July 24, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 9 of 9

The Clergy and the Economy
To what extent do you believe that the clergy may intervene in temporal matters, like politics and economics?
Well, I don’t believe a person loses his right to pronounce on matters of importance just because he’s an ordained priest.  Why should he?
Don't you believe it entails exercising moral authority to influence the consciences of Catholics in matters over which there is freedom of choice?
There is freedom of choice, and persons ought to exercise it. Look, take the case of the North American Bishops letter on the economy; they did not try to oblige the faithful to accept everything they said. They tried only to persuade them that their point of view was correct.
So the bishops granted that North American Catholics are free to disagree with what they expressed in that letter?
Those bishops said they welcomed a debate. Is there something wrong with that?
Do you believe that, by publishing this letter, they enjoy a special moral authority that they laity do not have?
No. In this instance there was no such pretension. Although I disagreed with much of this letter’s content, I believe it to be a model of the way bishops ought to comport themselves, that is, trying to persuade people of the merits of their position. At no moment did they say, “anyone who disagrees is outside of the Church.” In summary, I believe that the clergy have the same right as anyone else to speak out. They ask that others listen, but not necessarily agree with them about everything. Now, I also believe that it is certain that the clergy have generally not taken enough notice of what economics teaches. It is important, however, that the North American bishops seek to persuade and not oblige.  As Catholics we ought to listen with special attention to what they have to say.
Do you believe that the Church ought to exercise a preferential option for the poor?
Yes. I believe that we ought always to have a special consideration for the weakest and least fortunate members of our society.
How should the preferential option be expressed?
This is an empirical question. If we want to eliminate illness, whom do we call upon? Doctors. If we want to eliminate poverty, we ought to consult economists.
What do you think about what is called the economics of solidarity?
I’m not sure what they want to say. Certainly in the market economy there is solidarity between employers and workers, for example, because there exists a community of interests. The real conflict is among different employers and among different workers. The Marxist myth of worker solidarity is nonsense, because the workers hate each other, and the same goes for the capitalists. If you want to buy a house, you do not have a conflict of interest with the seller: your enemies are others who want to buy. With the seller you have a common objective, which is to arrive at a contract.
What is the relation between ethics and economics?
There cannot be a conflict between ethics and economics, because ethics is prescriptive and economics is descriptive. Economics shows you the probable effects of certain policies, while ethics teaches what ought to be done.
Would you like the Pope and the bishops to support capitalism openly?
Well, if they are going to support capitalism or something else, I would prefer that they support capitalism, but ideally they shouldn’t support either one. People who go to Mass on Sundays should be able to leave their political ideas outside.
When you say that the objectives of the preferential option for the poor are realized better under a free and competitive market economy, are you speaking as a priest or as an economist?
As an economist. 
End of Interview. For Part 1, go here.

July 23, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 8 of 9

The Minimum Wage
Do you believe that under certain circumstances the setting of a minimum wage can help the poor?
The minimum wage works to exclude all those whose services are valued at less than that minimum and, therefore, prevents them from obtaining employment and, further, from acquiring the habits conducive to attaining better positions.
Do you believe that the rich have an obligation to help the poor?
How ought they show it?
By being charitable, by helping the poor in effective ways, not only by giving money, but also giving alms, building orphanages, etc.  These are things that Christians have always done, and it is hoped that the rich will do likewise. It is more effective to appeal to generosity than to guilt.
Don’t you believe that the state ought to favor certain segments of society that cannot compete freely in the market?
Absent regulations, most people can compete. In a genuinely free market, those who can’t are few in number, and it is easier for private charity to take care of them than for state interventionists to grant them rights, for that only increases the number of the needy.
What effects on individual and collective morality do you attribute to state intervention?
In Russia, the transformation of a way of life was the fault, not of individuals, but of the system. In the United States and Great Britain, the welfare state increased debt and marginalized the familySome blame the decline of the family on a permissive society, but I blame it on the government's assuming the family’s traditional role. People can see that they are obliged to play that role, not by coercion but by market forces. It is the welfare state that has obscured individual responsibility and undermined what we call family values.  Families are the result of natural necessity; they were not invented when a group decided “Let’s have families.” 
To Be Continued

