Is Capitalism God-Ordained?

[ThomasJMullally]

Well, we’ve picked it alright… is God is happy about the results? I doubt the average person, is happy with the results… (One could say it is the worst of all systems, except all the others. Who said that?)

Here is something I would like to say, to Catholic Americans who think we should be bringing capitaism everywhere:

Harnessing more and more people into commerce and intensifying human competition will not save souls, nor will it give most people a better life. Meanwhile, our world is relentlessly being destroyed. This is the most recent concerns of humankind, and already inherent to Catholic teachings for the past two millennia. The environmental and financial catastrophes under globalization, along with unneeded wars and dislocations propagated by the richest of nations, are important reasons why the Church has begun to grow again. The Church is growing again, without any pandering to material concerns.

 

[Zoltan_Cobalt]

Actually to understand executive compensation you need a more advanced understanding of economics. It would be nice to think that perfect competition exists in the market for executives, but it actually does not. For example, one assumption of perfect competition is homogeneity of products or resources. The problem is that executives are not homogeneous, some are more competent than others. And it is not clear a priori who is competent and who is not. Even after hiring, determining the true marginal value of a CEO is difficult. Second, there is not perfect information in the market. Take the case of my buddy who ran the university system for $450k, that salary was based on a compensation consultant study that he recommended be done. It was called a “salary equity study” and guess what it found out he was underpaid. Of course, the study ignored data from a couple of neighboring states that had much lower salaries.

So just the working of competitive markets? Not always.

There is a big difference between FOR PROFIT and non profit CEOs.

The purpose of a non-profit is to spend money and attain a nebulous goal. A for-profit company MUST produce a profit…a very measurable goal.

Most non-profits can operate just fine with a manager and a book keeper rather than a high priced CEO. Unless that is the ulterior motive of the non-profit…(to provide a nice cozy compensation package for a member of the “Good-Old-Boys-Club”)

For-profit is a different ball game. Production must be efficient. Costs must be controlled. Financial goals must be met and stockholders must be satisfied. This takes expertise and talent. The CEO talent “pool” is well defined. A Board of Directors, in need of a new CEO, will know is a short time, who is available, who may be looking and who is happy where they are. Then it becomes the Board’s function to hire the best person for the most affordable compensation.

In the case of a non-profit, the position may be budgeted or decided by consultants, as with your friend. Lets use the $450K figure. That is what that job is worth. Now if another equally talented executive comes along and offers to take the job for $350K…guess what…
Now that job is WORTH $350K. Does that make marginal value of the bargain CEO $450K?..NO. His marginal value is what he is being paid.

 

[ThomasJMullally]

There is a big difference between FOR PROFIT and non profit CEOs.

The purpose of a non-profit is to spend money and attain a nebulous goal. A for-profit company MUST produce a profit…a very measurable goal.

Most non-profits can operate just fine with a manager and a book keeper rather than a high priced CEO. Unless that is the ulterior motive of the non-profit…(to provide a nice cozy compensation package for a member of the “Good-Old-Boys-Club”)

For-profit is a different ball game. Production must be efficient. Costs must be controlled. Financial goals must be met and stockholders must be satisfied. This takes expertise and talent. The CEO talent “pool” is well defined. A Board of Directors, in need of a new CEO, will know is a short time, who is available, who may be looking and who is happy where they are. Then it becomes the Board’s function to hire the best person for the most affordable compensation.

In the case of a non-profit, the position may be budgeted or decided by consultants, as with your friend. Lets use the $450K figure. That is what that job is worth. Now if another equally talented executive comes along and offers to take the job for $350K…guess what…
Now that job is WORTH $350K. Does that make marginal value of the bargain CEO $450K?..NO. His marginal value is what he is being paid.

 

[Zoltan_Cobalt]

Well, we’ve picked it alright… is God is happy about the results? I doubt the average person, is happy with the results… (One could say it is the worst of all systems, except all the others. Who said that?)

No. We did not pick it. Pure Capitalism has not existed in the world since the early 1900’s.
What we have today s a “Mixed Economy”, or pseudo capitalism, if you will. Highly corruptible and unjust.

