The answer to this question depends on exactly what one means by capitalism.
Most discussions of capitalism generate more confusion than light, simply because the meaning of this term is left undefined.
There are at least three meanings of this word that should be understood if one wishes to make sense of the teaching of the Catholic Church. Each of these three definitions is substantially different from the other two. Additional definitions are also possible, but will not be considered here in order to avoid undue complication.
The three definitions of capitalism are as follows:
That economic regime in which are provided by different people the capital and labour jointly needed for production.
Centesimus Annus #100
An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision rather than by state control, and by prices, production, and distribution of goods that are determined mainly in a free market.
The economic system that exists in the U.S.A.
The third definition is strictly from popular usage. We sometimes hear the expression that the United States is a capitalist country. So, in the popular imagination, capitalism is whatever economic system exists there.
The second definition is a sort of idealized system, which does not really exist anywhere in a pure form. The Church does not and never has had a problem with capitalism as per this definition. Pope John Paul II made this clear when he asked rhetorically in Centesimus Annus No. 42 about the appropriateness of capitalism and gave this reply:
“The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”
The first definition, strangely unfamiliar, makes a great deal of sense when analyzed in the context of the Church’s social doctrine.
The term “capitalism” emerged in the nineteenth century from the upheaval wrought by the industrial revolution. Almost from the beginning, this term elicited powerful reactions both for and against capitalism. The Church perceived the need to address the situation to give guidance to the faithful, but first it was essential to determine exactly what was being considered.
Capitalism per definition 2 was nothing new; it had always existed in some form. What was new? Why this new nomenclature? In the end, the popes decided that what was new was the massive dichotomy between ownership and labour. In the preceding medieval guild system, where the owner of a business was also the master craftsman of the enterprise, such a huge division did not exist.
In the new “capitalist” system, the owner of the enterprise almost never did any of the actual manual labour involved in the production of goods. He employed others to do that.
So this was the new thing, the “res nova” of capitalism. But what was the Church to make of this new development? Based on some terrible abuses, it would have been easy to condemn it. However, the Church, as always, analysed the phenomenon carefully, reasoning from first principles.
The popes did not see an intrinsic disorder in capitalism per definition one, although they were keenly aware of the abuses perpetrated by many early capitalists. Socialism also appeared and presented itself as a solution to these abuses.
Socialism, the idea that the state should own all property and thus control all economic activity, was unequivocally condemned by the Church.
In “Rerum Novarum”, the first great social encyclical, in paragraphs no.11 and no.12, Pope Leo XIII put it this way:
“The Socialists, therefore, in setting aside the parent and introducing the providence of the State, act against natural justice, and threaten the very existence of family life.
And such interference is not only unjust, but is quite certain to harass and disturb all classes of citizens, and to subject them to odious and intolerable slavery. It would open the door to envy, to evil speaking and to quarreling; the sources of wealth would themselves run dry, for no one would have any interest in exerting his talents or his industry; and that ideal equality of which so much is said would, in reality, be the leveling down of all to the same condition of misery and dishonor.
Thus it is clear that the main tenet of Socialism, the community of goods, must be utterly rejected; for it would injure those whom it is intended to benefit, it would be contrary to the natural rights of mankind, and it would introduce confusion, and disorder into the commonwealth. Our first and most fundamental principle, therefore, when We undertake to alleviate the condition of the masses, must be the inviolability of private property.”
Thus, socialism, which was born as a reaction to the excesses of the early capitalists, was judged to be intrinsically disordered. The Church’s position in this matter has never changed.
It is a curious fact that some modern commentators accuse the Church of moving toward socialism. Such is not the case.
In opposing radical capitalism, meaning thereby the absolute predominance of capital, Pope John Paul II, in Centesimus Annus No. 35, clarifies that:
“In the struggle against such a system, what is being proposed as an alternative is not the socialist system, which in fact turns out to be State capitalism, but rather a society of free work, of enterprise and of participation. Such a society is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied.”
Capitalism, on the other hand, while not condemned, was not given blanket approval. While capitalism was not judged to be intrinsically disordered, it is safe to say that the popes were not fully at ease with it. They warned repeatedly of an ever-present danger in capitalism, the danger of using people as a resource in production, undifferentiated from the material means of production.
Reasoning from the intrinsic dignity of the human person made in the image and likeness of God, they made it very plain that a human being could never become a means to an end, but was always the end which is to be served by all the material means.