July 22, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 7 of 9

Private Property and the Common Good
You say private property is an imperative of human nature.
I’ve already cited Leo XIII. It’s the only rational way to allocate resources.  If people aren’t allowed to keep the fruit of their labor, they’ll have little incentive to produce. Private property rationalizes production and increases well-being.
If private property is that central to being human, what happens to those human beings who don’t have any?
They’re in a better situation than if no one did. In most cases, everyone has some private property.  But, even so, the fact that someone has private property benefits those who have none.
Just how does the private property of a few benefit the whole?
The benefit isn’t a function  of the paucity of property owners, but from the very existence of private property. The market constrains producers to produce for the satisfaction of society.
Do you believe that the right of property ought to be limited for the common good?
It is important that the owner administer his property in such a way that it benefits the commonweal. How is that brought about? The problem is not whether or not controls exist, but rather whether they are exercised by market forces or by state regulation and intervention.  I maintain that the market solves this problem perfectly. Producers who do not adequately satisfy society’s needs very soon find themselves without property.
Do you believe the laws of the market ought always to function without intervention?
Yes, except when it results in harm to others, like fraud, pollution, etc.
But during wartime, for example, we resort to rationing and controls.
I agree with Henry Hazlitt, who held that precisely in times of war it is imperative that the market works freely. The greater the emergency, the greater the necessity not to intervene in the market’s functioning.  Rationing ought never be permitted, because it results in shortages.
The Church seems to favor the laws of the market, except when it comes to wages, and so she asserts that there ought to be a “living wage,” a just wage that permits dignified living.  What is your opinion?
There should be no intervention in the setting of wages. It is good to create conditions that permit adequate compensation for labor. But I don’t believe that that’s accomplished by intervening in labor markets. That only creates benefits for some at the expense of others or in the idleness of those “benefited. If employers have the capacity to pay an adequate salary, the market obliges them to pay it.
To Be Continued

July 21, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 6 of 9

Economic Laws
Do you believe that immutable laws exist in the economy?
But how are they established? The natural sciences permit the isolation of variables for the purpose of experimentation, but that’s not possible in the social sciences, where human complexity intervenes.
By means of mental experiments. One shouldn’t confuse prediction with the immutability of law.
But, to analyze the problem of inflation, for example, we have to factor in not only quantifiable aspects, but also intangibles, such as expectations, perceptions, etc., about which we cannot formulate immutable laws.
No, but let’s take another example: the minimum wage.  Can we say that the establishment of a minimum wage leads to unemployment? Not necessarily.  We would have to say that it would tend to increase idleness, but another factor, such as an increase in demand, can intervene, which can alter the expected result.
In what sense do you claim that the laws of economics are the “laws of God”?
In the same sense that physical or biological laws are, because they are an expression of the nature of things God has made.
How do you reconcile the idea of free will with these immutable laws that condition human behavior?
How do you reconcile the idea of free will with the immutability of the law of gravity? Look, if you throw me out of an airplane, I’m going to fall. One is free to be thrown or not, but not free not to fall if that happens.  Freedom pertains to the action that produces a determinate result, but not with the capacity to avoid those results.
If economic laws are so evident and immutable, why do economists differ in a way that natural scientists do not seem to?
They do not disagree about whether or not there are laws that are immutable. They disagree about whether a given law is immutable. I believe, however, that differences between economists are few and far between and these are greatly exaggerated. Between Paul Samuelson and Milton Friedman there might be ten pages of disagreement. In general, the disagreements do not concern laws, but rather politics, policy recommendations. In any case, physicists also disagree with each other. The major difference is that economists seek to establish not only laws, but also social priorities and policies. But by doing the latter they are not supplying economic answers. 
To Be Continued

July 20, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 5 of 9

The Distribution of Wealth
Some have said that capitalism is efficient for producing wealth, and so is an advance over socialism, which only distributes poverty.  A really effective means of distributing wealth, however, has not been found.
Of course it hasn’t, because the market does not distribute wealth.
What is the Church’s position on the distribution of wealth?
As far as I know, there is no official teaching that holds that the equality of wealth would be desirable.  What is wanted is a way to secure for all the satisfaction of their basic needs, not equality per se.  Leo XIII held [in Rerum Novarum] that “a transfer of private goods from private individuals to the community” in order to remedy existing evils “through dividing wealth and benefits equally among the citizens,” is a program “so unsuited for terminating the conflict that it actually injures the workers themselves.  Moreover, it is highly unjust, because it violates the rights of lawful owners, perverts the functions of the State, and throws governments into utter confusion.”
To what extent is economics a science like the natural or “exact” sciences?
I believe it is just like them.
But do you believe it has the same predictive power
No. Economics cannot predict anything.  If you maintain that, in order for something to be a science, it must have the power to predict, then I would say that economics is not a science in that sense, but rather in an older sense of the term.
To Be Continued

