Prof. Philip Booth – The Role of the State in Economic Life

Prof. Philip Booth is Editorial and Programme Director at the Institute of Economic Affairs, and Professor of Insurance and Risk Management at Cass Business School
Seminar on Wednesday 10 October 2007                                        

GO TO DISCUSSION

My aim tonight is to talk around some of the themes of this book, Catholic Social Teaching and the Market Economy. I shall not comment much on the chapters about consumerism, entrepreneurship and business, but those are very rich chapters. That on entrepreneurship by Fr. Anthony Percy from Australia is particularly so: there has been nothing quite like it published in this country. I highly commend it.

The first thing those of us involved tried to do in the book was to determine how Catholic teaching can be interpreted to help us in the public policy arena. In common with most – although not all – of the authors, I was approaching this as an economist. I had determined to put this book together because I had seen theologians and philosophers drop various ‘clangers’ from the point of view of economics when trying to draw up policy conclusions about issues to do with political economy. I come at this from the perspective of a specialist economist – and it may well be that I have dropped the odd ‘clanger’ myself from the point of view of theology and philosophy! Well then, seeking to determine how Catholic teaching might help us in the public policy arena, we were very anxious not to go about – as some texts do – ‘cherry-picking’ Catholic teaching, or quoting parts of encyclicals and other documents that served our purpose while ignoring the rest. There are areas – especially in the fields of development economics and labour market policy – wherein the authors felt that statements in Catholic documents on the specifics and technical aspects of policy were too prescriptive. We feel that when applied as such in policy-making, they do much damage to the poorest and most vulnerable people in the world. We try in the book to take the argument in these areas forward in a constructive manner. Nevertheless, it must be said that there is quite a lot in Catholic teaching to support a broadly free-market position in economics, and much of this teaching is not widely known.

Secondly, as we know, many specifics of policy in the economic field are left to the prudential judgement of the laity, duly informed by the principles articulated in the corpus of Catholic social teaching. We have tried to inform debate on these issues. Perhaps I could illustrate just one aspect of the intention of the book by talking about the minimum wage, to which a whole chapter is devoted. Catholic teaching has always demanded that, in most circumstances (though there are some exceptions), a minimum family income should be guaranteed to provide a subsistence living. There are, in fact, many ways in which that general principle might actually be achieved: paying a family wage could be a moral obligation upon employers; it could be a legal obligation, existing in most European countries, to provide a minimum wage; or we could rely on the market to set wages and have the social security system make up the difference – as happened in the U.K. until 1999.

These distinct approaches to ensuring a family subsistence income can lead to profoundly different effects. A minimum wage, for example, can lead to labour being replaced by capital as well as to higher rates of unemployment and longer terms of unemployment. Applying moral pressure on employers, as happens for example in the fair trade movement and elsewhere, can lead to an anomalous situation where one employer decides to take on less labour and more capital to pay a higher wage and is regarded as more moral than another company that takes on the pool of (un)employed labour at a lower wage. If we have a social security system which tries to make up the difference between market wages and family income, we get other economic effects from that.

The precise policy instrument used to achieve a given policy objective is often a technical matter. The Church recognises this and asks the laity, rather than ordained ministers, to try to make better sense of these issues; and that is what we try to do. I will come back to further such issues later on.

If there is one overwhelming conclusion to which the authors of the book have come, it is this: Christian Churches, especially in the ‘Anglo-sphere’, have too much confidence in governments solving problems that cause all Christians concern. In regard to the Catholic Church, this remark applies far more to the local bishops’ conferences – about which, more later – than to documents emanating from the Vatican which, with a few exceptions – at which, also, I shall look later –, have been more principles-based than technical. Without question, this political-economic worldview has permeated general thinking among priests, leaders of ‘Justice and Peace’ groups, and the like.

Many left-leaning Christian commentators seem to have a problem with the application of the idea of self-interest in the market economy. If you do not believe me, listen to some of the bidding prayers given on the Radio 4 Daily Service. I am quite serious. You will come across examples like this: ‘Lord, we pray that human need and not self-interest will determine what companies produce’. Self-interest is actually a helpful assumption in economic analysis but it does not mean that people are selfish. The assumption is, however, frequently conflated with selfishness or greed.

