The Catholic Challenge to the American Economy<i> edited by Thomas M. Gannon SJ (Macmillan: $19.95, hardcover; $12.95, paperback; 281 pp.</i> )

The title of this book of commentaries on the Catholic bishops’ pastoral letter on the U.S. economy will rub salt in the wounds of an American business community that is already uncomfortable with the idea of clergymen criticizing the free-market system.

Catholic challenge, indeed. Even before the National Conference of Catholic Bishops issued the first draft--in 1984--of what has become the pastoral letter “Economic Justice for All,” U.S. business was questioning the bishops’ right to comment on economics at all. Then, as the contents of the letter --technically an ecclesiastical instruction to the Catholic faithful--came out, denouncing poverty in the United States as “a social and moral scandal” and calling on the government to use federal spending to assure full employment, the brickbats flew.

The bishops were accused of being overly negative for stressing unemployment and ignoring the 27 million new jobs created by the U.S. economy since 1970. And they were criticized for failing to consider free-market solutions to the problems of joblessness and poverty.

But such criticism was less than fair. The central point of the bishops’ letter was not what kind of economy produces the greatest good for the greatest number, but what to do about the discards--theassembly-line workers consigned to permanent layoff, or the released mental patients whom society calls homeless and condemns to roam the streets. “All persons have rights in the economic sphere,” the bishops’ letter stated. “And society has a moral obligation to ensure that no one among us is hungry, homeless, unemployed or otherwise denied what is necessary to live with dignity.”

Other than relying on government, though, the bishops’ letter left unanswered just how society should go about ensuring dignity for all. And their message was mistimed. We are living still in the aftermath of Great Society programs that were discredited for doing more for middle-class administrators in Washington than for their intended beneficiaries among the poor. So we have become suspicious of government.

The business critics might be more credible if they conceded that the U.S. free-market economy is irrigated by a river of federal government contracts and support payments--from $27 billion in farm aid on up to the $289-billion defense budget. Intellectual humility might have asked for further inquiry into what the bishops mean by pious talk about “a preferential option for the poor.”

This book of essays by, on the one hand, theologians and, on the other, economists, politicians and leaders of labor and business provides at least a beginning of such inquiry. It argues and explains the implications of the bishops’ statement. And it reminds readers that the laws of economics rest on deeper pilings. It was Adam Smith himself, writes the editor of “Catholic Challenge,” Thomas M. Gannon, who pointed out that the self-interest inherent in the free-market leads to the common good only if most people in society accept a moral law as a guide for their behavior.

Unfortunately, one man’s morality is another’s iniquity and the perspectives of too many essays in this book are predictable. It is scarcely surprising that a labor official, Thomas Donahue, treasurer of the AFL-CIO, should hail the bishops’ recommendations for government intervention in the economy. Nor is it unexpected or especially enlightening that a business leader, James Burke, chairman of Johnson & Johnson, should criticize the bishops for not seeking free-market solutions.

By the time we reach the essay “Good Ends, Bad Means,” by Milton Friedman, in which the conservative economist chides the bishops for relying on national government rather than local institutions, we are agreeing to disagree, to admire the clerical intentions while concluding that the cruel side effects of economic change are the price we pay for prosperity.

In one of the most thoughtful essays in this book, Prof. Norman Birnbaum of the Georgetown School of Law observes that the bishops’ letter is falling mostly on deaf ears because American society, finding itself in a global economic struggle, has become more receptive to Social Darwinism, to a belief in the deserving rich.

But the Catholic bishops, operating on the fundamental principle that because there is a personal God, each person’s worth is incalculable--that the bag lady counts as much as the corporate executive--are not so receptive. For them, U.S. society’s rising tolerance for unemployment is “worrisome”; and so, imperfectly, they have assayed this economic letter.

And there are practical considerations as well, writes John Langan, a fellow of the Jesuit order’s Woodstock Theological Center, in an essay summing up this book. The preferential option for the poor, he says, originates not only from charity but also out of fear of “a passive population being created, awaiting the distribution of goods and services from an omni-competent government.” Ancient Rome ended up with that, to its ruin. The bishops, writes Langan, ask that ways be found to bring work to all precisely so that the poor do not become a proletariat ruled by the state but active participants in society. Finding the way to create such work, he recognizes, “is a higher and harder target to reach than setting up a comprehensive welfare system.” But all the more reason that the effort must be made.

What is finally to be said? That we are at the one time benefiting and suffering from what the Marxists call the contradictions of capitalism: The system that gets results and most accommodates individual liberty also penalizes or ignores a lot of unfortunate people--not without risk to itself. It is a system that has always been modified because even the powerful fear its ceaseless change, and it has always renewed itself because its very flux has opened possibilities for human creativity.

There probably is no reconciling the contradictions, but perhaps the next time out in this continuing debate, the bishops might ponder the system’s liberating qualities, and the bishops’ critics might study how best to mitigate its inevitable cruelties. A fresh approach at least might get the poor bag lady off the streets.