The flood of misinformation, misrepresentation, distortion, and outright falsehood about Capitalism is such that the young people of today have no idea (and virtually no way of discovering any idea) of its actual nature.

The evils, popularly ascribed to American Capitalism were not the result of an unregulated Free Market, but of government power over the Market. The villain in the picture is not Capitalism, but government controls.

 

[ThomasJMullally]

ThomasJMullally:
Stinkcat, we have zoltan constantly admitting to all the vagaries and inconsistencies the real American system (cronyism, irrationality etc). He believes is why we have not achieved “pure” capitalism. I just want him to see that you can’t have a perfect economic system, and that even if it is functioning perfectly as he wishes, to equitably distribute goods and labor, we are still destroying the world. We are destroying traditional cultures, we are destroying the world, and he wants to escalate it.

The solution is, each and every person needs to simply enjoy life and stop driving for profit. This is the closest to God-0rdained. (Adam Smith made it clear 250 years ago: we are wasting our time driving for profit, the market will negate our efforts!)

 

[catholictiger]

Peace be with you,

In my experience, Catholics and other Christians are unanimously in favor of capitalism and view all alternatives as anti-Christian. I was wondering if anyone could explain this to me? What is Christ-like about capitalism? Is it the only Church-approved economic system? Why do you think is there so much greed, corruption, poverty and social inequality in capitalist societies? I’m just looking for some explanations, because I’ve never had a fellow Catholic explain why they believe capitalism is ideal. Scripture and catechism citations in support of capitalism would be great! Thank you and blessings.

I don’t think God has ordained any type of economic system, what he gives us is principles to live by and our economic systems to follow. The Church because of this will never endorse a economic system, it will only criticize or praise certain elements of some systems that strongly fail to follow or follow these principles.

 

[ThomasJMullally]

No. We did not pick it. Pure Capitalism has not existed in the world since the early 1900’s.
What we have today s a “Mixed Economy”, or pseudo capitalism, if you will. Highly corruptible and unjust.

The flood of misinformation, misrepresentation, distortion, and outright falsehood about Capitalism is such that the young people of today have no idea (and virtually no way of discovering any idea) of its actual nature.

The evils, popularly ascribed to American Capitalism were not the result of an unregulated Free Market, but of government power over the Market. The villain in the picture is not Capitalism, but government controls.

Well, I am glad to hear there is skepticism among young people about the system… you don’t hear much about it. As for blaming government bureaucrats totally, even more bureaucrats exist in large corporations. Large corporations make their own regulations, over the lives of MANY… Do they make their policies for fairness, for life, for ethics, for morality, for presevravtion? HELL NO!!! As zoltan has agreed, they make them solely for putting more resources in their hoard… Catholictiger has weighed in on this, is zoltan going to fight a tiger… . The point is, capitalism is not 100% incompatible with faith, but it cannot be considered blessed.

 

[SuperLuigi]

Well, I am glad to hear there is skepticism among young people about the system…

One would probably think differently if one’s taxes went up to fund anti-Catholic measures.

That is what is happening.

you don’t hear much about it.

 

[stinkcat_14]

There is a big difference between FOR PROFIT and non profit CEOs.

The purpose of a non-profit is to spend money and attain a nebulous goal. A for-profit company MUST produce a profit…a very measurable goal.

Most non-profits can operate just fine with a manager and a book keeper rather than a high priced CEO. Unless that is the ulterior motive of the non-profit…(to provide a nice cozy compensation package for a member of the “Good-Old-Boys-Club”)

In other words I was right all along. It is very difficult to determine the marginal value of a nonprofit CEO.

For-profit is a different ball game. Production must be efficient. Costs must be controlled. Financial goals must be met and stockholders must be satisfied. This takes expertise and talent. The CEO talent “pool” is well defined. A Board of Directors, in need of a new CEO, will know is a short time, who is available, who may be looking and who is happy where they are. Then it becomes the Board’s function to hire the best person for the most affordable compensation.

Except of course in the case of publicly traded corporations there are incentive problems that stem from the separation of ownership from control. For example, large corporations often hire compensation consultants at $900+ per hour. The question is, who are these consultants trying to make happy? Is the owners of the business or is it the managers who might recommend the consultant to others for additional business. Also, while boards of directors are supposed to look out for the interests of the shareholders, it is debatable whether or not they actually do that.

