This weekend, I will take up some responses to Pope Francis’s ringing call for wealth redistribution and reforms in global capitalism, a topic which I took up in my column last May 17 (“10 richest Filipinos and the Pope’s call for legitimate wealth redistribution,” Times, May 17, 2014).
As might be expected, the holy pontiff’s radical proposal and stinging critique of capitalism did not go unnoticed or unanswered. Many liberals and progressives, welcomed his ideas. But there were also many who vigorously differed with him.
Because of the many comments on my column that I received online, including a few that disagreed with my opinion that “growing our economy is the better answer to income inequality than wealth redistribution by the state,” I want to share today some enlightening comments on Pope Francis’s thinking, which I believe can help inform local discussion of the pope’s proposals and ideas.
One well-argued and incisive rejoinder to Pope Francis was an opinion-page article written by Allister Heath and published by the London Telegraph last Tuesday, June 17. I am reproducing it in my column, because it’s the kind of learned essay that can lead to intelligent and spirited exchange.
* * *
Knowing how the world really works
BY ALLISTER HEATH
There can be no doubt that Pope Francis is a devoted and selfless man who has dedicated his life to serving others. A phenomenal theologian, he abhors war and poverty and is an inspiration to hundreds of millions of believers; he has gained widespread respect even among those who disagree with the Roman Catholic church’s teachings.
So it is with great sadness that I must take exception to the Pope’s views on economics and business. His hostility to capitalism, shared by the Church of England, is tragically misplaced. He has repeatedly savaged free markets, most recently at a Vatican conference this week, and aligned himself with the views of Thomas Piketty, the far-Left intellectual who obsesses about inequality and advocates crippling taxes on income and wealth.
In one key intervention, the Pope claimed that the “absolute autonomy of markets” was a “new tyranny.” It was a strangely inaccurate vignette of the modern economic system, which is characterised by not-so-free markets that are routinely bailed out, subsidised, taxed, capped, fettered, regulated and distorted by activist governments and their monetary and fiscal policies. North Korea is a genuine tyranny; free trade and genuine free markets are anything but.
It gets worse, unfortunately. At the height of Pikettymania, and before many leading economists punched holes in the French economist’s thesis, the Pope took to his Twitter (NYSE: TWTR – news) account to state, without any caveats or context, that “inequality is the root of social evil.” He was clearly referring to differences in financial outcomes and wealth and crucially, not to poverty or to inequalities of opportunity, both very different concepts.
In any free society characterised by private property rights and folks endowed with differing tastes, ambitions, talents and aspirations, there will inevitably be a divergence in earnings and wealth. Francis’ wholesale condemnation of inequality is thus tantamount to a complete rejection of contemporary economic systems. It is not a call for reform, or for moderation, but a radical denunciation.
The Pope’s latest critique this week was equally unfounded, blaming speculators for high food prices. “The few derive immense wealth from financial speculation while the many are deeply burdened by the consequences,” he said, claiming that “speculation on food prices is a scandal which seriously compromises access to food on the part of the poorest members of our human family.”
Francis’ predecessor, Benedict XVI, made similar comments, as have many pressure groups; ironically, food prices have actually been falling recently. But the truth is this: speculators are not to blame for high (or low) prices over any meaningful period of time, there is no genuine, robust statistical evidence to back up the Pope’s claims and any profits traders make do not come at the expense of the poor.
Those who buy and sell and seek to predict the future perform a crucial and legitimate social function; without them, the economy would lurch from over-supply to under-supply. Markets would be horrendously opaque and illiquid, with some consumers paying far more than others for identical products. When the price of food goes up, it means experts collectively feel demand will rise or supply will fall; thanks to such speculation, market prices are the best possible early warning signal. They allow farmers to plant more of the right kinds of crops, and futures markets allow them to insure themselves against price changes.
Speculators who keep getting it wrong go bust.
Food is relatively expensive because it is relatively scarce. Many countries are becoming richer and thus consuming more of it which is wonderful and more agricultural land is being used to produce biofuels and ethanol. Yet we have coped: technological progress, fuelled by entrepreneurial innovation, has made agriculture immensely more productive; and improved policies have meant that more countries now operate productive agricultural sectors.
