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It’s The ‘Common Good’ Economy, Stupid

Following the Chancellor's Autumn Statement, Joanne Green of CAFOD discusses capitalism and Catholic Social Teaching

In the wake of economic and financial meltdown politicians from all parties have been eager to offer new models of capitalism ranging from the ‘responsible’ to the ‘popular’.  As has been recently noted in the media, Catholic Social Teaching (CST) has a lot to contribute to the debate about the nature of capitalism, values and the market place.  Informed by our experiences of working with local partners and communities in the Global South, a reflection on CST principles as well as our own analysis of the current economic debate we are in the process of developing three concepts - purpose, participation and political communities - that we think need to be at the heart of any new approach to capitalism and the economy. 

Whilst staying silent on a preferred model of economic organisation, CST’s most fundamental challenge to the market, business and economy is that it must have a purpose and that purpose must be to serve wider society and indeed, the common good.  The Common Good can be summed up as seeking the good of all people, with no group or individual being left out. 

Capitalism has lost its purpose.  Partly as a result of the belief that free markets will mysteriously, via the invisible hand, bring about desirable social and environmental ends. Even Adam Smith, the originator of the “invisible hand” believed that free markets could only work with a moral framework.  There is also a distortion of the concept of “freedom” in economies which is a narrow and a negative view of freedom – that freedom is the absence of interference.  In fact, it could be argued that the dominance of this idea of “freedom” has curtailed broader freedoms. The dominance of current economic discourse has disempowered poor people and their governments as countries have been intellectually and legally blocked into adopting a particular set of policies deemed most conducive to growth by the lack of a debate on alternative economic policy and donors making acceptance of these policies conditional on receiving aid.

The obsession with GDP as the ultimate measure of economic success or failure is an obvious symptom of the lack of purpose. Governments have come to judge themselves and each other on their growth performance. Clinton's election slogan “it's the economy, stupid” sums up the pre-eminence of looking after the economy in government priorities. Governments need some reminding that looking after the economy, or business, is done so to achieve broader objectives of social progress and environmental sustainability.

So as well as having a clear purpose of serving the common good, the success of economies needs to be measured against the specific objectives we want the economy to fulfil; reducing poverty, creating decent jobs, increasing environmental sustainability and promoting stability, rather than GDP.  

Moving on from purpose to the way people participate or not in the economy: most economists and politicians now accept inequality is a problem. The IMF has declared that inequality of income helped create the financial and economic crisis through an abundance of capital being concentrated in the hands of small number of people. 

But what type of inequality do we really need to focus on addressing – is it an inequality of opportunity or outcome?  Politicians on the right tend to emphasise policies that promote equality of opportunity whilst those on the left would argue that it is inequality of outcome or income that is the real evil. We believe that both of these aspects are important but inadequate by themselves to address the real injustice of inequality.  Instead we would like to see a focus on an equality of participation in economic life which goes further than equality of opportunity as it is not just about giving poor men and women the chance to participate in the economy, it is about making that participation meaningful.

This is based on an understanding of what people need to flourish as human beings – that being made in God’s image they are created for that is to contribute to and participate in the common good – including economic activity. According to CST, human beings should be the subjects (artisans) of their work and their destiny. They are called to become ‘co-creators’ with God.

Of course distribution also matters, when there is too much inequality it is unlikely that poor men and women will be able to participate effectively in the economy, and it is also right that society looks after those that cannot and should not work. But inequality of contribution is primarily about fairness of returns rather than redistributive methods, for example, of achieving a more equal sharing of wealth.

Focusing on inequality of contribution rather than opportunity or outcome has implications for policy choices: that people in poverty have the means at their disposal to take advantage of an opportunity and that the market system is not unfairly stacked against them through making sure that the following is in place:

  • an enabling environment that works for all
  • a fair fiscal policy
  • social protection
  • regulation to correct market imbalances and instabilities.

Finally, requiring economic policy to be accountable to people and political communities is entirely consistent with the principle of subsidiarity expounded by Catholic Social Teaching. Citizens and communities through political debate should be the main arbiter of which economic policies are in their best interests. This is not to argue for the abolition of global institutions such as the WTO and IMF, but to argue for a much greater democratic accountability and connection between those institutions and the wishes and opinions of the people over whose lives they have enormous sway.  This is an argument for people and governments as their representatives to assert their rights to decide their own economic policy rather than feel bound to conform to the dominant ideology of market fundamentalism.

In the pursuit of deregulation at any cost, governments have also let global companies become increasingly detached from political and judicial processes intended to represent and protect their citizens.  It is essential for governments to work together to require companies to be transparent and accountable to citizens. As enormous challenges still remain which allow global companies to avoid oversight and ensure they make a positive contribution to society.

So, as we seek to respond to the Chancellor’s Autumn Statement are we looking through the lens of a ‘common good’ Capitalism?


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Detailed Summary

Date Published
05 December 2012

Issue(s)
New Economies, Innovative Markets

About The Authors

Joanne Green

Joanne Green is Head of Public Policy at CAFOD, having just returned from a year of maternity leave.  Joanne ha...