Is greed an inherent problem for free enterprise?

[tafan]

Abu,

So the pope gives two definitions of capitalism and he equates one of the definitions to a free economy. That would imply not all definitions of capitalism imply a free economy.

There are many forms of capitalism, the term in its basic meaning “the private ownership of the means of production” (ie capital) does not imply any type of freedom.

Certainly free enterprise implies capitalism. But capitalism does not imply you have free enterprise. Which is why the Pope said the answer is complex as to whether capitalism is good or bad.

You argue against yourself when you say that the first examples of capitalism occurred in the 9th century. But surely you would admit that there were examples of free economies prior to that. We certainly see examples in the bible.

You would be correct that the modern Chinese “communist” system (it is communist only based on the party in power) is the type of economy condemned by JP II. But it is certainly capitalistic in many instances. They do have private ownership of capital. They lack freedom in their economic endeavors. It was much the same in Nazi Germany (even more so, as all capital was privately owned), but again it lacked freedom.

It is a mistake to equate all forms of capitalism with free enterprise. I give you a couple of examples closer to home. Under ObamaCare, the health insurance system is still operated on capitalistic lines, but it has forfeited its freedom.
Even more of the same can be said about banking in the US today. When the 5 largest banks control 60% of the banking assets in the US and they operate under explicit government protection (too big to fail) and in return they operate as the government tells them too (an unspoken truth of the new financial regulation), there is little free enterprise. There seems to be nothing in our banking system which “recognizes the fundamental and positive role of business” or which
recognizes “as well as free human creativity in the economic sector”. And the price of loans, interest paid by banks, etc has largely been taken away from the free market and placed in the hands of the federal reserve. Our banking system is certainly capitalistic. It is certainly no longer resembles free enterprise. Banks are allowed to be huge, are allowed to make huge profits, as long as they act and behave how the government wants; with no care about the free market (outside of the price of their equity) or about how they help fund our economy (beyond funding the federal government.

I am tired of people defending all forms of capitalism. It allows for the most grotesque economic monstrosities to be formed. We had the problem in the early 20th century with huge concentration of wealth in the hands of a few industrialists. We had close to 100 years of progress made in forming a middle class and distributing wealth more equitably through a free market system. Now, it seems like we want two things : conservatives want gigantic corporations in the name of capitalism, liberals want gigantic government. They have found a way to cooperate and make it work: it is called a fascist economy. We all need to return to the principle of subsidiarity.

To summarize again: capitalism does NOT equal free enterprise. Free enterprise would certainly contain capitalism.

 

[Abu]

tafan #102
I am tired of people defending all forms of capitalism.

The error here is in not realising that it is the people who constitute governments, apart from individual evil in commerce, that distort the principles under which capitalism (free enterprise) or any other system is operated.

The economies of the West, led by the U.S.A., are widely considered to be “market” economies, but they are not the free enterprise economies arising from the Catholic Late Scholastics (“the ‘founders’ of scientific economics”) and the Austrian school of economics because these Western markets are deluged and deluded by interventionism.

Federal intervention in creating a feeling of prosperity stimulates the boom-bust cycle, resulting in an inevitable crash. The free market is always blamed for that crash. These artificial booms, wrote economist Henry Hazlitt, must end "in a crisis and a slump, and . . .worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of ‘capitalism.’ "(What You Should Know About Inflation, 2nd ed., Van Nostrand, 1965, 18).

As Dr Thomas E Woods shows in Meltdown, Regnery Publishing, 2009, p 64, in How Government Causes The Boom-Bust Cycle: “It’s not ‘capitalism’. It’s not ‘greed’. It’s not ‘deregulation’. It’s an institution created by government itself.” And further (p 151), “And because as far as American politics is concerned, the Fed may as well not exist – and thus the Fed’s policies are essentially never a subject for debate in the American public square – the chaos it creates is inevitably blamed on ‘capitalism’ and made the pretext for additional rounds of government intervention.”

That is the reality.

 

[CrossofChrist]

they are not the free enterprise economies arising from the Catholic Late Scholastics (“the ‘founders’ of scientific economics”) and the Austrian school of economics because these Western markets are deluged and deluded by interventionism.
.

Do you think Austrian/Libertarian economics is the only form of “capitalism” compatible with Catholicism?

 

[Ridgerunner]

That is the $64 question in economics, because part of a company’s return is due to prudent decision making and part of it can be due to the market changing in a way that is favorable to the company. For example, if the price of oil goes up, Exxon will have higher profits and some of those profits will have nothing to do with CEO behavior.

