Ethics and Economics

I’ve been slowly reading through John Medaille’s TOWARD A TRULY FREE MARKET: A DISTRIBUTIST PERSPECTIVE ON THE ROLE OF GOVERNMENT, TAXES, HEALTH CARE, DEFICITS, AND MORE.    As I’ve acknowledged in previous blogs I have no formal education in economics, so it often is incomprehensible to me, and I will not here defend or critique the book.

Medaille offers a rather somber evaluation of modern economics and thinks the ongoing economic crisis worldwide is not an aberration but really the end result of modern economic, capitalistic policies.  One thesis of the book is that in an effort to make economics a hard science (rather than a mere social science) economists jettisoned ideas of morality.  Economics void of morality becomes a strange animal indeed creating many of the problems we see all around the world.  Some people defend as the greatest good whatever is “good for the economy.”   But of course exactly what constitutes the economy is not completely accounted for (is it people or businesses?  citizens or corporations?), nor is “good” defined especially in a system of thinking which wants to avoid moral judgments.  Medaille for example points out that while current economic thinking assumes the existence of labor, it cannot account for the existence of labor because it totally ignores the existence of families.

Modern economics does not account at all for what it costs to produce a labor force, thus families are left to scramble on their own to earn enough to survive meanwhile “the economy”  (economic leaders and forces) feel no responsibility for the survival let alone thriving of families.  So economic policies often ignore what is good for the family.    Additionally the labor force is also the consumer force – the rich get richer off the labor and consumption of these people.   But those leaders of economic ideas see no connection between the cost of producing a labor force and their own profitability.    Medaille offers many ideas about how to correct some of the problems that beset the world economy today, ideas based in distributist economics.  Some of his ideas would resonate with conservatives (especially he advocates a significantly smaller federal government) but his arguments on the moral issues of economics might not make conservatives feel so comfortable.  The keystone to his ideas is the notion of the just wage (you can read more on distributist ideas at http://distributistreview.com/mag/)

I suppose because I’ve been thinking about Medaille’s ideas connecting ethics to economics, I paid attention to a 20 December 2011 NY Times Op-Ed piece by Charles Blow, Deep Pockets, Deeply Political.   Blow is sounding a recently familiar alarm:

 A tiny number of wealthy Americans are playing an ever-increasing role in financing our politics. This is not a good thing for a democracy.

Last week, the Sunlight Foundation, a non-profit, nonpartisan organization dedicated to making government “transparent and accountable,” issued a report, which said:

In the 2010 election cycle, 26,783 individuals (or slightly less than one in ten thousand Americans) each contributed more than $10,000 to federal political campaigns. Combined, these donors spent $774 million. That’s 24.3% of the total from individuals to politicians, parties, PACs, and independent expenditure groups. …

The report also pointed out that “overwhelmingly, they are corporate executives, investors, lobbyists and lawyers” and that “a good number appear to be highly ideological.” In the 2010 election cycle, the report revealed, “the average one percent of one percenter spent $28,913, more than the median invdividual income of $26,364.”

But perhaps even more disturbing was this:

The community of donors giving more than $10,000 (in 2010 dollars) has more than quadrupled, from 6,456 in 1990 to 26,783 in 2010. In 1990, they accounted for 28.1% of all itemized (over $200) donations. By 2010, that number had risen to 44.1%. These donors are also accounting for an increasing number of all donations. And they’re giving more, too. In 1990, the average donation was $13,443. By 2010, it was more than double: $28,913.

James Madison

That the top  1% of  the well-to-do are financially more influential in politics than the rest of the country is not new.  Certainly Jefferson’s call that “all men are created equal” was not really a declaration of the equality of every human being but rather a demand that the limited number of landed gentry should be considered equals with the king.  The founding fathers envisioned some sense of the upper class ruling the country (as I recall James Madison even made mention at one point that the wealthy actually constitute a minority in the country and they had to be protected under minority rights against majority rule!).   There seems to have been in fact some notion among America’s creators that the well-to-do get to retire from work early and then can nobly serve the country in political office (This was an idea entertained by Ben Franklin).   So the wealthy being more influential in government than the majority of people is part of our democracy by and for the people from the beginnings of these United States!

I find myself connecting the statistics which Blow mentions to the ideas of morality in economics raised by Medaille.  People who are willing to drop nearly $30,000 down to influence politics are the ones who are fighting against paying taxes.  They would rather give $30,000 to political parties to promote their own interests (though this political donation is a form of a tax – the price to prosper in America) than to give that same amount of money to the government for the common good.  And they will give that same amount of money year after to year to political causes to avoid paying even less than that amount in taxes.

