Reinventing the Economy Through Distributive Considerations

By Felipe Flores

Shifting the paradigm of neoclassical economics to boost a more just and fair economy

Economics is a social science which has portrayed itself as a rigorous, mathematical one, but it has fallen short in regard to incorporating ethical or justice considerations into its body of knowledge. This is not a new claim but still an alarming one due to the significant social outcomes driven by the practical applications -calculations- made by governments, corporations and individuals. Society seems to be unhappy about said social outcomes, for instance in issues of poverty, access to healthcare or wealth disparities. Nevertheless, many individuals and society actors have failed to acknowledge that we have been supporting -directly or indirectly- an economic system that has not worked for all, at least in the past decades. The mainstream neoclassical economics model and its assumptions are still being taught and highly utilized despite its limitations to measure performance, nudge individual behavior or guardrail more just outcomes which are far from the optimal, in real life.

Toward a Truly Free Market by John C. Medaille is a thought-provocative book which elaborates on interesting propositions about the shortcomings of the economic system as we know it and how distributism criteria can fill the gaps to allow for a more just distribution of economic outcomes. We notice the inefficient and unequal outcomes of the market economy in real life as we ponder the call to raise the minimum wage or discuss provisions to let minority-owned businesses access to government contracts. Likewise, we have noticed an increasing number of ways in which corporations have tried to remedy some of the deficiencies of the economic system, for instance through Corporate Social Responsibility (CSR) programs. Moreover, we have observed the growing call and advocacy to boosting inclusive capitalism and we even see the Catholic Church taking a lead on these initiatives through the Economy of Francesco. In sum, the “invisible hand” does not seem to work quite well for society. What can we do about it?

The author strongly recommends to revisit and emphasize the political economy consideration of the economic science over the mathematical demonstrations of artificial equilibriums -what he calls, the mathematical bias- when estimating outcomes that are inconsistent with reality. The short-term swings of the economy are nowadays mostly driven by expectations, uncertainties and current events more than they are supported by real, tangible good or services supplied and consumed by society.

The technicalities and his economic rationale are well explicated in his book. It is worth noting his support to progressive taxation and fostering the creation and growth of cooperatives. Another interesting idea is the proposition to normalize the returns from labor (wages) and capital (profits), as the differential might be exacerbating the wealth inequality gaps, for instance.

As pointed by Mr. Medaille, the current economic system in the US brings the worst of capitalism and socialism together because there are so many externalities and legacy government interventions, so that “the rewards are privatized, and the risks are socialized” (p. 83). In this way, the counterintuitive realization is that capitalism is incompatible with free markets. We let corporations and individuals “compete” in highly regulated sectors or sometimes controlled by self-regulating groups which only tend to reduce the number of suppliers and therefore letting the ones who hold these assets maintain more market power. On the other hand, we have other highly subsidized sectors which are less subject to competition as well (think of healthcare), where the price for these services does not match the marginal cost of producing the service. We have quasi-monopolies or monopolistic competition operating in many industries such as airlines, financial services. Indeed, many sectors seek to be bailed out sooner or later despite economic advantages given to them.

The pandemic period has only exacerbated the deficiencies and disparities of the current economic system. It is time to shift the underlying assumptions of the economy, ideally to be informed by justice and freedom too. It is time to provide incentives to nudge a just distribution out of the economic system to ultimately achieve a more inclusive and positive punctuated equilibrium.

Did You Get the Fratelli Tutti Memo?

By Christopher Hunt

Building the common good through fraternity and social friendships

A common project. A few paragraphs into Fratelli Tutti’s (FT) chapter 5 A Better Kind of Politics Pope Francis speaks of advancing toward a common project (FT 157-158). He goes on to speak of local, national and international politics, and inside of this common project, there are many other projects that must be formed and executed. As Archbishop Christophe Pierre explained at the previous webinar, “We will not open up this document to find readymade solutions,” we realize that there are personal and political actions that must be taken. This is a multigenerational project, and we need to get started on it now.

Politics are devolving throughout the entire world. Populism and nationalism are subverting any sign of a virtuous patriotism with demagoguery and ideology. Socialism is ruining countries that were growing into good economies a short time ago. Religious dictatorships are terrorizing their peoples. There is forming now intense polarization, and the different camps are seeing their political opponents as enemies that are evil and must be destroyed. Social media is stoking this fire with twisted AI and biased algorithms, causing people to have circular echo-chambers helping them to sail rapidly to extremes. News has become ultra-partisan, and fake news seems to be everywhere. The pandemic is causing greater unemployment which, coupled with lockdowns and social distancing norms is forcing us into widespread isolation, and making it easier than ever to delve deeply into ideology and immerse ourselves deeper into the online echo-chambers. We are more connected than ever through technology, but that does not necessarily translate into deep social connections nor meaningful solidarity; and many times said online interactions take less “encounter”, using the words of Pope Francis. These are all forces that are fighting against our common project.

