This story was first published on Forbes.com.
The recent economic statements by Pope Francis in his apostolic exhortation "Evangelii Gaudium" (EG) read as a call for a “Third Way” economic system ruled by experts and people of good will. Pope Francis writes:
Growth in justice requires more than economic growth, while presupposing such growth: it requires decisions, programs, mechanisms and processes specifically geared to a better distribution of income, the creation of sources of employment and an integral promotion of the poor which goes beyond a simple welfare mentality.
Pope Francis does not call for the socialization of the economic system and he does not point to any totalitarian country as a model. He states that this is “not a social document” and recommends the "Compendium of the Social Doctrine of the Church" as a more substantial guide for study and reflection.
Pope Francis waves as he arrives for his weekly general audience in St. Peter's Square at the Vatican, Wednesday, Dec. 11, 2013. Pope Francis has been selected by Time magazine as the Person of the Year. In only his first year, the Pope was selected by the magazine's editors as the person who had the greatest impact on the world, for good or bad, during 2013. (AP Photo/Alessandra Tarantino)
Nevertheless, as he did not include references to point 42 of John Paul II’s seminal encyclical "Centessimus Annus," which legitimizes a free-enterprise system based on a rule of law respect of human dignity, and as Francis’ language sometimes seems hostile to free markets, many Christian economists, and policy pundits, are alarmed. Several have questioned if the Pope has been negatively influenced by the Peronist culture of Argentina. Peronism has, as one of its pillars, an economic system that falls between socialism and capitalism. Juan Domingo Peron was an early champion of the Third Way.
In "EG," the Pope reaffirms that the Church does not have a “monopoly on the interpretation of social realities or the proposal of solutions to contemporary problems.” Within the hierarchy of the Church, many different economists are consulted. One economist who has a strong influence on the Vatican is Nobel Laureate Joseph Stiglitz, who some credit for dressing the Third Way economic system in academic garb.
There is no doubt, however, that Stiglitz’s writings had an impact on the second most influential Argentine at the Vatican: Monsignor Marcelo Sánchez Sorondo, chancellor of the Pontifical Academy of Science.
Stiglitz was appointed to the Pontifical Academy of Social Sciences in 2003 and had been chairman of the Council of Economic Advisers under President Bill Clinton. John Allen, a respected Vatican observer, wrote in 2003 that Stiglitz, “in that capacity, will help guide Vatican policy on global economic issues.” Allen also added that Stiglitz was a personal favorite of Sánchez Sorondo.
During a program sponsored by the Acton Institute, I had the privilege of sitting next to Sánchez Sorondo and he told me that Stiglitz was indeed his favorite economist. John Allen further added:
Stiglitz argues that the Clinton team made a mistake by accepting that the government should stay out of economic policy, leaving the finance sector to dictate the rules of the game. Stiglitz is thus likely to bolster what has already been the strong line of John Paul II, that public authorities must intervene in economic affairs to ensure that the benefits of globalization work for the common good.
Most of the statements on economics coming out of the Vatican that disturb free-market champions have been preceded by similar statements from noted economists. Such is the case with Francis’ apostolic exhortation.
Pope Francis delivers his Angelus blessing from the window of his private studio to thousands of pilgrims gathered in Saint Peter's Square on December 8, 2013 in Vatican City, Vatican. Pope Francis on Friday paid tribute to Nelson Mandela expressing his hope that the late President's example will inspire generations of South Africans to put justice and common good at the forefront of their political aspirations. Photo Credit: Franco Origlia/Getty Images
The paragraph that has garnered the most critical comments from market-oriented scholars is the one chiding the notion that economic growth will always “trickle-down” and “inevitably succeed in bringing about greater justice and inclusiveness in the world.” It is hard to find an economist who would argue that there are no exceptions to this theory. We can easily find high rates of growth coexisting with injustice and lack of inclusiveness. China and India are good examples.
The use of the word “trickle-down,” difficult to translate and usually used to denigrate the free economy, has opened the door for many discussions. It is likely that "EG" was originally written in Spanish. The Pope used the term “derrame” (spillover). Scottish philosopher and political economist Adam Smith wrote about the “universal opulence which extends itself to the lowest ranks of the people” in a “well-governed society.” When translated, “derrame” has been used for Smith’s word “extend.” Smith never defended “the absolute autonomy of the marketplace and financial speculation.” He did not have an absolute “trust in the unseen forces and the invisible hand of the market” and he understood the importance of a well-governed society.
An incomplete litany of other laments and economic admonitions from the Pope include: “a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system”; accepting “the dominion of money over ourselves and our societies”; the “dictatorship of an impersonal economy lacking a truly human purpose”; the “widespread corruption and self-serving tax evasion”; and “the invasion of ways of thinking and acting proper to … cultures which are economically advanced but ethically debilitated.”
Since the publication of "EG," Catholic economists have been providing answers and criticisms to each of these points. We can note that empirical studies show that economic freedom is the best antidote to corruption. Also notable is the work of free-market scholars of great prestige, such as the late Wilhelm Roepke, who created blueprints for a “Humane Economy.”
Boats and water taxis make their way along Dubai Creek on November 13, 2013 in Dubai, United Arab Emirates. Dubai is recovering from its slump caused by the the global financial meltdown. The government has recently released figures that show that construction and tourism and the non-oil economy are once again growing. Photo Credit: Christopher Furlong/Getty Images
The best contribution that free-market champions can make is to become outstanding and convincing economists so that influential leaders incorporate all economic truths into their moral admonitions. A good example to follow is that of Gary Becker, the Nobel Laureate from the Chicago School, who has been a member of the Pontifical Academy of Science since 1997. Becker’s sound economic research and his respectful demeanor during meetings at the Vatican earned him that spot. The writings of Nobel Laureates from other schools of thought sympathetic to free enterprise, such as F.A. Hayek and James Buchanan from the Austrian and Public Choice schools, also deserve more attention from the Vatican.
Juan Carlos de Pablo, one of the best professors at the Pontifical Catholic University in Buenos Aires, where I studied and taught, told his classes that, “if economists do not know economics, how can you blame the bishops for their economics?” Pope Francis has acknowledged the role of the laity in many areas, not only economics. Those of us who are Roman Catholics and are convinced about the economic and moral superiority of the free economy have a duty to engage the Vatican in a fruitful and respectful dialogue.
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