Vaticanomics: The Holy Father Tackles Globalization

By TYLER COWEN

Pope Benedict's Encyclical Letter, issued earlier this week, is full of critical comments about commerce, the profit motive, banks and businesses. The Rev. Thomas Reese, S.J., former editor of America, gushed to USA Today: "What politician would casually refer to 'redistribution of wealth' or talk of international governing bodies to regulate the economy?" Washington Post columnist E.J. Dionne even suggested that the encyclical "places the pope well to Obama's left on economics."

Yet for all its left-wing rhetoric on economic matters, the encyclical is not quite the "progressive" document that it has been trumpeted to be. The underlying assumption of the document is the continued reign of the status quo -- a globalized, wealth-creating market economy -- with some ethical adjustments. This is a fundamentally conservative piece of work. When President Obama meets with the pope tomorrow, we should not expect him to stand too far to the left of the president.

It is true that the encyclical registers many complaints about commercial society. It says that current economic arrangements create inequalities and injustices. It laments that people pursue self-interested goals without the broader community or the prospect of transcendence in mind. It says that "today's international economic scene, marked by grave deviations and failures, requires a profoundly new way of understanding business enterprise." It warns against "lowering the level of protection accorded to the rights of workers, or abandoning mechanisms of wealth redistribution in order to increase the country's international competitiveness." And it argues that "the continuing hegemony of the binary model of market-plus-State has accustomed us to think only in terms of the private business leader of a capitalistic bent on the one hand, and the State director on the other."

But the more the Catholic Church criticizes a given practice or institution without calling for its abolition, the more it seems to come to terms with its existence, urging reform but accepting reality. This encyclical, more than anything else, gives the reader the impression that modern capitalism, including some of its "financial cowboy" varieties, is here to stay: "The economy needs ethics in order to function correctly -- not any ethics whatsoever, but an ethics which is people-centred."

The encyclical recommends tougher financial regulation and an enhanced commitment to foreign aid, not to mention a greater role for global governance. Furthermore, management "must . . . assume responsibility for all the other stakeholders who contribute to the life of the business."

But for all the talk of regulation and global governance, such proposals are put forward without much urgency or excitement. We should probably not expect too much to come from the encyclical's call for more state power.

Most of the encyclical, appropriately, expresses a desire for ethical conduct. The importance of ethics for civilization is obvious, but of course good ethics, consistently applied, are hard to come by. People are very good at ethical and psychological compartmentalization, and so it is possible for them to offer the church nominal authority over the ethical realm while continuing their dubious economic behavior.

It should be said that, despite moments of coherence, the encyclical is a sprawling mess that reads as if it was written by a bureaucracy that felt it had to mention everyone's concern. What does it mean to write: "The transition inherent in the process of globalization presents great difficulties and dangers that can only be overcome if we are able to appropriate the underlying anthropological and ethical spirit that drives globalization towards the humanizing goal of solidarity"? It sounds as if somebody has read Hegel. It's good that the document repeatedly reminds us that globalization doesn't have to be bad. But what exactly do we do with that knowledge?

Many of the encyclical's generalizations tend to favor the point of view of the left. For instance, the document refers repeatedly to growing inequalities, but in fact, at the global level, inequality has been falling, most of all because of the continuing economic growth of China and India.

Although it was just issued, the encyclical already feels dated. Globalization is one of the main concerns in the document. Yet because of the financial crisis, international trade has been falling apart. The real worry is not how to manage the economic globalization we have but how to stop the world's rapid deglobalization, which is at a pace that matches the collapse of trade in the 1930s. For better or worse, economic rather than ethical factors will determine the outcome here.

There's a section of the encyclical that worries about labor outsourcing, a practice that -- like many other forms of international trade -- is actually shrinking. The fear expressed in the document is that outsourcing will lead to a downsizing of social-security systems, but the real problem has turned out to be an across-the-board loss of jobs, both in the countries that demand outsourcing and in those that supply it.

The encyclical's statements about microfinance stand out. For all of its qualifications and talk about an ethical framework, the document endorses microfinance in two different sections. Keep in mind that many microfinance loans charge the borrower 50% or 100% interest a month and sometimes subject nonpayers to neighborhood intimidation; the church has come a long way from medieval usury laws.

Overall, the encyclical does not portray either Pope Benedict or the church generally as a notable source on economics and justice. A guiding principle of the document is that truth should illuminate charity, and indeed the very title of the document -- "Caritas in Veritate" -- refers to "love in the light of truth." But we are never told how much religious ethics can ever constrain the free market.

A truly revolutionary document would have dealt with the rise of China and India. Though Western society has experienced a widespread secularization, our versions of capitalism and democracy are still based squarely on Christian ideas, and I believe this marriage of liberalism and Christianity has been for the better. China and India, despite each having some number of Christians, have no realistic prospects for a comparable ideological accommodation between morals and markets, and so we are entering uncharted waters.

How will the rise of non-Christian powers affect the practice of capitalism? Will Christian and non-Christian societies understand each other well enough to negotiate successful international agreements? To what extent will Europe even manage to stay Christian? By some accounts Islam is the most frequently practiced religion in the Netherlands today.

You'll search this encyclical in vain for answers to these questions or even for a framing of their import. To consider such questions would be to admit that Christianity, and Catholicism, are not as universal as many people would like them to be. When the church comes to terms with that idea, maybe then we'll start seeing some intellectual progress.

Mr. Cowen is the author of the recently published "Create Your Own Economy: The Path to Prosperity in a Disordered World."