In the case of a non-profit, the position may be budgeted or decided by consultants, as with your friend. Lets use the $450K figure. That is what that job is worth. Now if another equally talented executive comes along and offers to take the job for $350K…guess what…
Now that job is WORTH $350K. Does that make marginal value of the bargain CEO $450K?..NO. His marginal value is what he is being paid.

There is no requirement that someone be paid his marginal value. Some workers get paid more than their marginal value, some less. In a university system with a $800 million budget, overpaying a CEO by $100k per year is a drop in the bucket.

 

[Zoltan_Cobalt]

Well, I am glad to hear there is skepticism among young people about the system…

Its not really skepticism, Tom. It is ignorance brought about by our socialist dominated educational system.

As for blaming government bureaucrats totally, even more bureaucrats exist in large corporations. Large corporations make their own regulations, over the lives of MANY.

That’s right Tom. Many large corporations do, in fact, write laws that positively effect their own operations as well as negatively effect the lives of others. This is only possible due to corporate influence over government. If government stayed out of business it could remain un-corruptible and corporations would have to rely on the value of their products and services to succeed. True, pure Capitalism…wins every time.

… Do they make their policies for fairness, for life, for ethics, for morality, for presevravtion? HELL NO!!! As zoltan has agreed, they make them solely for putting more resources in their hoard…

A person does not start a business for ethics or morality…but preservation is important and fairness happens when government stays out of the picture and the Free Market levels the playing field.

It sounds a bit harsh but “…putting more resources in their hoard” is another way of saying Profit (?) And there is really nothing wrong with that.

Catholictiger has weighed in on this, is zoltan going to fight a tiger… . The point is, capitalism is not 100% incompatible with faith, but it cannot be considered blessed.

I have no argument with Catholictiger when he says: “The Church because of this will never endorse a economic system, it will only criticize or praise certain elements of some systems that strongly fail to follow or follow these principles.”

This is true, because the Church has heaped more praise on True Capitalism than any other system.

 

[ThomasJMullally]

 

[ThomasJMullally]

… the Church has heaped more praise on True Capitalism than any other system.

Not really-- the Church is generally in favor of democracy, which is another matter. It tends to stay out of economic controversy, except: on th topic of overambitious development projects that displace people and destroy land.

Except: on the topic of: genetic engineering, which is great for profits but bad for our place under God.

Except: on the topic of labor exploitation.

Except: on the topic of abortion (which usually seems economically rational to the would-be mother.)

Except: on the topic of the armaments industries, which are very profitable

Etc etc etc…

 

[Zoltan_Cobalt]

Not really-- the Church is generally in favor of democracy, which is another matter. It tends to stay out of economic controversy, except: on th topic of overambitious development projects that displace people and destroy land.

Except: on the topic of: genetic engineering, which is great for profits but bad for our place under God.

Except: on the topic of labor exploitation.

Except: on the topic of abortion (which usually seems economically rational to the would-be mother.)

Except: on the topic of the armaments industries, which are very profitable

Etc etc etc…

Rerum Novarum–Pope Leo XIII

Caritas in Veritate-- Pope Bennedict

Centesimus Annus-- John Paul II

Etc…

 

[ThomasJMullally]

OK, ZC… Centisimus Annus from John Paul is no endorsement of capitalism. Private property is endorsed and fault found with governments too, at the same time here is a Wikipedia summary w/ highlights:

"Throughout the encyclical the Pope calls on the State to be the agent of justice for the poor and to protect human rights of all its citizens, repeating a theme from Pope Leo XIII’s Rerum Novarum.[3] Addressing the question of the State’s obligation to defend human rights, Pope John Paul II states:

When there is question of defending the rights of individuals, the defenceless and the poor have a claim to special consideration. The richer class has many ways of shielding itself, and stands less in need of help from the State; whereas the mass of the poor have no resources of their own to fall back on, and must chiefly depend on the assistance of the State. It is for this reason that wage-earners, since they mostly belong to the latter class, should be specially cared for and protected by the Government."