In the ancient Roman republic the imperial family and their slaves staffed the government at no public expense.  Senators and the equestrian class did the same out of a sense of duty – it was they who paid out of their own wealth for public buildings and services.  The landed elites of the provincial cities in turn paid for public services out of a sense of their own responsibility for the public good.

Is this civic sense, the sense of the common good,  what is so lacking in the current process of the wealthy paying for the politics of America?  Now, sadly people are willing to pay only for their own self interest – which often means exactly avoiding contributing to the common good.  A civic pride seems to be lacking.  The Romans thought patriotism meant working for the common good of all citizens which entailed spending their own money to build up (=edify) society.   Belonging to the wealthy class and owning property was considered a privilege which carried great responsibility for the common good of every citizen.  They believed all citizens should benefit from prosperity of the empire and of the wealthy.

Americans love to criticize entitlements – generally of any subgroup of Americans to which they don’t belong.  But entitlement thinking exists in the upper echelons of wealth too – it is entitlement which says the wealth is mine alone and no part of it is to be used for the common good.   It is entitlement thinking which fails to see the land on which we stand as a natural resource which is a shared good which profits all Americans.

George Washington

The common good does not mean socialism.  Medaille certainly opposes socialism which he actually thinks is really a necessary offshoot of capitalism because  current capitalism fails to consider that all economic issues are ethical issues as well.  Patriotism as valuing all citizens and working for the common good is in short supply in America these days.   Patriotism which values civic duty  is not a nationalistic exclusivism or exceptionalism.  It is a virtue which the founding fathers did embrace as they imagined citizen statesmen and citizen soldiers.   These same founding fathers thought the wealthiest Americans would come forward and support the common good for all citizens – such were their ethical beliefs.

None of this means we cannot question the size of the federal government, or work to reduce its size.  Certainly the size of the government is a question worth debating – and for Medaille this is part of the ethical discussion which needs to take place.  The issue I raise is whether our extreme individualism doesn’t in the end hurt the very basis of civil society as we cease to have any sense of responsibility for others.

6 thoughts on “Ethics and Economics

  1. “Certainly Jefferson’s call that “all men are created equal” was not really a declaration of the equality of every human being but rather a demand that the limited number of landed gentry should be considered equals with the king.”

    All men are equal in the sense that all men have souls, and thus are equal before God, regardless of any Earthly attributes such as wealth, status, beauty, intelligence, etc. This notion of equality came out of a famous debate at the University of Salamanca in 1550. At that time, it was determined that the native tribes who were being encountered in the new world had souls, and therefore possessed certain rights. Jefferson made passionate and eloquent claims for the equality not just of rich men, but even of slaves. It’s true, he never freed his own slaves, and that’s a disappointing failure on his part to live up to his own ideals. But Jefferson is certainly not the only man to fail to live up to his own ideals. He was steadfast in his insistence on the equality of all men, not just the rich.

    “Americans love to criticize entitlements – generally of any subgroup of Americans to which they don’t belong. But entitlement thinking exists in the upper echelons of wealth too – it is entitlement which says the wealth is mine alone and no part of it is to be used for the common good. It is entitlement thinking which fails to see the land on which we stand as a natural resource which is a shared good which profits all Americans.”

    This seems to undercut what you are trying to say. That the rich are greedy and will take advantage of a situation if they can is no surprise: they are human. A poor person with the same influence will do the same thing. Economist Milton Friedman talked about this when describing the inevitable growth of the welfare state. Welfare recipients have a much stronger incentive to pursue the expansion of benefits than those paying the benefits have in preventing further growth. This is because it takes only a small increase in everyone’s taxes to generate a large increase in the welfare payments made to the poor.

    The poor will always be with us, Jesus said so. The rich cannot be trusted any more than anyone else can, so what are you going to do? If we are seeing sharp rise in campaign contributions from the rich lately, it is a sign that such contributions buy a lot more influence than they used to. That is a perversion of justice, and when we’ve separated from justice, we are no longer talking about capitalism. (One legitimate function of the state that Adam Smith identified as being necessary for the functioning of free-market capitalism is the enforcement of justice.) Elsewhere on your blog I offered a definition of justice: the act of giving to someone that which is due him, and that we know a thing is due a person if, by taking it from him, we harm ourselves more than we harm him. You didn’t seem to like that definition, but it’s the best one I have. Enact laws that are in accordance with it, and capitalism can work beautifully.

