I fancied myself a social justice warrior and regarded capitalism with a moderately hostile predisposition. I “knew” what everyone knows: Capitalism is great for the rich but terrible for the poor. The natural progression of free enterprise is that the rich and powerful accumulate more and more of the world’s resources while the poor are exploited. That state of affairs might be fine for a follower of Ayn Rand, but it is hardly consistent for a devotee of Our Lady of Guadalupe. Right?
As with most people of my generation, for me the symbol of world poverty was a starving child in Africa. I remember a picture from my childhood—I think it was from National Geographic—of an African boy about my own age. He had a distended belly and flies on his face, and he became for me the human face of true deprivation. As I grew up, I assumed, as do most Americans, that the tragic conditions facing the starving African boy had gotten worse. Today, more than two-thirds of Americans think global poverty has worsened over the past three decades.
This assumption and the attendant beliefs about capitalism hit a snag when I studied economics for the first time. In reality, I learned, humanity has starvation-level poverty on the run. Since 1970, the fraction of the global population that survives on one dollar or less a day (adjusted for inflation) has shrunk by 80 percent. Since 1990, the number of children who die before their fifth birthday has collapsed by more than 50 percent. Life expectancy and literacy rates have steadily climbed.
When faced with suffering, we often ask a conventional question: “Why are some people poor?” But grinding material poverty was the norm for the vast majority of people through the vast majority of human history. Our ancestors had no concept that mass poverty was an acute social problem that cried out for remedies. Deprivation was simply the background condition for everyone.
In just the last few hundred years, that all changed for a few billion people. So the right question today is: “Why did whole parts of the world cease to be poor for the first time in history?” And further: “What can we do to share this ahistorical prosperity with more people?” Economics taught me that two billion of my brothers and sisters had escaped poverty in my own lifetime. This was a modern-day miracle. I had to find its source.
My search for the “why” of this miracle required almost no detective work. Virtually all development economists, across the mainstream political spectrum, agreed on the core explanation. It was not the success of international organizations like the United Nations (as important as they are) nor benevolent foreign aid that pulled billions back from the brink of starvation. Rather, the responsibility lay with five interrelated forces that were in the midst of reshaping the worldwide economy: globalization, free trade, property rights, the rule of law and the culture of entrepreneurship. In short, it was the American free enterprise system, spreading around the world, that had effected this anti-poverty miracle.
Again, this is a mainstream scholarly finding, not some political cliché. Informed people from left to right agree on these basic points. As no less an avowed progressive than President Barack Obama put it in a 2015 public conversation we had together at Georgetown University, the “free market is the greatest producer of wealth in history—it has lifted billions of people out of poverty.”
None of this is to assert that free enterprise is a perfect system—but more on that in a moment. Nor is it to claim that free enterprise is all we need as people. But it has unambiguously improved the lives of billions. It became my view that if I was truly to be a “Matthew 25 Catholic” and live the Lord’s teaching that “whatever you did for one of the least of these brothers and sisters of mine, you did for me,” then my vocation was to defend and improve the system that was achieving this miraculous result.
That is how an unlikely Catholic became an even more unlikely warrior for free enterprise.
My new mission gave meaning to my growing disenchantment with music. I was hungry for work that served vulnerable people more directly. Now I had a roadmap to point me toward that future. I graduated from correspondence college shortly before my 30th birthday. Traditional graduate work in economics followed, and I left music for good to pursue a Ph.D. in policy analysis. That sparked a career as a university professor, teaching economics and social entrepreneurship.
As I taught about the anti-poverty properties of free enterprise, a common objection—especially among my Catholic friends—remained. “Okay,” many said, “I see that markets have pulled up the living standards of billions, and that’s great. But they haven’t pulled people up equally. In fact, capitalism has created more inequality than we have ever seen.” This spawns ancillary concerns about the rich getting richer at the expense of the poor, and the rising inequality of opportunity. My challenge as a Catholic economist was to answer these questions in good faith.