In economics we call this problem the principal agent problem which is unique when there is a separation of ownership from control. If you hire a manager to run a business which you 100% own then that decision is not very interesting since if you pay too much you will bear the cost of that in the form of lower profits. However, in a large corporation if a CEO is overpaid the cost is spread among thousands of shareholders. Theoretically the board should represent the shareholders interests, but most board members are recommended by management and so there is a closer relationship between the board and management than is ideal. Warren Buffet tells the story of being on a board compensation and arguing that a CEO should not get a big raise because of subpar performance. The result was that he was never asked to serve on a compensation committee again.

en.wikipedia.org/wiki/Principal%E2%80%93agent_problem

Actually, one thing that disclosure requirements might do is increase compensation across the board. If the CEO knows how much his peers are making it makes it easier to ask for more. So it is possible that everyone is overpaid, although I am not sure how one determines that.

Undoubtedly true, and even I know of examples of what I suspect to be overcompensation by controlled boards. However, I don’t see how anyone outside an industry or business could possibly know what’s excessive and what isn’t for a particular individual. To know that, one would have to know the industry and the company so well that few could ever qualify to be the “judges” (board members) unless they came from within the industry at least, and perhaps from within the company itself. (Who knows what Apple has on the far-reaching drawing boards other than Apple people, included outside board members who are reasonably close to the insiders, and a handful of industrial spies?)

Seems the process is almost inherently “incestuous”, and if the company is particularly large and complex, the more difficult it would seem to avoid it.

 

[Abu]

CrossofChrist #104
Do you think Austrian/Libertarian economics is the only form of “capitalism” compatible with Catholicism?

No, but it utilizes the Late Scholastic insights very well. As Bl John Paul II teaches in Centesimus Annus, 1991, 43: “The Church has no models to present;”

Catholic teaching supports free enterprise, based on the Catholic Late Scholastics who discovered and developed the natural laws of cause and effect in economics.

The Popes have some realization of the cause and effect of economic laws:
“If I were to pronounce on any single matter of a prevailing economic problem, I should be interfering with the freedom of men to work out their own affairs. Certain cases must be solved in the domain of facts, case by case as they occur…[M]en must realise in deeds those things, the principles of which have been placed beyond dispute…[T]hese things one must leave to the solution of time and experience.” [Pope Leo XIII. Quoted in *The Church And The Market, Dr Thomas E. Woods, Lexington Books, 2005, p 4].

Pius XI wrote of “matters of technique for which [the Church] is neither suitably equipped nor endowed by office.” Quadragesimo Anno, 1931, 41]….“economics and moral science employs each its own principles in its own sphere.” [QA, 42].

In Does Catholicism Still Exist?, Alba House, 1994, Fr James V Schall, SJ, writes that the Church has had to acknowledge “that there are certain ways that must be employed if mankind is to meet its economic problems. These ways can be known and imitated, but they must include a juridical system, profit, enterprise, knowledge, exchange, a market, voluntary organizations, a relatively independent economy, private property, and respect for work and excellence.” He says *Centesimus Annus *contains a frank acknowledgement that socialism has failed on its own terms as witnessed by events in Eastern Europe. But, “The Pope insists that there are always many dangers of greed, selfishness, and materialism in this market system” and is “blunt and frank that man cannot achieve his inner-worldly goods or goals without Christianity….he is dealing with the unity of man in all his aspects, faith and reason, this world and the next, morals and economics.” (p 184-6).

Again, Fr James V Schall, S.J., in Does The Catholic Church Still Exist?, points out re CA that “The very meaning of ‘options for the poor’ need no longer be ideological in overtones but directed instead to the very real possibilities for a poor people to overcome their own problems with the intelligent aid of those who know how to produce wealth in the first place.’ (p 178).

“If the first unique aspect of this Encyclical is its analysis of the real problem with totalitarianism, the second unique aspect is its willingness to accept the general principles of the market economy. The Pope insists that there are always many dangers of greed, selfishness, and materialism in this market system. No one needs to deny his point to recognise that he also calls attention to what have become commonplace among those who have sought to understand how modern societies develop their material bases.”

 

[migueltojose]

The constitution also says US citizens have a DUTY to prevent such things from happening regarding govt, but in todays worlds, most people that even suggest such a thing are arrested and called domestic terrorists, so no one is willing to stand up and do their constitutional duties anymore. like ive said before, if our founding fathers could see the state of our country, they would be rolling in their graves. Majority of the population is content with just letting the govt do whatever it wants to do

Until the pain of doing nothing exceeds the pain of doing something, nothing will get done.

