All that glitters is not gold
Five bishops from the Church of England roundly criticised the economic policies of the Labour Party government in Britain in an article published in the Sunday Telegraph on Sunday 28 December 2008. One of the bishops, from Manchester, branded Labour as being “morally corrupt”. Traditionally, British governments of all colours have followed; over the centuries and whenever possible, extreme economic liberal policies that put the focus on the market while relegating the state to a minor role in economic affairs. The US is in fact a relative newcomer to the unregulated market; its venture can be counted in decades rather than centuries. These two powers, nonetheless, evangelised neoliberalism in a big way since the 1970s and many countries joined the feast willingly or otherwise until the most recent crisis that emerged in 2007/08. However, the drift into this form of economic free for all has not gone unchallenged. The five bishops simply expressed a view that was put forward by successive popes over many decades, as described later, but a few words of explanation might help to put the neoliberal concept into context.
Adam Smith’s view that ‘rational’ individuals should be free to manufacture, trade, and barter at will and without interference from the state was held as an inviolable tenet. The concept had an ethical claim: people who seek their own self interest will ultimately, and without necessarily intending to do so, benefit the whole community. In later years the idea became known as economic liberalism which then assumed. from the 1980s, a fundamentalist format infamously known as neoliberalism. The concept see the market, free from all and any external regulation, as the supreme element in humankind’s life. All else is there to serve, protect, and promote the market. The setup’s disengagement from any value system is taken as an article of faith. Ethical, cultural, and religious rights and wrongs should not cloud the business of buying, selling, manufacturing, lending, and profit-making in the free market. Any such scruples; just like external regulation, should be eliminated as they would distort the market and result in wasteful inefficiencies. In short, winner takes all and hang the consequences.
The drift into neoliberalism that coincided with Reagan’s era in the USA and Thatcher’s premiership in the UK mushroomed into the globalised economic system that has engulfed most of the world until the bubble burst in 2007/08 resulting in economic turbulence reminiscent of the 1920s and 1930s. At the time of writing politicians in the advanced economies, and their so-called expert advisors, are grappling with unfamiliar conditions that confront them with new issues on a daily bases. One refrain is heard loud and clear: these are unexpected events that no one could have foreseen. Bankers and industry plutocrats are blamed for their greed but governments are busy bailing them and their corporate empires with money that ordinary citizens will have to find for decades to come. Most remain in their lucrative posts, others having received millions each year in salaries and bonuses have retired to spend the rest of their days in absolute luxury.
Contrary to assertions, the collapse was predicted by several authors and commentators. At heart the fling was simply too good to be true. George Soros, for instance, published his critical book on the Crisis of Global Capitalism back in 1998. There were other cautionary words, including articles published on this website. But in the orgy that was in full swing these warnings were ignored or dismissed as alarmist. One has to admit that the protagonists were so numerous and powerful that any contrary opinions were expected to go unheeded. The fact that the former group is now keeping a low profile should not be seen as final victory. The moment the global financial and economic systems begin to show signs of recovery the supporters of unregulated markets will re-emerge again to repeat the same sorry cycle yet again: massive profits for the few, later to be paid for by the many. It has regularly happened before so beware!
It is this repetitive cycle that prompted me to delve into unexpected sources to seek guidance from the past. And where better to look for guidance than the words of successive popes; the Bishops of Rome and leaders of half the Christians and about one sixth of the world’s population. It was interesting to see what the popes thought of unregulated economic liberalism as they are somewhat difficult to dismiss as socialists, alarmists, or Islamic fundamentalists!
There was good reason for mentioning Islam. Muslims’ antagonistic stance against extreme economic liberalism and what it entails in inequalities and in social and cultural upheavals is well documented. They are labelled as ‘fundamentalists’, ‘extremists’, or outright terrorists. That dispenses with their viewpoint. However, it is not commonly known that successive popes, through their periodic encyclicals, also had much to say about the rights and wrongs of economic liberalism. The popes argued that prosperity and peace could only be achieved under the umbrella of a healthy collaboration between capital, unions, and states. They were strident in stating that anything else would in effect be a recipe for conflict, as well as being against natural and heavenly precepts. Basically, they felt there is more to life than profits.
So what did the popes say?
Pope Leo XIII (1810-1903) issued Rerum Novarum (on ‘new things’) on 15 May 1891. This came at a turbulent period of revolutionary change, marked by socialist ideas that were gaining popularity in the nineteenth century in response to strident economic liberalism that had been at centre stage for quite some time. The first paragraph of what came to be known as the Leonine encyclical painted a picture that looks familiar to readers in the twenty-first century:
“The elements of the conflict now raging are unmistakable… in the changed relations between masters and workmen; in the enormous fortunes of some few individuals, and the utter poverty of the masses;… The momentous gravity of the state of things now obtaining fills every mind with painful apprehension.” (Rerum Novarum, papalencyclicals.net).
