The latest fad in the world today seems to be lambasting capitalism and free markets. Any time someone speaks in favor of capitalism and free markets, opponents tend to label them as individuals who detest poor people, are racist and devour babies. Of course, most of those who denounce free markets are economic illiterates who have never touched the works of Murray N. Rothbard, Ludwig von Mises or Henry Hazlitt.
Perhaps to garner support from the Occupy Wall Street folks (who knows?), the newest individual to criticize capitalism is Pope Francis, who issued his first encyclical Tuesday, an 85-page document that consists of brief critiques of free markets.
It is completely understandable that Pope Francis fails to understand economics since it is understood that Jesuits are trained to promote the ideology of communism, which opposes private property rights and that everything belongs to the state rather than the people. These individuals’ opinions on the matter should be taken with a grain of salt, but they are interesting to read due to the comic relief provided.
What did Pope Francis say? Here are some excerpts:
How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.
First of all, how is consumer wastage a fault of the marketplace? This is due to consumer ignorance rather than the marketplace. Who is going to stop individuals from wasting a chicken leg, cabbage or a slice of cake? The Gestapo?
Next, let’s compare Americans starving to Africans. Americans are highly ungrateful for the world they live in. A world where there are plenty of cheap foods available to consume, while Africans have to live on bowls of rice for an entire week until the next shipment comes in from some non-governmental organization. Also, there are numerous charities across the United States, where if somebody can’t afford to buy food, there are food banks and philanthropic organizations that help feed the poor (sometimes government shuts them down). This can’t be said in places like Uganda, Somalia and Sudan.
Why is there readily available food and charities aiding the poor? Free markets. Due to technological advancements, competition and innovation, consumers are able to access a lot of food for a cheap price. It can be conceded, though, that sometimes the food isn’t nutritious, but when you’re hungry you don’t really care.
As an average person spends $1 for a burger at McDonalds – no matter how bad it is – a person living in Swaziland has to garner up enough money to acquire some grains.
Pope Francis despises competition so does he want one central body to provide all goods and services for the populace? Sure, we can really depend on the Health and Human Services Department to provide healthcare.
Lastly, it is true that masses of people in the world today do not have the opportunities to work. However, can this number match that of those found in the Western world? Nope. Places with immense unemployment are in locations where there isn’t capitalism or free markets and just an oppressive and corrupt government.
Example: Zimbabwe has an unemployment rate of 70 percent, while Switzerland has a jobless figure of 3.2 percent.
Indeed, the U.S. is going through a difficult time, but why is that? The government and the Federal Reserve.
In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.
This is where Pope Francis’s economic ignorance becomes ubiquitous. Free markets, as anyone with an understanding of Economics 101, aren’t about “trickle-down theories.” A lot of libertarians would tend to concur with Robert Wenzel, who wrote that “he has a very pedestrian view” and “It indicates a confusion about the underlying correct methodology of economics, which is a deductive science, not an anecdotal or empirical science.”
While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules.
First of all, why is there such a large gap? Why is the rich getting richer? It’s because of the Federal Reserve with its inflationist policies. When it creates the freshly printed money out of thin air, it gets transferred to the wealthy, while the poor and the middle class get the bread crumbs as it passes through the system. This is not the result of the marketplace but rather terrible Keynesian monetary policy.
Is Pope Francis actually arguing that there is “absolute autonomy of the marketplace”? This is false as the federal and state governments have intervened in the state that punishes free enterprise and small business, while instituting policies that only benefit the large corporations.
The tyranny that Pope Francis should be talking about is government as it is the behemoth that has been tyrannical for centuries.
In the end, Pope Francis should sit down and read some books from the Austrian Theory or free market persuasion. Here are some great books to start with: “Economics in One Lesson” by Henry Hazlitt, “America’s Great Depression” by Murray N. Rothbard, “Liberty Defined” by Ron Paul, “Against Leviathan” by Robert Higgs and “Free to Choose” by Milton Friedman.
But hey, perhaps this document was ghostwritten by the likes of Robert Reich or Paul Krugmann.
“[S]ome people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion … never … confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the … workings of the prevailing economic system.”
In the U.S. all growth in net wealth has been confined to the top 10% for more than 20 years. This is the group that wields the economic power and 90% of the population must trust in their goodness. The shrinking middle class has lost 8% of their net wealth since 1995. The poorer half of the population gradually lost a staggering 70% of their net wealth since 1995. The wealth gap has nothing to do Fed policies regarding inflation as you suggest.
“[I]nequality provokes a violent reaction from those excluded from the system … [and] because the socioeconomic system is unjust at its root.” according to Francis. “A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders.”
The wealth gap relates to ethics and the lack of political will. Governments overtax the poor and fail to create full employment because elites are opposed to almost any inflation. A 4% rate of inflation and 4% unemployment rate would be just fine.