The evidence on income inequality seems to be all around us and irrefutable, particularly in the United States. From 1979 to today, the income won by the “top 1 percent” of Americans has surged by roughly 200 percent, while the bottom four-fifths have seen income growth of only about 40 percent. Today, the share of income that flows to the top 10 percent is higher than it has been since at any point since 1928, the peak of the bubble in the Roaring Twenties. And our lackluster “recovery” following the Great Recession likely amplified these long-run trends. Emmanuel Saez, a University of California economist, estimates that 95 percent of all the country’s income growth from 2009 to 2012 wound up in the hands of the top 1 percent.
Taking this evidence on its face, it is easy to conclude that our capitalist system is hopelessly flawed. Digging deeper, however, produces a more textured story.
To begin with, we should remember that inequality is not necessarily a bad thing when the alternative is the equality of grinding poverty, which was the case in previous centuries. Few would prefer a nation of equal paupers to modern-day America. But in any case, the notion that global income inequality has been rising inexorably is incorrect. From 1988 to 2008, a key era in the continued worldwide spread of market systems, economists have shown that the worldwide Gini index—a common measure of inequality—at worst has stayed level and has most likely fallen.
The real concern is capitalism’s purported tendency to create radically and unfairly disparate economic outcomes. In reality, however, most of the places with sky-high inequality are not bastions of unfettered free enterprise. According to the World Bank, while the United States has the 63rd highest level of income inequality in the world, communist China is higher (57th place). Pope Francis’ native Argentina, characterized more by government edict and economic planning than by free enterprise, is higher still (53rd).
If capitalism per se does not cause income inequality, what does? One part of the answer becomes clear after spending just a few days in China or Argentina. It is impossible to miss that prosperity in these places depends largely on political power and privilege, much more so than in the United States. While the United States is not perfect on this score by any means, our relative success at decoupling non-merit-based clout from economic success goes a long way toward explaining why so many people are so eager to relocate here.
Most of you have a family like mine. You are probably the descendant not of nobility but of ambitious riffraff who risked everything to flee poverty, oppression or both. Initially, they knew, poverty and inequality would also greet them in America—but here those conditions would be mutable, and some measure of prosperity could be achieved through hard work and personal responsibility. All this is doubly true for American Catholics, who were long viewed by the elite as the very archetype of impoverished and unpolished immigrants. Generations of Catholic immigrants—perhaps Juan Diego would be one today—showed up on our shores and at our borders starving for jobs and opportunity. Our country’s attractiveness to immigrants has persisted to this day, belying the idea that the United States is now some kind of plutocratic dystopia.
What about the worry that rich people are benefiting at the expense of the poor? It is ill-founded. All income groups in the United States have seen dramatic increases in their standard of consumption—not just since colonial times but also over the past few decades. Today, government data show, conveniences such as air-conditioning and color television—once literally inconceivable—have become ubiquitous all across the income distribution. Forty-five percent of Americans with incomes below the poverty line today live in a house with three or more bedrooms.
This is why many economists suggest that data on household consumption spending offer a better gauge of families’ daily realities than pretax earned income. Many households lose significant funds when they pay their taxes; many others gain meaningful resources through government transfers and benefits. Yet all of this is lost in the conventional income statistics. This is an especially noteworthy omission for Catholics, since our preferential option for the poor and corporal acts of mercy aim at concrete, specific improvements in actual living conditions. Eliminating poverty should mean fighting to raise living standards to a satisfactory threshold and eliminating acute material insufficiency. Mathematically, there must be a bottom 10 percent and 20 percent of earners in any society. The morally relevant issue is not this mathematical truism but rather how these people are actually living.
So what happens when we turn to consumption statistics, painting a more holistic picture with the data on what households actually spend? The allegations of recent runaway growth in inequality evaporate. Measured this way, the gap has not grown meaningfully in decades.