    Historically speaking, no other system has been more friendly to families and moral growth than capitalism, while redistributionist policies have been maybe the most spiritually destructive, most anti-family force mankind has ever seen. http://www.heritage.org/research/testimony/the-effects-of-welfare-reform That this is so is easily explained, if justice is as I’ve defined it. Charity can reverse justice, but charity is based on love, which requires knowledge of the beloved, which is something the state can never possess. So when you call on people to have a sense of responsibility towards others, I am in total agreement with you. I don’t think we want the state to have anything to do with it, though. There is an objective moral order to the universe, and we hurt people far more than we help them when we start committing injustices.

    1. Fr. Ted

      Jefferson did think all MEN were created equal, but that equality didn’t include women or Africans. It wasn’t simply a “failure” on his part not to free his slaves – he had no intention of freeing them because his lifestyle was impossible without them. Jefferson penned his words on equality for an intended audience – King James of England – not for slaves and women, probably not for Catholics either! He was claiming equality with the king, but he didn’t extend “manhood” to Africans or women for that matter.

      My reference to “entitlements” is not so much a reference to greed, which indeed is common to humanity, but rather a question about whether due to the modern embrace of extreme individualism we fail to see ourselves as social/relational beings and thus become blind to civic duty and social responsibility. The wealthy aren’t cursed by God, but blessed and that blessing comes with a special responsibility for others. The reverence to the Roman republic and America’s founding fathers is a reminder that at one time the wealthy did have a strong social sense and did their civil duty because they were prosperous. Our extreme individualism leads to a certain heartlessness about the needs of others and so we feel less and less responsibility for the problems of others. I’m not advocating for the socialist state, but between extreme individualism and socialism there are many degrees of civic responsibility for others.

      As far as I can tell Distributist economics is not redistribution, that is socialism and Distributists oppose socialism. Distributists are concerned about ethics in economics, Medaille defines it as “how society distributes its ‘common goods.'” Distributists are not talking charity, but a just wage. This was the economic idea that was proposed by Pope Leo XIII in 1891 in his encyclical, Rerum Novarum. According to Medaille this idea of the just wage is a lynch pin of Catholic moral teaching – the basis for economic justice.

      1. anon

        I rather thought Jefferson was appealing to something other than the king – somewhat generally to the enlightenment spirit of the times and somewhat more particularly the French, whose support was no doubt recognized as necessary. I very much doubt the idea of equality of the colonists would have resonated with the king.

      2. Fr. Ted

        Jefferson was declaring American Independence from the King of England, so it all was directed to the King. Jefferson said it was “self-evident” that all men were created equal. But self-evident to whom? Not to the King of England, not to the slaves in America.

        And true the claim to equality didn’t resonate with the King, that is why he sent his army to America to quash the rebellion. The King understood the message was aimed at him.

  2. cindy

    True, the model of Andrew Carnegie’s level of philanthropy is difficult to cite in the current century. However, I highly doubt that the Romans were motivated purely by civic pride. Privately funded navys and armadas were common as well. Quid pro quo? Many suffered great poverty to fund the competitive vanity that conveyed power through grandeur. I doubt if money was freely dispensed without asking, “What’s in it for me?”

    I imagine if the facts were checked, charitable giving has never been higher than it is today. Why would so many countries in the world be advertising for Americans to rescue them from poverty?

    1. Fr. Ted

      I don’t know if you have any sources that would cause you to doubt the motive of civic pride. I know Prof Ken Harl and other historians have written about it and documented it, but perhaps they exaggerate. Harl says that one of the things that happened to the Roman Empire in the Byzantine period is that the sense of civic pride was lost and whereas the senators and equestrians for a long period in history funded public projects out of pride and to build up their localities, in the Byzantine period their positions became awards from the Emperor. As Harl claims, “Imperial laws redefined honor from a requirement for civic service into a reward for imperial service (along with tax ememptions), thereby draining cities of local patrons.” In other words, at one time people were honored for their civic service, but later civic positions were awarded as an honor. These honorary positions came with the plus of the person being exempted from paying taxes. So the wealthy ceased being patrons for their localities and instead stopped giving anything to the localities and saw this as a just reward for their work.

      The giving for public projects was not perceived of as charity but as an honor for the wealthy patrons. It was a totally different form of thinking than we see around us today, except in a few notable cases. Some wealthy individuals do contribute heavily to the building of a hospital, a college building, or an auditorium, etc. Often the buildings are named for them.

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