One counter-example is sufficient to show how wrong it is to confuse the two ideas. I came here today by Tube. It was in my self-interest to do so. If I had not done so I would have been late or would have had a large hole in my wallet due to taxi fares. It was not, in any sense, selfish to come by Tube but it was in my self-interest. In fact, we act with a range of motives in a market economy. But market transactions, in general, are undertaken by mutual agreement, because they consist of voluntary contracts and must therefore, of course, be in the self-interest of both parties. Economists accept that a certain legal framework is essential to ensure voluntary transactions are not in the interest just of the two parties but rather of society as a whole and, in fact, the Catechism of the Catholic Church sums up the functions of that legal framework very well. I do not think most economists would disagree with this summary:

The activity of a market economy cannot be conducted in an institutional, juridical or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services. Hence the principal task of the state is to guarantee this security, so that those who work and produce can enjoy the fruits of their labours and thus feel encouraged to work efficiently and honestly.

What is remarkable, however, is that those who criticise the assumption of self-interest in the market economy have a tendency to suspend that assumption, or to assume away motives of greed and self-interest, when they propose that the market economy be replaced in some areas by the state or political authorities in determining allocation of resources. It must be remembered that in criticising the market economy, we must compare it with the alternatives. The alternative to voluntary institutions being responsible for resource-allocation is for the state to take over.

If, in fact, allowance is made for the existence of self-interest within the political system and among the bureaucrats and politicians, there should be considerably less confidence felt that problems identified with the market economy may be resolved through political action! We should not ignore the potential contribution of voluntary non-political institutions to the addressing of social problems. That is enormous, but I would regard such voluntary institutions more as parts of the market economy – perhaps better expressed as the broader free economy – than as kinds of political society. It is, moreover, worth remarking that many voluntary institutions in modern-day Britain, and also the United States, such as Catholic adoption agencies and schools – about which I shall speak later – have in effect been nationalised, with their functions much more closely controlled and directed by the state than I, for one, think desirable.

Let us suppose for a moment that socialists or other objectors to the market economy are correct and that we can assume away the principle of self-interest in political societies. Imagine voters no longer voting on the basis of what is in their own self-interest; politicians no longer acting on the basis of their self-interest; bureaucrats giving up empire-building and their aversity to risk; everyone, in fact, acting in the general public interest and the interest of society… It is possible! Even if politicians and bureaucrats listened to, and acted according to, the best-formed consciences possible, they would still not be omniscient. In other words, they cannot centralise within government the knowledge that resides in all the millions of actors throughout economic society. They cannot, therefore, recreate the richness that a market economy has in terms of providing goods, services and welfare to the general community. All these things are well understood by modern economists including those of public-choice schools, Austrian schools, and so on. They are based on fundamental perceptions of human nature that are broadly Christian. It seems at times that modern economists understand better than many Christian commentators on economic issues the importance of having some humility about the role of government, of knowing the limits to what can be achieved through political society, given man’s imperfectability.

That issue is rarely explicitly discussed in religious commentary on economic issues. It has been discussed obliquely in one or two papal encyclicals.

Even in relatively unsophisticated discourse about matters of political economy from a Catholic perspective we have, though, become used to using two words (with which we will all be familiar) that are often said to balance the extent to which we should have recourse to a market economy: individual freedom and family autonomy on the one hand, and action by government, interfering in the market economy, on the other. Those two words, of course, are subsidiarity and solidarity.

The discussion of these concepts, as you might expect, is quite prominent in a number of chapters in the book. You would probably expect of the authors the conclusion that Christian commentators on economic issues in the Anglo-sphere do not take full account of the importance of subsidiarity, and that is so. But a greater problem perhaps, one the authors identify as leading to bias in favour of action by government, is a serious misconception by Christian economic commentators about the nature of solidarity. If one reads Vatican statements on economic matters and on matters of economic-social concern, perhaps only 10% of the time is the word solidarity used to indicate the pursuit of particular ends by means of the political system, and still less by means of national governments. Government action is regarded as a last resort even in a society which fully embraces a concept of solidarity.