July 19, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 4 of 9

Don’t you believe that since capitalism depends on the increase in consumption it promotes consumerist values?
I categorically deny that capitalism depends on increasing consumption.  The market works at any level of consumption, and could even allocate goods in a society of hermits.  If desires change and, instead of refrigerators, people want bibles, the market will be more efficient in producing goods that they then consider more important.  The market does not dictate what people want or need, but satisfies whatever those needs happen to be.  The belief that, absent any stimulation of or increase in consumption, capitalism will collapse, is senseless.  Now, the reduction in the consumption of certain goods, from one day to the next, would leave some producers with large unsold inventories.  But such events are not very probable.  And an economic depression is not due to a sudden desire to lower consumption.
In what respect are monopolies endemic to capitalism, as some claim?
Adam Smith was the great opponent of monopolies.  Now, when we speak of monopolies, we refer to the government’s granting of legal permission to one producer to be the sole producer in a given market, which removes from that market others who can produce more or less.  Such a monopoly is not a product of the market, but rather imposed by law precisely because the market did not permit it.  For a monopoly to emerge on the free market, there would have to be only one producer in whole the world of a certain product.  We cannot say that there is a monopoly in one country if the supposedly monopolized good is produced elsewhere in the world.  The only important thing is legally permitted market entry by anyone.  Curiously, the people who condemn capitalist monopolies are the same ones who defend governmental monopolies in mail service, telephones, etc., which anyone who wants to eradicate monopolies should oppose.
You make a distinction between laissez-faire capitalism and state capitalism.  What would you say about that?
Laissez-faire is simply what obtains when people are free to decide what to produce, how much, and whether to exchange their product and with whom, without governmental interference.  The government acts only to uphold the law against fraud, robbery, to guarantee contracts, etc.  As Friedman would say, the government is an arbiter, not a partisan judge.  The situation closest to this is found in Hong Kong.  But the truth is that it has never existed in any part of the world, because there are always degrees of intervention, from the minimal instances in Hong Kong to the massive ones in the United States.
In one of your talks you said the Soviet Union also has a market.  What did you mean?
You see, a socialist economy cannot exist except under conditions of extreme primitivism. The socialist experiment in Russia ended around 1920.  The gist of Marx is that central planning does not mean “no intervention in the market,” but rather the abolition of the market, the end of commerce, no more production for sale, no more money. If that situation does not obtain, then there is no socialism in the Marxist sense. The Soviet Union has a market economy: there is money, there is the exchange of goods.  Today [1987], it has a highly regulated and inefficient economy, due to a great deal of intervention.
If, as you maintain, the Soviet Union has a market economy, then we have to invent a new word to distinguish it from those Western . . .
Why not call them all “mixed economies”?
But then how would you distinguish the Soviet economy, where the market neither allocates resources nor determines prices, where the central authority plans what to produce, how it is exchanged, etc.?
Look, fortunately the Soviet economy is not all that planned or its people would starve to death.  Planning exists everywhere—in the United States, in Chile, even in the Soviet Union—but it’s limited.  I repeat: no “socialist” country has socialist economics, because, in its strict meaning, it could only exist among primitive tribes who live by hunting and gathering. 
To Be Continued

July 18, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 3 of 9

Economics and Ethics
Do you believe that economic systems are morally neutral? Or rather that capitalism does have moral content because it stresses the economic and material dimensions of human existence and therefore its doctrine may be fairly described as “economistic”?
Why would you say that?  What is “economism”?
Well, there is the Marxist idea that economic conditions determine human existence, values, beliefs, etc.  It is usually raised in criticism of Marxism, but it is also attributed to capitalism.
I don’t know anyone who affirms such an idea.  No economist holds anything like it.
Certainly there are economic schools that analyze all institutions and phenomena, marriage, suicide, etc., from an economic perspective.
Certainly those things have economic aspects, but they should not be explained deterministically.
Are economic systems morally neutral or not?
Economic assertions are not value-judgments, and morality has nothing to do with them. For example, to assert that rent control must lower the standard of living is simply an assertion that I believe is true, but it is not a value-judgment.  It does not automatically imply that one is for or against rent control. It says only that if rents are controlled there will be certain effects. Morality pertains to ends, and economics to means. It could be desirable to reduce poverty, and the economy offers the tools to make that happen, but it does not determine whether or not that should be a priority.
To Be Continued