If, therefore, profit became the paramount end of any enterprise, and people became merely a means to achieve this end, a morally disordered situation would exist. The popes recognized that this was not necessarily the situation in capitalism as they defined it, but merely a danger lurking in the shadows.
If we consider now definition 3, capitalism, that is, as it exists in the U.S.A. (or Canada for that matter) how are we to judge it in the light of the Church’s teaching?
The defenders of North American capitalism are evidently uncomfortable with some of the social doctrine pronouncement from the Church. One often reads of accusations that the Church is soft on socialism, for instance. This assertion that the Church is moving toward socialism seems to be based on two misunderstood realities.
The first is the role of government. The Church teaches that government has the right and duty to regulate economic activity, for the benefit of all. Some, on the right wing end of the political spectrum, can’t seem to be able to get past the word “government” and cry “socialism”. Socialism is not the same as government overview of economic activity. The two are as different as night and day.
The second is the Church’s insistence that economic activity must be socialized. Again, this does not mean, or even imply, socialism. What this insistence means is that economic activity must be directed toward the common good, not merely for the benefit of some.
The real question is this: to what extent has North American capitalism succumbed to the temptation to use people as a means to another end, namely, money? When we consider this question, we must not think only of employees, but also customers and suppliers, who are also human beings. Different people may well come up with different answers to this question, but one thing is clear, there are certainly many questionable elements in the picture.
What, for instance, are we to think about false or misleading advertising, the only aim of which is to get people to buy? What are we to think of products or services which are useless or even harmful to the consumer? In Centesimus Annus No. 36, Pope John Paul II offers this elaboration:
“To call for an existence which is qualitatively more satisfying is of itself legitimate, but one cannot fail to draw attention to the new responsibilities and dangers connected with this phase of history. The manner in which new needs arise and are defined is always marked by a more or less appropriate concept of man and of his true good. A given culture reveals its overall understanding of life through the choices it makes in production and consumption. It is here that the phenomenon of consumerism arises. In singling out new needs and new means to meet them, one must be guided by a comprehensive picture of man which respects all the dimensions of his being and which subordinates his material and instinctive dimensions to his interior and spiritual ones. If, on the contrary, a direct appeal is made to his instincts – while ignoring in various ways the reality of the person as intelligent and free – then consumer attitudes and life-styles can be created which are objectively improper and often damaging to his physical and spiritual health. Of itself, an economic system does not possess criteria for correctly distinguishing new and higher forms of satisfying human needs from artificial new needs which hinder the formation of a mature personality. Thus a great deal of educational and cultural work is urgently needed, including the education of consumers in the responsible use of their power of choice, the formation of a strong sense of responsibility among producers and among people in the mass media in particular, as well as the necessary intervention by public authorities.
A striking example of artificial consumption contrary to the health and dignity of the human person, and certainly not easy to control, is the use of drugs. Widespread drug use is a sign of a serious malfunction in the social system; it also implies a materialistic and, in a certain sense, destructive “reading” of human needs. In this way the innovative capacity of a free economy is brought to a one-sided and inadequate conclusion. Drugs, as well as pornography, and other forms of consumerism which exploit the frailty of the weak, tend to fill the resulting spiritual void.
It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed towards “having” rather than “being”, and which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself. It is therefore necessary to create life-styles in which the quest for truth, beauty, goodness and communion with others for the sake of common growth are the factors which determine consumer choices, savings and investments.”
The Church teaches that all human beings are morally accountable. There really is no such thing as an impersonal marketplace in which there is not moral accountability. The marketplace is made up of a myriad of interacting human beings, each and every one of whom is personally responsible for all of his actions.
North American capitalism obviously presents a very ambiguous picture, when viewed in this light.
By way of summary, we could say that:
Capitalism per definition 3 is a very ambivalent thing, lacking an internal moral regulator.
Capitalism per definition 2 is a somewhat idealized concept, but which bears the approval of the Church.
Capitalism per definition 1 is intrinsically not disordered, but prone to abuse.
Is capitalism good, bad or indifferent? That depends on the precise meaning attributed to that word.
Per definition one, it is indifferent.
Per definition two, it is good
Per definition three, it is flawed.
The Church has given us the principles upon which we are called to build a better new order, which Pope John Paul the Great has called the civilization of love.
In the economic sphere, this task belongs properly to the Catholic laity as Vatican II has made clear. We do not yet have an economic order worthy of this new civilization, but some of its elements are already visible.
Surely the time is ripe to get to work.