division and specialization, and the geographical accouterments of that division and specialization that create anonymity between producers and consumers in transactions over most sophisticated goods. The interaction of producers and consumers in the old Soviet Union were no less anonymous than in the West, notwithstanding that much of the production and distribution of goods in the former came via non-market routes. Any more humane system of “social” production (relative to the old Soviet Union, that is) will be just as anonymous. This results from the technological demands of modern production. And, most likely, if this issue will be solved, if ever, by new technological innovations allowing diffuse and local production without huge efficiency losses.

Akin to the claim parenthetical phrase in the Vatican document, it is not the market that imposes anonymity in modern economies, it’s the nature of modern production, whether those goods are produced and distributed via markets or not. Anti-liberals simply misdiagnosis the problem if they think reining in or abolishing the market will mute the cause and consequences of anonymity between producers and consumers.

In any event, the surprise in the document for me is that its tone does not reflect the tone emanating from other parts of the Vatican. Indeed, when one gets to the actual policy proposals forwarded in the last half of the document, it is all pretty tame stuff, recommending (without specifics) that nations develop means to insure that assets underlying securities (and derivatives based on those securities) have and can be accurately valued (think bogus property values preceding the 2008 crash), the problem of national-level tax havens, etc. That said, there are some aspects of the document’s analysis that seem aimed at the wrong targets. I plan to interact more critically with some of the document’s claims in my next post.