This applies to the populace as well as congress, etc.

For politicians pain equals risk of election/re-election, wealth, power, influence…

For the populace pain equals lack of creature comforts… food, shelter, clothes and the American dream of independence and mobility… the automobile…

Meanwhile we are obese, heat and cool homes that are too big, waste money on fashion and drive really nice cars… Shock to Maslow… we prefer to hang around the bottom…

Unfortunately but realistically not much will happen until it is too late. By the time we are affected to the point of action the major drivers will be unstoppable.

For who would bear the Whips and Scorns of time,
The Oppressor’s wrong, the proud man’s Contumely,
The pangs of despised Love, the Law’s delay,
The insolence of Office, and the Spurns
That patient merit of the unworthy takes,
When he himself might his Quietus make
With a bare Bodkin? Who would Fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscovered Country, from whose bourn
No Traveller returns, Puzzles the will,
And makes us rather bear those ills we have,
Than fly to others that we know not of.
Thus Conscience does make Cowards of us all,
And thus the Native hue of Resolution
Is sicklied o’er, with the pale cast of Thought,
And enterprises of great pith and moment,
With this regard their Currents turn awry,
And lose the name of Action.

 

[Robert_Sock]

The constitution also says US citizens have a DUTY to prevent such things from happening regarding govt, but in todays worlds, most people that even suggest such a thing are arrested and called domestic terrorists, so no one is willing to stand up and do their constitutional duties anymore. like ive said before, if our founding fathers could see the state of our country, they would be rolling in their graves. Majority of the population is content with just letting the govt do whatever it wants to do

It’s not government that’s having such a negative effect on our society, but the mass media! The media has people hypnotized!

 

[mikekle]

It’s not government that’s having such a negative effect on our society, but the mass media! The media has people hypnotized!

I agree, and the fact that all media outlets are owned by certain individuals does not make it any better, as they literally control what is news and what is left out.

this became an issue with a past Olympics and a reporter had a huge story about Nike and the slave labor they were using to produce their products, but since they were the number 1 sponsor of the olympics, this story was killed and the reporter was fired and threatened to keep quiet.

I would assume this same thing is rampant today and probably alot of true news we do not even hear about.

 

[Robert_Sock]

I agree, and the fact that all media outlets are owned by certain individuals does not make it any better, as they literally control what is news and what is left out.

this became an issue with a past Olympics and a reporter had a huge story about Nike and the slave labor they were using to produce their products, but since they were the number 1 sponsor of the olympics, this story was killed and the reporter was fired and threatened to keep quiet.

I would assume this same thing is rampant today and probably alot of true news we do not even hear about.

 

[CrossofChrist]

. As Bl John Paul II teaches in Centesimus Annus, 1991, 43: “The Church has no models to present;”

Catholic teaching supports free enterprise, based on the Catholic Late Scholastics who discovered and developed the natural laws of cause and effect in economics.

The Popes have some realization of the cause and effect of economic laws:
“If I were to pronounce on any single matter of a prevailing economic problem, I should be interfering with the freedom of men to work out their own affairs. Certain cases must be solved in the domain of facts, case by case as they occur…[M]en must realise in deeds those things, the principles of which have been placed beyond dispute…[T]hese things one must leave to the solution of time and experience.” [Pope Leo XIII. Quoted in *The Church And The Market

, Dr Thomas E. Woods, Lexington Books, 2005, p 4].

Pius XI wrote of “matters of technique for which [the Church] is neither suitably equipped nor endowed by office.” Quadragesimo Anno, 1931, 41]….“economics and moral science employs each its own principles in its own sphere.” [QA, 42].

In Does Catholicism Still Exist?, Alba House, 1994, Fr James V Schall, SJ, writes that the Church has had to acknowledge “that there are certain ways that must be employed if mankind is to meet its economic problems. These ways can be known and imitated, but they must include a juridical system, profit, enterprise, knowledge, exchange, a market, voluntary organizations, a relatively independent economy, private property, and respect for work and excellence.” He says *Centesimus Annus *contains a frank acknowledgement that socialism has failed on its own terms as witnessed by events in Eastern Europe. But, “The Pope insists that there are always many dangers of greed, selfishness, and materialism in this market system” and is “blunt and frank that man cannot achieve his inner-worldly goods or goals without Christianity….he is dealing with the unity of man in all his aspects, faith and reason, this world and the next, morals and economics.” (p 184-6).