Man cannot be understood on the basis of economics alone nor defined by class membership, but within culture (#24)

Peace and prosperity are goods that belong to the whole human race (#27)

There must be a change in priorities and values on which economic and political choices are made (#28)

Development must be seen in fully human, and not merely economic, terms (#29)

The human inadequacies of capitalism are far from disappearing (#33).

Many human needs are not satisfied in a free market economy (#34).

The State needs to control the market to guarantee that the basic needs of society are satisfied (#35)

The defeat of “Real Socialism” does not leave capitalism as the only model of economic organization (#35)

Consumerism has created attitudes and lifestyles which damage the physical and spiritual health of human beings (#36).

The ecological question emphasizes human responsibility to future generations (#37)

Some democracies have lost the ability to make decisions for the common good… A community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good (#48)

 

[Zoltan_Cobalt]

OK, ZC… Centisimus Annus from John Paul is no endorsement of capitalism. Private property is endorsed and fault found with governments too, at the same time here is a Wikipedia summary w/ highlights:

"Throughout the encyclical the Pope calls on the State to be the agent of justice for the poor and to protect human rights of all its citizens, repeating a theme from Pope Leo XIII’s Rerum Novarum.[3] Addressing the question of the State’s obligation to defend human rights, Pope John Paul II states:

When there is question of defending the rights of individuals, the defenceless and the poor have a claim to special consideration. The richer class has many ways of shielding itself, and stands less in need of help from the State; whereas the mass of the poor have no resources of their own to fall back on, and must chiefly depend on the assistance of the State. It is for this reason that wage-earners, since they mostly belong to the latter class, should be specially cared for and protected by the Government."

Pope John Paul II must LOVE true Capitalism because…

Capitalism is the only social/economic system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a Capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights.

John Paul’s outlook on the defenseless and the poor has nothing to do with Capitalism or any economic system for that matter. He does not mention how the wealth is earned or created. He is simply promoting the government transfer of wealth.

Since true Capitalism produces more wealth and less poor there would be more to share in a benevolent, charitable way. The transfer of wealth by government force would not be necessary.

Man cannot be understood on the basis of economics alone nor defined by class membership, but within culture (#24)

True Capitalism has provided more prosperity and a longer period of peace than any other system.

There must be a change in priorities and values on which economic and political choices are made (#28)

This is true. a change to true, pure Capitalism would solve that.

Development must be seen in fully human, and not merely economic, terms (#29)

That is a benefit of Capitalism

The human inadequacies of capitalism are far from disappearing (#33).

Here John Paul is correctly speaking of the corrupt pseudo-capitalism that exists today.

The State needs to control the market to guarantee that the basic needs of society are satisfied (#35)

The market today IS controlled…that is the reason for #33 and #34.

The defeat of “Real Socialism” does not leave capitalism as the only model of economic organization (#35)

Of course…but True Capitalism should be recognized as the best model.

Consumerism has created attitudes and lifestyles which damage the physical and spiritual health of human beings (#36).

Consumerism has nothing to do with Capitalism or any economic system.

The ecological question emphasizes human responsibility to future generations (#37)

True

Some democracies have lost the ability to make decisions for the common good… A community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good (#48)

Again this has nothing to do with economic systems, but I like it. It reminds me of my favorite Ben Franklin quote:

“I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. In my youth I traveled much, and I observed in different countries, that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

My friend Abu, provides a much better “Catholic” interpretation of the subject papal writings. See his post #4 on this thread.

 

[ThomasJMullally]

It is hard to separate consumerism from capitalism, but I’ll accept that consumerism was a choice the US made-- it was born to retool the economy after WW2 and has burgeoned out of control. And, if the US is not trying to replicate consumerism elsewhere, which is a hard case to make. then elsewhere they now aspire to it anyway. What a mess,

What of financial meltdown, born of consumerism? I hope you are for the elimination of corporate subsidies, at the very least… The problem of last Depression was contraction of liquid assets and bank failures. The problem of this one was the propping up of all excess financial capacity. If Bush had let Bear Stearns go in May 2008, the correction would have been hard but brief.