Did you get the Fratelli Tutti memo? Pope Francis calls to all people of good will “...I have written [Fratelli Tutti] from the Christian convictions that inspire and sustain me, I have sought to make this reflection an invitation to dialogue among all people of good will” (FT 6). The World Synod of Bishops tell Catholics that “ action on behalf of justice and participation in the transformation of the world fully appear to us as a constitutive dimension of the preaching of the Gospel, or, in other words, of the Church's mission for the redemption of the human race and its liberation from every oppressive situation...The members of the Church, as members of society, have the same right and duty to promote the common good as do other citizens. Christians ought to fulfill their temporal obligations with fidelity and competence. They should act as a leaven in the world, in their family, professional, social, cultural and political life. They must accept their responsibilities in this entire area under the influence of the Gospel and the teaching of the Church. In this way they testify to the power of the Holy Spirit through their action in the service of people in those things which are decisive for the existence and the future of humanity. While in such activities they generally act on their own initiative without involving the responsibility of the ecclesiastical hierarchy, in a sense they do involve the responsibility of the Church whose members they are” (Justice in the World- World Synod of Bishops 6, 38).

Similarly, we are taught by the Canadian bishops that in this endeavor, “ just as yeast leavens bread from within, so the laity are called to be a leaven in the world. This is not accomplished primarily by expounding on particular doctrines or speaking about Christian values. Rather, the Christian himself or herself is the leaven. Lay people live in families and in communities. They work or study and are involved in the social and political life of their communities at the local, national, and international levels. They become a leaven through the unique way they approach work and study, live in society, and participate in politics” (Co-responsibility of Lay Faithful in Church & World – CCCB- 8, 9). Catholics are being called by their shepherds to enter into this in a specifically Christian way. It is our responsibility to do so.

Informing ourselves responsibly on the matters stated above is a foundational act of charity. We cannot make informed decisions, nor can we pass on, educate, those whom we owe education; primarily our children. As the good Archbishop Christophe Pierre points out, though, we need information that is infused with wisdom. “True wisdom demands an encounter with reality. Today, however, everything can be created, disguised and altered” (FT 47). Prayer and Scripture will help us to have wisdom, that goes without saying. Similarly, another saying goes, “work as if it depends on you, pray as if it depends on God!”, we must tag “study” along with “work”, and have the “it” being wisdom.

How do we lead a life of service to our brothers and sisters, and help to form a politic that helps ALL people to have a better life? We are called to embrace the Good Samaritan attitude in our individual encounters, and also to enhance the political infrastructure that expands the common good in society. As Archbishop Pierre explained, this is not to stop merely at the personal level, but must extend into policies of state... political, economic and social (FT 164-165). We must reject those “leftist ideologies or social doctrines linked to individualistic ways of acting and ineffective procedures [which] affect only a few, while the majority of those left behind remain dependent on the goodwill of others” (FT 165). We also cannot rely on neoliberalism which “simply reproduces itself by resorting to the magic theories of ‘spillover’ or ‘trickle’ – without using the name – as the only solution to societal problems... the alleged ‘spillover’ does not resolve the inequality that gives rise to new forms of violence threatening the fabric of society” (FT 168). St. Paul VI explained clearly, “let it be said once again that economics is supposed to be in the service of man” (Populorum Progressio, 26).

We are acting as the Good Samaritan when we are living a life of charity and love in our personal lives. How we treat our spouse, our children, friends, co-workers and fellows we deal with on a day-to-day basis, in our choices in how we purchase goods, in the ways we choose to inform ourselves, in our acts of charity and alms-giving, education of our children, in our life of prayer and sacrifice; in all acts of spiritual and corporal works of mercy, in making ourselves available to others despite our busy schedules, in seeing the presence of God when encountering our brothers and sisters in greater need or those who hold opposed worldviews.

As Archbishop Pierre asked us at the webinar, “can we truly see each other as brothers and sisters despite our (religious, economic, social, political) differences?” It is a serious invitation to challenge ourselves and go beyond our groupthink barriers.

Think Globally, Act Locally

By Christopher Hunt

Education and informed action are our primary responsibilities to advance the common project proposed in Fratelli Tutti (FT). The “Good Samaritan” attitude is an essential business too.

