Under Catholic social teaching, the common good in the economic sphere is the proper domain of government. And the government can best serve the common good by deploying the twin principles of solidarity and subsidiarity. Solidarity calls on the government to ensure the provision of the basic goods necessary for integral human development and the common good, including income security, decent jobs, nutrition, health care, education, housing, and a sustainable environment. It is important to note that the market, left to its own devices, tends to under-supply many of these goods. That means that the state must assume a more active role if people are going to get enough of what they need. It does not mean that the state always needs to supply these goods itself. It can sometimes outsource provisions to the private sector, but one way or another it must ensure that these goods are provided. And owing to the principles of the universal destination of goods and the preferential option for the poor, the poorest must take special precedence in policymaking.
Subsidiarity calls for higher-order associations, including the state, to promote but not usurp the responsibilities of lower-order associations. It calls for a proper balancing of the scales, with government support for what John Kenneth Galbraith called institutions of countervailing power—including unions, small businesses, consumer organizations, cooperatives, and regional and local banks. When establishing the rules of the game, the government should strive to respect, assist, and promote the interests of all participants in the economy, not only the interests of the wealthy and well-connected.
Catholic social teaching also has much to say about the relative roles of capital and labor. Neoclassical economics does not. As noted, neoclassical economics assumes that the sole role of the corporation is to maximize profits, typically equated with shareholder value, and hence that the corporation has no wider social role—this view was stated most forcefully by Milton Friedman. In this framework, labor is simply a factor of production. In labor market equilibrium, which again leans heavily on the assumption of competitive markets, the worker is paid in terms of what they contribute to productivity. Once again, neoclassical economics finds a natural ally in libertarianism as not only wage-efficient but also just, because the wage represents the outcome of free choices between worker and employer and the worker is paid in line with what she contributes.
Catholic social teaching takes a different perspective. Under its principles, the role of business, just like the state, is to further the common good. This has numerous implications. First, it calls on businesses to produce goods and services that further genuine human flourishing rather than support mere preference satisfaction. This casts a moral pall over many goods in our modern economy, including addictive products, advertising, luxury brands, pornography, and the fossil-fuel industry. Second, business must support decent work, putting this goal above profits—Catholic social teaching recognizes the priority of labor over capital. Work is also seen as a vocation, as people reach their full potential through dignified, meaningful work. Profit cannot be the number one criterion, a core argument against the principle of maximizing shareholder value. Relatedly, Catholic social teaching holds that business should support a wider array of stakeholders than shareholders alone—including workers, suppliers, customers, society at large, and the environment. It suggests a model whereby business can both make a profit and enact a social benefit, in the form of hybrid enterprises. At the same time, business is called upon to promote and protect the natural world, both by refraining from harming the environment and by supporting sustainable development solutions.
Catholic social teaching also has much to say about the role of labor. It starts from the premise that a worker is not merely a factor of production but a human being who possesses dignity and agency. From this perspective, decent work is a path toward fulfillment and flourishing, core dimensions of integral human development. A key priority, then, must be the promotion of secure and dignified employment as a central goal of public policy. A just wage is central to the concept of dignified work. Indeed, a just wage is regarded as one of the main ways to achieve the universal destination of goods in practice. And, importantly, a just wage is not synonymous with a market wage. Along with just wages, Catholic social teaching recognizes an array of rights for the worker. These include pensions, unemployment benefits, affordable or even free health care, family support, adequate rest, vacation time, and safe work environments. Crucially, Catholic social teaching also respects the right to form unions and to bargain collectively.
Catholic social teaching also affirms the right of workers to share in both profits and the management of the firm. Worker cooperatives are an example of the former; the latter is evident in the model of codetermination found in Germany and other continental European countries. The German model of industrial relations is based on worker representation on boards, work councils that give employees a stake in decision making, and wage negotiation at the regional or sectoral level underpinned by strong unions.
Neoliberalism, in contrast, places a high premium on what it dubs “flexible labor markets.” The logic is straightforward: if wages are the outcome of competitive labor markets, any interference in the labor market would hinder efficiency and only generate unemployment. Thus neoliberalism opposes what it sees as excessive interference in labor markets—including minimum wages, protections against workers getting fired, social benefits, and unions. Yet the reality is different. Because workers lack power and options, flexible labor markets tend to generate jobs that are low paying and insecure, most recently in the so-called gig economy. In this system, flexibility is synonymous with insecurity, inequity, disengagement, and a decline in workplace trust. It is a poor substitute for institutions centered on collective bargaining, profit sharing, and codetermination—which can be simultaneously productive, competitive, democratic, and equitable.