Over time, it is these trends which determine the cost of our lunch and dinner, not traders; it is a shame that so many people find it easier to shoot the messenger than try to understand the underlying causes of scarcity and plenty.
Of course, the system can break down. Bubbles can appear: quantitative easing and ultra-low interest rates have pushed up a variety of asset prices over the past few years; too much money is chasing too few commodities. Markets can be manipulated, as we saw with Libor; fortunately such illegal activity doesn’t tend to have much of an actual long-run impact on prices but it should nevertheless be penalised severely. Cracking down on such abuse is one thing; seeking to stop speculation is another entirely.
The Pope also recently criticised “trickle-down” economics in fact a caricature of free-market arguments in scathing but equally incorrect terms. “There was the promise that once the glass had become full it would overflow and the poor would benefit. But what happens is that when it’s full to the brim, the glass magically grows, and thus nothing ever comes out for the poor,” he said. It is hard to reconcile such a baffling statement with recent economic history. Even the poorest among us today have access to medical technologies which the richest of the rich couldn’t even have dreamed of a century ago. The number of people living in extreme poverty in emerging markets has collapsed from half the population in 1981 to 21pc in 2010. A giant new global middle class has emerged in China, India, Africa and Latin America.
Yet no real free-marketeer believes that growth alone is enough to solve all problems. In the West, wages are under pressure and youth unemployment elevated, among a myriad other urgent issues. The solutions are complex; they include boosting entrepreneurship, improving education and more flexible labour markets. They certainly do not involve wholesale, ill-informed attacks on the market economy.
Religious groups have a central role to play in improving society: they can promote self-control, civility, respect and ethical behaviour, and help to reduce fraud, manipulation and other illegal activity in all spheres of human action. They can remind their followers that there is more to life than merely accumulating goods, and that reading, learning and thinking are wonderful things.
They can convince the rich to finance poverty-alleviation programmes, medical research, and educational scholarships. They ought to emphasise the oneness of humanity, and thus help remove protectionist barriers which prevent people from poor countries from selling their wares to richer countries. The task is immense.
But unthinkingly to fight capitalism the greatest alleviator of poverty and liberator of people ever discovered makes no sense. The sooner the world’s great religions learn to love the wealth-creating properties of the market economy, the sooner they will be able to harness them to make the world a better place.
[Times OpEd Editor’s note: End of Allister Heath article, the British spellings in which we have not changed.]
* * *
Cal Thomas: Vatican wealth redistribution
Another reply to Pope Francis from which I’d like to quote is the column of American syndicated columnist Cal Thomas, which specifically addressed the pope’s radical proposal for wealth redistribution. He wrote:
“I have great respect for the humility displayed by Pope Francis, but in his latest call for the “legitimate” redistribution of wealth, he has it backward. Instead of taking more money from those who have earned it, he should advocate for creating new wealth.
“Time magazine reports that, according to the best guess of bankers, Vatican wealth is between $10 and $15 billion. If Pope Francis is serious about redistribution, he should lead by example and sell all Vatican property, including its valuable artwork, empty its bank and give the money to the Italian government, or to the United Nations.
“Charity and philanthropy are better than wealth redistribution because they create a bond between the giver and the receiver, unlike an anonymous government check. These donations also establish an expectation that the receiver has a moral responsibility to use the money or services wisely and be accountable to the giver.
“Redistribution, or whatever name you give the practice, is socialism. Socialism often leads to mutually shared poverty.
“In a speech to the heads of major UN agencies meeting in Rome, Pope Francis also said about wealth distribution: ‘Specifically, this involves challenging all forms of injustices and resisting the economy of exclusion, the throwaway culture and the culture of death which nowadays sadly risk becoming passively accepted.’ “
“He’s right about that, but removing barriers to the creation of wealth is a better path to elevating the poor than penalizing the wealthy through asset confiscation.”
I publish the views expressed above not to endorse them, but to stimulate further discussion in our country, where the issues raised by Pope Francis are rife and acutely felt.