Again, Fr James V Schall, S.J., in Does The Catholic Church Still Exist?, points out re CA that “The very meaning of ‘options for the poor’ need no longer be ideological in overtones but directed instead to the very real possibilities for a poor people to overcome their own problems with the intelligent aid of those who know how to produce wealth in the first place.’ (p 178).

“If the first unique aspect of this Encyclical is its analysis of the real problem with totalitarianism, the second unique aspect is its willingness to accept the general principles of the market economy. The Pope insists that there are always many dangers of greed, selfishness, and materialism in this market system. No one needs to deny his point to recognise that he also calls attention to what have become commonplace among those who have sought to understand how modern societies develop their material bases.”

 

[stinkcat_14]

Undoubtedly true, and even I know of examples of what I suspect to be overcompensation by controlled boards. However, I don’t see how anyone outside an industry or business could possibly know what’s excessive and what isn’t for a particular individual. To know that, one would have to know the industry and the company so well that few could ever qualify to be the “judges” (board members) unless they came from within the industry at least, and perhaps from within the company itself. (Who knows what Apple has on the far-reaching drawing boards other than Apple people, included outside board members who are reasonably close to the insiders, and a handful of industrial spies?)

Seems the process is almost inherently “incestuous”, and if the company is particularly large and complex, the more difficult it would seem to avoid it.

I think the problem is even worse in the public sector and nonprofit sector. We have a system office that oversees a bunch of mostly independent campuses. I am not sure what good they do, although that is an easy complaint from a faculty member on one of the campuses, it is easy to complain about them, but I also am not sure what they really do of substance. Anyway the President of the system makes about $450k plus bonuses and while it is around the going rate (a little high perhaps) for that type of job, it is hard to know whether any particular president is worth that salary. The interesting thing is a few years back they did a “salary equity study” for themselves and found out they were underpaid.

 

[Reep]

Admittedly, greed harms the soul of the greedy man, but the greedy–but honest–merchant can only become rich by providing valued goods or services to the public.

I think of it as one of God’s many jokes on the devil. He is very generous and makes life good in spite of His imperfect creatures. Only free enterprise can do this. It’s not perfect, but it is self-correcting. It beats having busybodies in the government second-guessing every thing we do.

 

[Ridgerunner]

Anyway the President of the system makes about $450k plus bonuses and while it is around the going rate (a little high perhaps) for that type of job, it is hard to know whether any particular president is worth that salary. The interesting thing is a few years back they did a “salary equity study” for themselves and found out they were underpaid.

No surprise there!

 

[dshix]

It’s not government that’s having such a negative effect on our society, but the mass media! The media has people hypnotized!

I agree absolutely. If anything has damaged the people in America and the world, it is the market of ideas and its bad use.

 

[Robert_Sock]

I agree absolutely. If anything has damaged the people in America and the world, it is the market of ideas and its bad use.

See that, we agree again, after the multitudes of disagreements that we had. God bless you!

 

[dshix]

See that, we agree again, after the multitudes of disagreements that we had. God bless you!

I enjoy agreeing with people and I take the chance whenever I can.

God Bless!

 

[Robert_Sock]

How do we put LOVE into the global economy to combat greed? I personally believe it will take a uniting of the world’s major religions–such as a common cause to end extreme poverty in the world using an unprecedented lobbying power.

 

[mikekle]

How do we put LOVE into the global economy to combat greed? I personally believe it will take a uniting of the world’s major religions–such as a common cause to end extreme poverty in the world using an unprecedented lobbying power.

Thats a nice thought, but in todays world with todays systems in place, it will sadly never happen, best chance of this is for the next civilization coming after we are gone.

 

[Robert_Sock]

Thats a nice thought, but in todays world with todays systems in place, it will sadly never happen, best chance of this is for the next civilization coming after we are gone.

It sure seems like Pope Francis (like Bl John Paul II) is making great strides towards religious solidarity. vaticaninsider.lastampa.it/en/the-vatican/detail/articolo/francesco-francis-francisco-28206/

 

[nishkalank]

Greed is the Unwillingness to limit desires for more possessions, more pleasures ,more pride. This has to be decided by oneself taking into account the needs to lead a normal life not indulging in unnecessary luxuries. Only a sincere heart that loves God can take a decision with the help of the Conscience. None can accuse another.