Bishops Show Good Business Sense

At least some readers are probably aware that the National Conference of Catholic Bishops released last November the final version of a pastoral letter titled “Economic Justice for All: Catholic Social Teaching and the U.S. Economy.” The letter urgently appeals for a “ ‘new American experiment’--to implement economic rights, to broaden the sharing of economic power and to make economic decisions more accountable to the common good.”

Response to the bishops’ letter among economists and business writers has been schizophrenic. Some have condemned the bishops’ commentary and proposals as bad economics. Others have admitted that a little dose of decent morality might not be such terrible medicine for the U.S. economy.

These two responses are always counterpoised: The bishops offer bad economics in a cloak of decent morality. The implicit conclusion: “Good” economics and concern for the common good mix about as well as oil and water.

This juxtaposition is misplaced. The bishops’ economic proposals would not only encourage a more just economy--fostering a sounder economic spirit of cooperation--but they would also promote a much sounder economic foundation. Good economics and human decency go together like a horse and carriage.

The bishops initiated their foray into economic analysis and policy debates, undertaking what turned out to be a six-year project, because they had concluded that “the promise of the American dream--freedom for all persons to develop their God-given talents to the full--remains unfulfilled for millions in the United States today.”

They worried not only about economic insecurity and poverty but also about a spreading “social fragmentation, a decline in seeing how one’s work serves the whole community and an increased emphasis on personal goals and private interests.”

‘New Partnership, New Structures’

In response to these concerns, the bishops’ letter both ventures some specific policy proposals to pursue economic security and justice and also suggests a more general reorientation of economic policy. It calls for “new forms of cooperation and partnership among those whose daily work is the course of the prosperity and justice of the nation . . . for new structures of economic partnership and participation within firms, at the regional level, for the whole nation and across borders.”

In supporting those proposals, the bishops reject the widespread free-market belief that rugged individualism and cutthroat competition will, in the end, serve everyone’s needs. “Today a greater spirit of partnership and teamwork is needed,” they conclude; “competition alone will not do the job. . . . Only a renewed commitment by all to the common good can deal creatively with the realities of international interdependence and economic dislocations in the domestic economy.”

These are not conclusions designed to endear the bishops to the gatekeepers of free-market ideology. Long before the final version of the letter was even released, opponents began to attack it as unsound and misguided. As early as 1984, a conservative group calling itself the Lay Commission on Catholic Social Teaching and the U.S. Economy began circulating sharp criticisms of the bishops’ letter-in-progress, eliciting substantially supportive commentary in the press.

The Wall Street Journal editorialized that the pastoral letter “profoundly . . . misapprehends the nature of capitalism.” A columnist for the not-quite-so-conservative New Republic commented that “no one has yet accused the Catholic ethic of being a source of economic dynamism.” After all, these early commentaries insinuated, whaddya expect from a buncha bishops?

Ah yes, but these are the days of “junk bonds” and insider trading scandals. Perhaps a bit of good old-fashioned morality might not be such a bad idea after all. In that vein, for example, Lawrence R. Klein argued in this column three weeks ago that “a revival of economic morality is needed to shore up confidence.” If entrepreneurs and financiers were more honest, he suggested, investors would be more likely to provide the funds needed for sustained growth and prosperity.

Objectives Can Be Compatible

But those kinds of pleas for a little more morality still build on the notion that the bishops’ proposals constitute bad economics. The pleas logically assume, as Klein suggests, that in general “the market system works toward a so-called optimal allocation (of resources).” Such an economy is likely to fall short of such a blissful condition only when the competitive process is impeded. The market works, Klein argues, “only if information is widely available on an equal basis to all participants. Without closer supervision, this condition will not prevail, and the market solution will produce distortions.”

The system would work fine, in short, if there were less lying and cheating.

But that kind of plea for morality misses one of the main premises on which the bishops’ pastoral letter rests. Economic effectiveness and moral decency are not in conflict. It is possible both to care for our neighbors and to secure greater economic security and efficiency.

How? The argument is that greater economic participation and democracy have two crucial advantages for the effectiveness of the economy’s operations.

First, if economic decision making is held accountable to the public good, resources are less likely to be wasted because workers and citizens will have a better chance to protest and restrain economic profligacy.

Are corporations spending too much on mergers and commodity speculation and too little on productive investment? Then a more democratic economy could institute differential reserve requirements that would reward lenders for productive investments and penalize them for paper investments and junk bonds. Or a more democratic economy could establish a public investment bank that would directly provide credit to projects that it felt best served the public interest--projects producing decent goods and services while providing decent jobs at decent wages. Firms would receive investment subsidies in return for an agreement to public scrutiny of their uses of those funds.

Second, workers and managers are much more likely to work toward a more productive economy if they are confident that they will fully share in that economy’s prosperity. When workers watch their wages fall and their children’s dreams corrode, are they likely to commit the time and effort necessary to make the economy work?

Many now call for a new labor-management partnership to help improve U.S. competitiveness in the global economy. But “partnerships between labor and management are possible,” the bishops’ letter argues, “only when both groups possess real freedom and power to influence decisions.”

The bishops conclude that “society as a whole, acting through public and private institutions, has the moral responsibility to enhance human dignity and protect human rights.”

We do not need to make grave economic sacrifices in order to honor these moral imperatives. None of these kinds of policy transformations would be easy or free of problems. But an economy promoting human dignity and human rights can work effectively to produce growth with equity, economic security with moral decency.

We may not need to make economic sacrifices, but we will need to make the political commitment necessary to pursue such a possibility and vision. “To have such a vision promulgated by one of the most prominent institutions in American society,” Alexander Cockburn and Robert Pollin conclude in a recent article in the Nation, “offers an enormous opportunity for an onslaught on the parched and mean-spirited thinking” that currently dominates economic debate. The bishops have issued a call. And the time is right.