In other words, the zero-sum fear about our economy is mistaken. True, the rich are doing plenty well in the United States. Should they pay their tithe and then some, devoting resources not only to their government through taxes but also voluntarily to their churches and charities to help those who are less fortunate? Of course. But there is no real sense in which their success is directly stolen from the poor or middle class. In material terms, all these groups are unimaginably better off today than before free enterprise entered their lives.
A bigger concern is inequality of economic opportunity. The waves of immigrants drawn to this country did not expect to exchange impoverished lives in their homelands for instant wealth and luxury in the United States. But they did believe—accurately—that they were exchanging ossified lives in permanently stratified societies for one in which hard work could more directly yield a measure of prosperity.
Unfortunately, the best data available today suggest that absolute economic mobility is, in fact, declining. A recent study led by Raj Chetty, a Stanford economics professor, shows that the percentage of children who earn more than their parents has rapidly decreased. Their research shows that at age 30, about 90 percent of children born in 1940 were earning more than their parents had earned at that same age. Only half of children born in the 1980s were able to accomplish the same feat. And Americans’ expectations are trending downward to match this reality: According to a survey from mid-2015, only one in eight Americans believe their kids will have more disposable income than adults today.
Of all the concerns about inequality, this is the most legitimate. Unfortunately, it is also the hardest to solve. For example, it is a dubious proposition at best that forcibly redistributing wealth to decrease inequality would necessarily reinvigorate opportunity. After all, the approximately $20 trillion in transfer payments that have resulted from the War on Poverty have purchased a lot of welfare programs to make poverty a little less unbearable, but they have failed to do anything meaningful to make poverty more escapable. Even education spending, which is meant to level the playing field, has failed to do so. It has doubled per child (in real terms) since 1970, yet the achievement gap between students at the top and bottom of the income distribution has increased, not decreased, by a third.
The bottom line is that income inequality is not rising worldwide or, when properly measured, in the United States. Income inequality is not a unique product of capitalism, and it does not itself create impoverishment of the poor or the diminution of opportunity. Income inequality is the wrong focus for our anxieties about free enterprise. Opportunity inequality is the crisis we face today, and weakening the free enterprise system will not solve this problem.
Once I climbed over common Catholic criticisms of inequality, I realized that I had summited only a small foothill in the debate over free enterprise. A much bigger mountain loomed: the effects of capitalism on the soul.
The critics’ argument goes something like this: Capitalism makes us into materialists, into money-making automatons. Capitalism focuses us on greed and acquisition at the cost of our families, our faith, our friendships and even our planet. It sucks the life out of life.
The great G. K. Chesterton voiced this objection in his classic essay “Three Foes of the Family.” “It cannot be too often repeated,” he wrote, “that what destroyed the Family in the modern world was Capitalism.” He charged that the ethos that accompanies free enterprise had “broken up households and encouraged divorces, and treated the old domestic virtues with more and more open contempt.” Pope Francis put forward a similar point in his 2013 apostolic exhortation “Evangelii Gaudium”: “In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.”
These critics claim that market-based societies destroy real human flourishing because they inevitably make their participants more acquisitive and selfish, and therefore more unethical and unhappy. The evidence on the happiness question is especially evocative. In 2009, for example, researchers from the University of Rochester conducted a study tracking recent graduates’ progress at achieving goals they had set for themselves. Some of the 147 alumni had set out toward “intrinsic” goals, such as developing deep, enduring relationships. Others aimed at “extrinsic” goals, such as achieving wealth or becoming famous.
The results brought good and bad news. The good news is that, by and large, the subjects did achieve their stated goals. But be careful what you wish for, because it was only the alumni who had set intrinsic goals for whom success translated into actual happiness. The people who had successfully attained extrinsic goals, many of which boiled down to indulging avarice or pride, experienced more negative emotions, such as shame and anger. They even suffered more physical maladies such as headaches and loss of energy.
For Catholics, this is a potentially lethal criticism of free enterprise: As capitalism fixates us on wealth, it weakens the family, fragments the community and leaves us miserable. Is this not the very essence of idolatry?