Having established his credentials, at length, as a devotee of sensible liberal beliefs in economics and as a severe critic of socialism in any form, Leo XIII moved on to pose a serious challenge to sacred planks of liberal economic orthodoxy. He questioned in particular the right of economic actors to monopolise power.
Leo XIII issued three other documents; Diuturnum (on civil power) in 1881, Immortale Dei (on states) in 1885, and Libertas (on human liberty) in 1888, which addressed, just as forcefully as the 1891 encyclical, other associated topics on the same theme.
Similar issues were picked up by Pope Pius XI in Quadragesimo Anno (on social order) on 15 May 1931; a turbulent inter-war period that was later described as ‘economic warfare’. He was concerned about the growing gap between haves and have-nots and the harm this caused to peaceful social and political life. He pointed out that Pope Leo XIII in Rerum Novarum “sought no help from either Liberalism or Socialism, for the one had proved that it was utterly unable to solve the social problem aright, and the other, proposing a remedy far worse than the evil itself,…[Pope Leo] fearlessly taught that government must not be thought a mere guardian of law and of good order…”
Pope Pius XI also attacked extreme economic liberalism and its “erroneous suppositions”. He identified especially the loss of “social governance” caused by the “near extinction of that rich social life which was once highly developed through associations of various kinds…” He likened liberalism that results in concentration of wealth, and therefore “immense power”, in the hands of a few individuals to a “despotic economic dictatorship.”
Thirty years later, on 15 May 1961, Pope John XXIII issued Mater et Magistra in which he drew attention to lack of “correlation between “economics and morality” and the belief that in business “the main operative principle was that of free and unrestricted competition.” He pointed out that the “natural consequence of all this was a spirit of indignation and open protest on the part of the workingman, and a widespread tendency to subscribe to extremist theories far worse in their effects than the evils they purported to remedy.”He was writing of course some forty years before the ‘war on terror’ came on the scene.
Interestingly, in the context of the high salaries presently paid to footballers, television presenters and other ‘celebrities’, Pope John identified for criticism the disproportionately high rate of remuneration for “relatively unimportant services and services of doubtful value…Economic progress must be accompanied by a corresponding social progress…” Pope John of course did not live to witness the unbelievable salaries and bonuses currently paid to company chief executives and directors on the grounds that they bring with them unparalleled talents essential to the businesses concerned; many of which are now virtually bankrupt!
Finally Pope John raised another issue of relevance to the twenty-first century: assistance by more wealthy countries being used to gain political control of weaker and poorer countries and for “furthering their own plans for world domination…They must beware of making the assistance they give an excuse for forcing these people into their own national mold… Such action would, moreover, have harmful impact on international relations, and constitute a menace to world peace.” Again, he did not live to see the spread of terrorism and fundamentalism: features that feed well on real or perceived injustices committed by leading powers and their local cronies.
To bring the discussion even closer to the present era, it is appropriate to mention Octagesima Adveniens; an apostolic letter from Pope Paulus VI dated May 1971. His remarks on “liberal ideology” are most revealing:
“On another side, we are witnessing a renewal of the liberal ideology. This current asserts itself both in the name of economic efficiency, and for the defence of the individual against the increasingly overwhelming hold of organizations, and as a reaction against the totalitarian tendencies of political powers. Certainly, personal initiative must be maintained and developed. But do not Christians who take this path tend to idealize liberalism in their turn, making it a proclamation in favour of freedom? They would like a new model, more adapted to present-day conditions, while easily forgetting that at the very root of philosophical liberalism is an erroneous affirmation of the autonomy of the individual in his activity, his motivation and the exercise of his liberty. Hence, the liberal ideology likewise calls for careful discernment on their part.”
I included the views of successive popes to underline the key point that those who support sensible economic liberalism and who are opposed to socialism could have serious and justified concerns about economic liberalism when it is taken to extremes. Inclusion of the Christian viewpoint was necessary, furthermore, because a number of the leading advocates of economic neoliberalism profess strong Christian beliefs.
Is this the end of unregulated free for all economic liberalism?
There is much talk about lessons to be learnt and the politicians mantra; ‘so that this could never happen again’, is repeated incessantly. This is meaningless public misinformation. Going by past experience, the neoliberal zealots, now silent, will come back with a vengeance. Rent seekers have to make up for lost time. Could nothing be done? Yes of course: don’t believe their nonsense: if it is too good to be true then it is too good to be true.
And finally, what about Adam Smith; the thinker most economic liberals quote (or misquote) regularly? Actually, his thinking was closer to that of the popes than economic liberalists will have us believe. And if his advice on credit was followed maybe the present so-called credit crunch might not have been so bad:
“To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them; or, to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law, not to infringe, but to support.
“Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade which are here proposed.”
Have a healthy, happy, and sensibly liberal New Year!