Solidarity should be understood first as a matter of how we relate to, and view, our neighbours: it is an attitude, one translated into good works, for example, through individuals’ actions as employers and as business managers. We then move along the chain to action through families, extended families, professional associations, community groups, schools, parishes, and so on. Finally, there is action through the political sphere. The latter has to be a last resort because it is fundamentally coercive, circumscribing the freedom and creativity of those trying to address social problems, and also because government agencies cannot be as close to the problems as those who bind together in a voluntary capacity to help others. Government intervention, furthermore, often distorts, detrimentally, the behaviour of those it tries to help.

A good example of subsidiarity being perverted is given by the recent debate about Catholic adoption agencies in the U.K. This was a debate, at least ostensibly, about whether the government should require Christian adoption agencies to facilitate adoption by homosexual couples. This debate was really a sideshow. The real point is that the role of government should be to assist Christian adoption agencies to exercise their proper functions. Instead, for the last thirty or forty years, Christian adoption agencies have provided services to government in a manner dictated by government although it has been only in the last few years that government has dictated demands in a way unacceptable to Christian adoption agencies. The agencies have become servants of the government – not the other way round. The recent pastoral letter of the Catholic Bishops of England and Wales about education made exactly the same error, but it was the Bishops, not government, who were responsible. This issue (though not the pastoral letter) is discussed in a full chapter of the book. The pastoral letter talked approvingly of the Church providing schools in collaboration with the ‘political authorities’. I think those were more or less the exact words. This was an error not just because it involved rushing to the highest possible level of government to provide education and thereby ignoring subsidiarity within the political system. There is now more or less complete central government control over schools and very little control left to lower levels of government. It also involved a complete misunderstanding of the idea of solidarity. The combination of solidarity and subsidiarity in this field should surely involve the state aiding those who cannot afford an education to obtain one, and providing the institutional framework within which various institutions, starting with the family, can provide children with education. What we have in fact is a rush to the state to solve any identified problem. There is a problem – not everybody can afford schooling – and the solution must be that the state be the monopoly provider of schooling for everybody. As Catholics we are then grateful if we can have our own monopoly of Catholic schools with a small amount of independence – not actually amounting to much – from the state. Such collaboration of the hierarchy with political authorities seems to me to leave very little room for parental initiative and responsibility.

If you look at Church documents on education, say Gravissimum educationis, they makes statements like: ‘there must be no kind of school monopoly’; and ‘public subsidies must be paid out in such a way that parents are truly free to choose schools for their children’. The Compendium of Catholic Social Doctrine states that it is an ‘injustice’ (which is quite a strong word) not to finance children at private schools to the same extent as they are financed at state schools. Economists of a free-market perspective may drool over these statements because it is through these mechanisms – by financing consumers or parents, and not by setting up state schools – that the will of parents and families can properly be expressed and that high-quality education will be provided efficiently. The Catholic view offers a different chain of reasoning but a similar conclusion. Proper application of the principle of subsidiarity, buttressed by the principle of solidarity, but relying first on voluntary communities and not on the state, is the only way that Catholic parents can properly put the needs of their children first and educate their children according to their consciences. This approach – funding people and not institutions –, practised in some European countries and in some U.S. states, was first formally proposed by Milton Friedman.

It can be seen that funding parents to choose their own education, rather than having politicians set up schools and run them in collaboration with the Church authorities, neatly combines the concepts of subsidiarity and solidarity. In solidarity, we are using taxpayers’ funds to finance the education of the poor, if not of everybody. In a spirit of subsidiarity, the state is helping the poor who cannot afford education to obtain it. The state would not be, as today in the U.K., displacing the functions of the family, but rather helping and supporting it to perform its proper functions.