July 17, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 2 of 9

Capitalism’s Reputation
Why do you think “capitalism” has such a bad reputation and that pejorative connotations attach to it?
Capitalism is associated with the hunger for profit that follows from the capitalist premise that each person ought to be free to do as he wishes provided he does not prevent another from doing what he wishes.  This goes back to what we said about human motivations and the confusions some have created between the profit motive and the wider concept of the satisfaction of all desires and interests.  Adam Smith held that the profit motive would exist under any economic structure and that it is utopian to hope for its disappearance.  The advantage of the market system—in which all players are subject to the rigors of competition, free of gov­ernmental intervention—is that it creates a situation in which businessmen can satisfy their desires only if they first satisfy the desires of the general public.  The market channels this motivation into healthy and socially beneficial ways.  When the state intervenes on behalf of different interest groups, however, there is no guarantee that this will redound to society’s benefit.
Won’t you even grant the historical perception of the allegedly negative effects of capitalism upon the working classes?
It’s almost impossible to convince people that that negative version of capitalism’s initial effects is false, even though the historical evidence refutes it. The images that come from English novels from that era prevail.  As C. S. Lewis once said, the problem lies not in introducing new ideas into the popular mind, but in removing false ones.  The idea of the worsening condition of the poor due to capitalism seems ineradicable.  But modern historians have amply shown that the industrial revolution raised the people’s standard of living.  The most obvious evidence is that it permitted the population to increase, demonstrating at least that people under capitalism could survive, whereas before they would die.
Do you believe the Catholic Church has always been anti-capitalist?
Well, if one studies Catholic economic thought in the Middle Ages and the Renaissance, we find Dominican, Jesuit, and Franciscan clergy supporting quite modern economic doctrines.  We find there the idea of utility, for example. After all, the banking system began in Italy before the Reformation, and the Italian cities originated finance capitalism.  The French Revolution is a factor in the Church’s opinion: it was associated with liberalism; liberalism advocated the removal of feudal structures; and the Church was as much the beneficiary of those structures as was the nobility.
But the social teaching of the Church is generally regarded, rightly or wrongly, as anti-capitalistic.  Is this a faulty reading of Rerum Novarum and Quadragesimo Anno, or were they, in fact, anti-capitalistic?
I believe that Rerum Novarum was certainly more favorable to capitalism than to socialism. It maintained that capitalistic risk-taking leads to excesses and therefore ought to be subject to certain controls—but that’s not a rejection of capitalism’s essence. The belief that it should be controlled was not ethical, but economic.  They feared that if the market were permitted to operate freely something horrible would happen.  But this is a claim that stems from an economic, not a moral, judgment.
This prejudice of the Church against capitalism is not limited to developing Latin countries: the North American Bishops have issued a pastoral letter highly critical of the capitalist economy.
So they did. I suppose they got the type of economic advice they were looking for, the kind that left-wing economists provide, more left-wing even than the Democratic Party’s Brookings Institute.  Well, I don’t share that economic doctrine.
To what extent do North American Catholics share those points of view?
Not much.
Has it led to any response?
No, not either way. I don’t think it’s been perceived as terribly relevant, although I won’t say it isn’t. I believe there is a concurrence between what clergymen think and the viewpoints of certain intellectuals. In the academic world economic ideas very similar to those supported by the American Catholic Bishops still hold sway.  
To Be Continued