We are now in a better position to map out the contours of a new social-democratic movement modeled on the principles of Catholic social teaching. But before we do, it would be useful to recall what led the postwar social-democratic model to unravel. The French economist and historian Thomas Piketty lists three things: the failure to develop a more just approach to property ownership, the difficulty of sustaining progressive taxes on income and wealth, and the failure to address inequality of education within neoliberal meritocracy.
With regard to the first two items on that list, Catholic social teaching offers a compelling path forward. For a start, it promotes a vigorous role for the state in guaranteeing the material bases of integral human development—including food, housing, health care, education, social protection, decent work, leisure and family time, and a safe environment. To fund this, governments have ample scope to raise taxes on high-income earners, holders of great wealth, and large corporations—a policy that would reduce inequality and lessen the likelihood of our government being controlled by wealthy interests. Given the centrality of decent work, it makes sense to promote full employment as a goal of policy, and maybe even to offer guaranteed public employment to all who wish it at the prevailing minimum wage. Here, a heroic push to decarbonize the economy and shift toward renewable energy—possibly under the auspices of a Green New Deal—will surely entail enormous employment opportunities. To address the last problem on Piketty’s list, it will also be important to invest heavily in both education and vocational training. Indeed, governments might want to consider making some forms of tertiary education, vocational training, and early-childhood education cheap or even free.
It will also be important to focus on those institutions that go beyond education and redistribution—areas where Catholic social teaching offers much guidance. For a start, governments should ensure that unions are sufficiently strong to enable collective bargaining for just wages, benefits, and working conditions. They should promote democracy in the workplace, through worker representation on governing boards and in the internal management of enterprises. They should also promote worker cooperatives and other forms of profit sharing. At the same time, governments should implement corporate-governance reforms to make sure that businesses are responsible not only to shareholders but also to all other stakeholders.
An overriding priority must be to solve the climate crisis and other environmental concerns. This is a global challenge. It will require the decarbonization of our energy system by the middle of this century at the latest. Otherwise we will have little hope of preventing global temperatures from rising to more than 1.5 degrees above pre-industrial levels. That would undermine the very basis of human flourishing.
Respecting the global commons is a crucial component of an ethical approach to globalization. Yet such an approach goes well beyond climate change. An ethical globalization would be based once again on the twin principles of solidarity and subsidiarity—solidarity because responsibility to care for the other has a global dimension, and subsidiarity because the appropriate level of decision-making is sometimes multilateral. An ethical globalization would have numerous dimensions. It would implement environmental protections. It would fight pandemics, partly by ensuring the equitable distribution of vaccines. It would curb tax havens (as the G-20 is finally trying to do). It would design mechanisms to relieve excess sovereign debt. It would finance sustainable development in poor countries. And it would regulate trade and capital flows in accordance with the common good.
One final point: I mentioned that a failure of neoliberalism lies in its focus on GDP growth as the only standard of well-being. GDP certainly has value as a measurement and should not be simply discarded. But it needs to do a better job of accounting for distributional factors. One way to do this is to calculate the income growth of the rich, the middle class, and the poor—and to use these calculations as indices of economic well-being and guidesaaa to policy. More imaginatively, this could be complemented with broader measures of well-being, including happiness studies that ask people to evaluate their life satisfaction. Such studies show that, along with per-capita GDP and health, people care about social support and trust in institutions. In the context of the United States, while per-person income has tripled since 1960, self-reported levels of happiness have been flat. Social problems have multiplied even as purchasing power for a wide range of consumer goods has increased. A narrow focus on GDP misses all this, whereas a focus on happiness and well-being would better account for all the various factors that go into integral human development.
This policy roadmap is heavily influenced by the values of Catholic social teaching. Yet these prescriptions can be embraced by Catholics and non-Catholics alike. All that is required is an appreciation of the fact that the current system is failing and that new values are needed. I would argue that circumstances call for a fuller engagement with both the principles of Catholic social teaching and the policies inspired by it, which have been rigorously developed over the past century. Ordering the global economy along these lines would counter the excesses of neoliberalism and redress some of the social and ecological damage it has caused. It might also help us save our democracy.
This essay is based on Anthony Annett’s new book, Cathonomics: How Catholic Tradition Can Create a More Just Economy (Georgetown University Press).