It is rare that one sees, in policy statements by the bishops of England and Wales, the word solidarity used in the context of its full intended richness. Perhaps the most obvious example of this is in the bishops’ publication, Taxation for the Common Good, in which the level of provision of state services is never seriously questioned, but simply justified in the name of solidarity. But how can anybody possibly argue that if we are to view action by the state in the economic sphere as a last resort (and that is the precise phrase used in the Compendium of Catholic Social Doctrine) that the state should spend 47% of the national income (as the U.K. government will do next year)? I think that, as Christians, we are rather too sanguine about the extent of intervention by the state in economic life – particularly when we bear in mind that the state is no longer the benign, Christian and culturally conservative force that perhaps it once was.

So far I have talked about applications of concepts to policy areas. I want now to take a specific issue and show what I believe can go wrong when absolutist statements are made about specifics of policy by Church leaders. So far I have taken ideas and concepts articulated in particular by popes through encyclical letters and applied them to specific policy areas to draw out some issues we might discuss. I shall now consider how, even at Vatican level, some quite precise and absolutist statements have been made with the best of intentions about technical economic policies.

The whole of Christendom seems to make statements about the economics of development aid with more or less one voice. It appears sometimes that Church leaders rarely stop to ask whether development aid might actually hinder rather than assist those it is meant to help, after we allow for the flawed nature of man acting through the political system. I will repeat what I said before: political economists, going back to Adam Smith and probably before, have understood the implications of the flawed and imperfectible nature of man for economic policy better than Christian commentators on economic matters. Vatican documents, and documents by all hierarchies in the Anglo-sphere, and indeed of all Christian churches, have made very strong statements in favour of foreign aid to help deal with the problem of underdevelopment and the gap between the rich and poor in the world. They have also made strange statements about the nature of inequality and the process of globalisation. We have often heard, for example, about the apparently widening gap between rich and poor. A number of John Paul II’s letters on solidarity related to the international sphere speak of this. Yet in fact a widening gap between rich and poor exists only in a very narrow and particular sense – though an important sense – and we should not allow it to distort the whole economic debate. The history of the last forty years shows a dramatic shrinking of the number of very poor people in the world largely because of successful economic development and globalisation.

Some documents have actually talked about countries being left behind by the process of globalisation. Although, again, this is in a certain sense true, I am not sure it is the best way of describing the situation because it takes our focus away from what the real arguments and policy debates should be about. It is true that there are many countries not participating in globalisation and ‘left behind’ – these are often what we call ‘failed states’. But the fastest-growing economies are those of countries such as India, China, Botswana, Mauritius and Vietnam which are once-poor countries – still pretty poor in fact – that are beginning to participate in the process of globalisation, economic development and developing liberal market economies. The slowest-growing countries in the world, apart from states not participating in the process of globalisation at all, are those like Japan, Germany, France and the U.K. The idea that the poor are ‘left behind by globalisation’ really is a thesis that, for the most part, does not add up. There are already-developed countries that are progressing rather slowly; and there are countries which have not yet developed that are beginning to develop liberal market economies and participate in world trade. These latter often begin to catch up rather rapidly with countries that have developed earlier. There are also countries – the most difficult cases, becoming smaller in number – that do not participate at all in the process of globalisation. Because they do not develop, these are left behind by the rest. The greatest challenge in economic development is precisely dealing with what Paul Collier has described as the ‘bottom billion’.

One of the Vatican’s solutions to under-development is aid. I find it ironic that Populorum progressio articulated the case for aid not just in the sphere of ‘voluntary solidarity’ (the Christian community in rich countries helping on a voluntary basis people in poorer countries) but also through government-to-government transfers from rich governments to poor governments. The irony lies in that vision having been articulated and motivated by a papal visit to India in 1964. It should have been pretty obvious, even at that time, that what India needed was a liberal market economy rather than foreign aid. India is almost the classic case of underdevelopment on account of bad policy. The problem is that aid can entrench bad government and it is bad government, in general, that leads to dire poverty.

Statistics on the success of foreign aid are, I am afraid, pretty grim. Aid to Africa has had a strong negative correlation with economic growth there. It has had also a strong negative correlation with development of good governance.