We have a responsibility to learn our history, to learn the philosophy and teachings that the Church has handed down to the laity so that we can be informed and understand what is going on concerning our current events. We must view the news of the day through the context of history in order to better interpret and understand the realities we are being faced with. This gives us the burden of continual education through reading and the use of educational media. This is also necessary if we wish to form our children correctly, for if we do not do this “someone [will tell our children] to ignore their history, to reject the experiences of their elders, to look down on the past and to look forward to a future that he himself holds out, doesn’t it then become easy to draw them along so that they only do what he tells them? He needs the young to be shallow, uprooted and distrustful, so that they can trust only in his promises and act according to his plans. That is how various ideologies operate: they destroy (or deconstruct) all differences so that they can reign unopposed. To do so, however, they need young people who have no use for history, who spurn the spiritual and human riches inherited from past generations and are ignorant of everything that came before them” (FT 13). Therefore, we must know our history, our culture, and retain the unique aspects that give us so much to offer on the grander scheme of which we are speaking. If we lose this, we “end up losing not only (our) spiritual identity but also (our) moral consistency and, in the end, (our) intellectual, economic and political independence” (FT 14).

So, one of our foundational responsibilities is the formation and education of our children. A good formation nurtures responsible and caring citizen, builds good families, builds good communities, builds good states, builds a good international community. We must educate our children well in religion, philosophy, history and the academic subjects. This is our duty, not the duty of the state, though the state may be of help. When choosing educational institutions, we must choose wisely. If there are not affordable institutions that will aid us in properly forming our children, then we must take the responsibility on, and homeschool our children.

It does not end with our children. In fraternal love we may be the Good Samaritan to our brothers and sisters in our extended families, our church families, and our communal families by supporting our local Catholic schools, and other public and private schools in our area which are forming children well, by advocating for better curricula if they are not, and by aiding schools in poorer areas of your community with charitable donations and political activism. We can also help by aiding those people in our circles that cannot afford a good education for their children. As we are looking to the world, we can personally be the Good Samaritan to those in poorer nations. St. Paul VI tells us “that economic growth is dependent on social progress, the goal to which it aspires; and that basic education is the first objective for any nation seeking to develop itself. Lack of education is as serious as lack of food; the illiterate is a starved spirit” (Populorum Progressio, 35). Do you have friends in a poor nation? Do others in your circle have friends in poor nations? Often, a good education in a poor nation is inexpensive by our standards, though prohibitive to the average families abroad in such nations. If our personal finances allow, we can sponsor a family’s child or children to get a good primary education. If it is possible, we can host young adults who aspire to university education in our nation’s institutions. It will be these educated children and young adults that will bring their new skills to the building of their respective nations. “(Authentic democracy) requires that the necessary conditions be present for the advancement both of the individual through education and formation in true ideals, and of the ‘subjectivity' of society through the creation of structures of participation and shared responsibility” (Compendium of the Social Doctrine of the Church, 406).

Another way to be the Good Samaritan is by rejecting that globalization of indifference which seems to have overshadowed those of us in the wealthier countries. Often, we buy clothes, phones, gadgets, coffee, produce which was made, assembled, grown by people who are made to be slaves. We have heard of poor Chinese workers jumping to their deaths in order to escape the dire situation they are put in. Made to sleep where they work, building the technology we spend exorbitant amounts of money on, or those poor souls in that clothing factory in South Asia who were locked inside so as to force them to work in horrid conditions, making our clothes that we buy, which cost less than the material to make them ourselves. They died not being able to escape the fire that engulfed the building. So, we can be the Good Samaritan by advocating as citizens to our congressmen and senators and to our president to demand the respect for human rights of workers across the globe and to support international trade laws that do not allow our corporations to utilize goods made and procured in such fashion. And we can also choose how we purchase. This can be sacrificial in some regards as we switch to purchasing fair trade products whenever available or purchasing the more expensive garment that was not made by slave labor. In a word, buy mindfully, in a spirit of fraternal love for our brothers and sisters that are far removed from our lives.

There is also the obvious actions of the Good Samaritan, which is aiding in local charities, personally feeding and clothing the hungry and poor in your community, fighting for prison and justice reform. There are often soup kitchens that need food and volunteers, places that accept clothing for the poor. These are immediate necessities, and we must work to eradicate extreme poverty and hunger. Our aid right now to those in need in our community is a responsibility. We will need to grow in fortitude to speak up against meanness and bullying, against racism whenever we encounter it. We must stand in solidarity with our brothers and sisters -locally and across the world- that do not have the means that we have, and we must work to help them to acquire better means.

We must work at this with all people of good will. Let’s boost our fraternal bonds with all communities and reload our energy as we advance this common project.