July 16, 2012

Ethics and Capitalism: An Interview with James A. Sadowsky, S.J.—Part 1 of 9

In 1987, Lucia Santa Cruz interviewed Mr. Ferrara’s inconvenient Jesuit, James A. Sadowsky, S.J., the first Rothbard-influenced anarcho-Catholic,* for the Chilean daily newspaper El Mercurio. Father Sadowsky’s answers to her questions were translated into Spanish, and the interview appeared in the November 22nd edition of that periodical and reprinted the following year in an anthology edited by Eliodoro Matte Larrain, entitled Cristianismo, Sociedad Libre Y Opción Por Los Pobres [Christianity, the Free Society, the Option for the Poor], which was published in Santiago, Chile by Centro de Estudios Publicos. 
About ten years ago I attempted to render this interview into in the expressions with which thirty years of friendship have made me familiar.  I was not happy with result, but only because he was not. (“It’s not English!,” he grumbled.)  Although the result is looser than his thought deserves, I no longer think it so bad that the illuminating content of his thought—which I believe does pierce the wooden slats of my translation—should be kept from a wider audience.  And so after almost 25 years of waiting for the truly bilingual kindred spirit to show up, I am publishing my amateur version in the hope that he or she will find it (or you will tell him or her about it) and be moved to ask me for a photocopy of Spanish text, which I will gratefully supply.
The interview has been divided into nine consecutive posts, following the subheadings of the original interview.
Some of you would want to know that Father Sadowsky’s health has deteriorated over the past year.  He is well-provided for at the Jesuit infirmary in the Bronx, but pretty much alone and forgotten.  He needs your prayers.  If you wish to send him a note of good wishes and appreciation, you may write him at Murray-Weigel Hall, Fordham University, Bronx, NY 10458. 
Anthony Flood

* In answers to questions put to him in another interview by Martin Masse for Le Québécois Libre (Montreal) in 2002, Father Sadowsky related this aspect of his intellectual journey. That interview was published on June 7, 2003. Take this link to it.  To read eleven essays by him on philosophical, theological, and economic topics, visit the Sadowsky portal on my site.

The Drive for Profit?
Capitalism rests on a specific idea of human nature and its basic motivations.  What it is the significance of the assertion of capitalism’s philosophers who claim that man is moved primarily by the desire to satisfy his own interests?
It goes far beyond looking for personal material benefits.  Man (however tautological this may sound) does aspire to meet his needs, but in the wider sense, which covers the most diverse kinds of needs.  Good can be of any kind, and one can desire them not only for oneself, but also for one’s family and for society as a whole.  To desire something is not necessarily to desire it for oneself.
You don’t believe, then, that it is synonymous merely with the drive for profit?
Well, why do you suppose the Red Cross plays the market?  To make money?  Clearly so they can satisfy the needs of others, not their own.
Underlying capitalism is not only a conception of human nature, but also a theory of knowledge that presupposes the human mind’s limited ability to scientifically grasp all mundane realities.
It is often said that there is a relation between belief in absolute truth and intolerance.  I deeply disagree.  I don’t see a logical connection between them such that it leads to the persecution of dissenters.  Indeed, I fail to see why a relativist must be tolerant.  There is nothing in relativism that logically favors tolerance.
I am referring to mundane matters.
So am I.
But behind the idea that the market allocates recourses more efficiently than does central planning is the notion that the human mind cannot grasp the infinity of complex variables that comprise reality and, therefore that each individual ought to be free to express his preferences on the free market.
Well, all you’re saying is that there’s no such thing as human omniscience.  But belief in absolute truth is not the same as belief in human omniscience.  I claim only that in some very limited areas, the human mind cannot err.  Being free of error is not the same as having knowledge.  In other respects this immunity from error is limited and refers only to a few matters.  For example, I can truly affirm that I exist.  You’re right with respect to what is claimed about the market, but that only shows that we don’t know everything.  That does not, however, necessarily warrant renouncing belief in absolute truth.
There is a difference between believing in absolute truth and maintaining certain true sayings irrevocably?
That’s why I told you that in claiming that one can know absolute truth, I refer to a few, very restricted areas where there are infallible truths.  I would say that in nine out of ten cases knowledge is conjectural; but it is important that there be cases of non-conjectural knowledge.  I insist on this, you see, because in defending capitalism one must be careful not to base that defense on inadmissible pretensions.  Let me take an historical example. One reason why the Catholic Church was so opposed to continental liberalism is that it built its case on skepticism.  Anglo-Saxon liberals never fell into that.  The continental liberal tradition is skeptical and rationalistic.  People like Adam Smith or Burke, however, could not be further from this position.  This skepticism formed no part of the English tradition or of the classical liberal philosophers.  This is important, because these considerations color the perception of capitalism.
To Be Continued