The answer to this has occupied me for the past decade. I have lain awake worrying about the coarsening materialism of our society and American popular culture. Turn on the television, go to the movies, glance at practically any advertisement, and you will learn that the formula for a happy life is simple: use people, love things, worship yourself. Is capitalism to blame?
My conclusion is that it is not. Systems are fundamentally amoral. The forces that make up the free enterprise system are fundamentally content-neutral. Free enterprise could be used for purely evil ends if capitalism produced only pornography and poison gas, or for purely virtuous ends if man were not fallen. In reality, like basically every human endeavor, capitalism as currently practiced contains a mixture of praiseworthy and damnable behavior. At root, then, what matters is the morality of those who participate in the system.
Confusion about this point is the reason for one of the most frequent misquotes in all of Scripture. St. Paul is often incorrectly cited as saying that “money is the root of all evil.” On the contrary, his indictment was of inordinate attachment to money: “For the love of money is a root of all kinds of evil, and in their eagerness to be rich some have wandered away from the faith and pierced themselves with many pains” (1 Tm 6:20).
The problem is not money; it is attachment to money. Why else would God himself enter the world in complete poverty? More precisely for the topic at hand, the big problem is not free enterprise per se. It is the choice by many men and women to prioritize the struggle for riches ahead of higher goods such as faith, family and friendships.
Still, doesn’t the free enterprise system’s relentless efficiency at creating wealth make it a special offender at incentivizing selfishness and avarice? Even if humans tend naturally toward greed until we are corrected, doesn’t capitalism just slam our feet down on the accelerator?
In a word, no. Anyone who traveled behind the Iron Curtain in the 1980s (or China and Argentina today) has seen every bit as much human selfishness and greed on the part of the powerful and privileged. And there is little doubt that kings, princes and even popes throughout history fell to pecuniary idolatry. Greed was a deadly sin long before the invention of capitalism. Free enterprise—which has brought so much good to billions of people—is not the culprit. …
The bottom line, in my view, is that Catholics have no cause to reject free enterprise. We must acknowledge the limitations of any economic system, and avoid fashioning false idols out of our wealth or the markets that make it possible. But those tempted to consider different economic systems must remember that only free enterprise (accompanied by necessary regulation and proper social safety nets) has helped fulfill the noble antipoverty goals of our faith for billions of people all around the world. Meanwhile, capitalism’s collectivist competitors, such as state socialism or communism, have left a long trail of misery, tyranny and atheism. …
In “Gaudium et Spes,” the Second Vatican Council gave laypeople a clear teaching on the importance of our secular work. “Let Christians follow the example of Christ who worked as a craftsman,” the document declares. “Let them be proud of the opportunity to carry out their earthly activity in such a way as to integrate human, domestic, professional, scientific and technical enterprises with religious values, under whose supreme direction all things are ordered to the glory of God.” In short, the church teaches each of us with an honest profession to sanctify our work, no matter what it may be.
During the years when my work was music, my favorite composer was Johann Sebastian Bach. The master of the High Baroque published more than 1,000 works over the course of his 65 years. From keyboard études to church cantatas for every Sunday in the lectionary, Bach’s incredible compositions seemed to fall easily from his pen.
But music was not the most important force in Bach’s life. Before music came family. He was the father of 20 children. And before everything else came his love for God. Bach finished each of his scores with the words “Soli Deo gloria,” or “Glory to God alone.” When asked one time why he wrote music, his answer was simple but profound: “The aim and final end of all music should be none other than the glory of God and the refreshment of the soul.”
I first read that quotation when I was still playing the French horn. It inspired me, but it also sank in like a knife to the heart. I wanted to be able to sanctify my secular work as the church instructs; to be able to confidently say that my work glorified God and served my fellow men and women. In the orchestra, frankly, I was feeling that way less and less often. A lot of nights I was refreshing no one, and I began to crave a new profession that would offer a more direct path toward serving others.
Steve Prestegard.com: The Presteblog 
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