 

[Abu]

catholictiger #45
I don’t think God has ordained any type of economic system, what he gives us is principles to live by and our economic systems to follow. The Church because of this will never endorse a economic system

God has ordained humanity with reason and free-will and one saint has clearly endorsed an economic system in which people of good will can exchange goods and services in keeping with Catholic principles.

See *Centesimus Annus *42, 1991, Saint John Paul II:
‘If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”.’

Since here capitalism = free economy, and reaffirmed by Bl John Paul II is the ‘fundamental human “right to freedom of economic initiative,” ’ (Sollicitudo Rei Socialis (On Human Concerns), Encyclical, 1987, #42), and initiative = enterprise, it is clear what the pope means.

On Caritas in Veritate Fr John De Celles points out that Pope Benedict XVI clearly states that “The Church does not have technical solutions to offer” [CV 9]. Also…it does refer repeatedly to the ‘market economy,’ a term of art which Pope John Paul II used to refer to that form of capitalism that is ‘the path to true economic and civil progress.’

Do you have a problem in understanding St JP II when in *Sollicitudo Rei Socialis *(On Human Concerns), Encyclical, 1987, #42, he declares as a basic human right: the “fundamental human ‘right to freedom of economic initiative.’ ”?

Do you have a problem with the fact that initiative = enterprise?

And therefore do you have a problem with business economy = market economy = free economy = free enterprise?

 

[ThomasJMullally]

It is interesting how our died-in-the-wool advocates of capitalism, even so far as claiming Church endorsement of same, keep finding solace in the idea that the US is not “real” capitalism, that if only the state would stop interfering, we would reach a perfect society. This is the same thing every communist said… about the Soviet Union!

The point is, if you can appreciate that man-made hierarchies and struggles over resources (that people may or may not need for their own use), get in the way of love, compassion, understanding etc, then you would also appreciate that it doesn’t matter if the offender is a government bureaucrat never picking up his phone, a public company hiding information from investors, a monopoly gouging, a consortium colluding, or whatever. We have overgrown, impersonal inhuman systems, public and private. To think that private ownership of bureaucracies creates a perfect society, compared to the same buildings full of pencil-pushers reporting to politicians, and that this change in status would assure the rights of little guys, the minor stockholders, the consumers, the poor etc, this is just some useless theory as short-sighted as Marx’s. The politicians and industrialists who steamroll rights and seize resources to hoard, are intertwined.

The solution isn’t the government and it isn’t the private sector-- it’s to stop thinking there is one solution, or any symmetrically perfect answer. If you do, you tune out, you go about your business, you have ceased learning. And the world falls further apart.

 

[Seraphim73]

What of financial meltdown, born of consumerism?

It wasn’t born of consumerism. It was born of a failure of government. The government made it profitable for banks to make high risk loans through pressure and Fannie Mae and Freddie Mac buying up those toxic loans. Couple that with the fact that these banks realized that they were “too big to fail” and that the government would use force to coerce the tax payers to bail them out and you had a recipe for disaster.

I hope you are for the elimination of corporate subsidies, at the very least

Of course I am. We must always remember. People, statist and progressives in particular look at capitalism as a profit system. The reality is it’s a profit and loss system, the loss being more important than the profit because it eliminates inefficiency

The problem of last Depression was contraction of liquid assets and bank failures.

The problem of the Great Depression was a mismanagement of the money supply by the federal reserve. Again a failure of government.

The problem of this one was the propping up of all excess financial capacity. If Bush had let Bear Stearns go in May 2008, the correction would have been hard but brief.

Absolutely. Even though the government had a large role in creating the crisis to begin with any company that was so poorly managed should have been allowed to go under. That includes GM and Ford.

 

[ThomasJMullally]

Grrreat-- we’re on the same team after all. I am against anything that alienates and burdens the common man, which includes government bureaucracies. I just like to chide Tea Partiers for failing to see their commonality with the far left. And far lefties, for failing to see their commonlity with Tea Partiers. It is a commonality of dismantling the horrible, middle-of-the-road, autocracy of bipartisanship, this stasis, that we are stuck in since Bill Clinton showed up… Best of luck, see you soon,Tom