$400bn in aid between 1970 and 2000 seems to have produced not a single example, in the many statistical studies of the subject, of an economic success story. There is a reason for this and it has to do with the Christian view of human nature that I have mentioned before. Economists seem to understand this better than Christian non-economists. The main cause of under-development is bad government. Government-to-government aid entrenches and finances bad government. Indeed, it actually rewards bad government. It can encourage civil war because the best way to get rich is to get hold of the government machine into which foreign governments are pouring large amounts of finance. The foreign assets of the African elites and former elites are, I believe, estimated to be about 150% of African governments’ foreign debt. It leads entrepreneurial people who wish to prosper not to develop businesses – looking outwards and downwards towards the people – but rather to look upwards towards government. Aid helps raise the status and reward of government service as opposed to private-sector economic activity. Aid makes governments accountable to donors, the people providing aid, and not to the people they are governing. But even that accountability does not seem to work. When the economy deteriorates, even if it is the fault of government, donors are naturally very loath to cut off aid if a country is actually becoming poorer. Aid also encourages something we call ‘rent seeking’ in the political economy – that is political activity designed to obtain financial reward from government policy.

There are many technical economic reasons why aid reduces growth into which I have no time to go here. These are to do with how it harms particular sectors of the economy through its effect on the real exchange rate and through its encouraging of capital-intensive and not labour-intensive industry.

There are at least two conditions necessary for aid actually to work. The first requires aid-recipients to be omniscient and know exactly how money can best be spent to obtain maximum economic benefit. The second demands that recipients be incorruptible angels. If such conditions held, the problem of poverty in the underdeveloped world would not in fact exist in the first place!

Catholic social teaching has a lot to offer here, and especially so at this particular time when poverty has become entrenched in a small number of generally land-locked, often resource-rich, countries, which are frequently engaged in recurrent civil wars. If there is a role for aid to play here it must be more subtle than the simple transfer of money from one government to another. There is a tendency, as Peter Bauer put it, for aid that follows that pattern to involve ‘taking money from poor people in rich countries and giving it to rich people in poor countries’.

In conclusion, the basis of a market economy is that it distributes economic resources peacefully, by mutual agreement. This is what voluntary contracting is all about. It might be interesting to go along to the local Justice and Peace group and make that statement to people who are from what you might call ‘left-leaning’ perspective – people who have perhaps too much trust in political authorities being able to attain their legitimate aims in fields of concern: poverty, homelessness, etc. It would be a challenge to get across the point that when we allocate resources through the political system we fundamentally subvert or undermine the only mechanism which actually involves distributing economic resources peacefully and by mutual agreement. When economic resources are allocated through the political system we all have to campaign through the political process to have economic resources allocated to pensioners, schools, housing, etc. Almost weekly there are huge demonstrations near where I live to prevent the local hospital from being closed. Now I have no idea whether it is a good thing for health services in the region for that hospital to be closed or not, but I would be stunned if there was a demonstration in any town for the local hospital to be closed in order to offer more resources to that in a neighbouring town. People are acting out of self-interest within the political system, and they seek to get what they can from a limited pool of economic resources in a way that creates conflict and disharmony. That is quite unlike the economic process of free exchange.

That is what happens when resources are allocated through the political system. Sometimes this campaigning becomes violent – witness contemporary France where farmers will set fire to public buildings to campaign for subsidies that risk causing extreme poverty in under-developed countries. Conflicts do arise in a market economy that is not properly circumscribed within the rule of law. The rule of law and the protection of property rights, as the Church has said, are absolutely vital to prevent powerful interests riding roughshod over established property rights of the less powerful. It is therefore vital that governments actually fulfil their proper function of underpinning the free economy within an appropriate framework of law. They should not, however, undertake economic functions that ought rightfully to remain with individuals, families and voluntary communities. The best of Catholic social teaching recognises this and is compatible with the best of political economy.

I should like to add that the market economy does have, and should have, deeper functions. We have a problem which John Paul II and Pope Benedict have both addressed, namely that of a consumerist society wherein we very often value the market economy for fulfilling an apparent want of conspicuous consumption which is not a real need.  Regrettably, for many people in this country market supply is limited to such articles of conspicuous consumption. Meanwhile, decisions on education and health (for 90% of the country), and on pensions and insurances (for about 50%) – items that in other circumstances might often make up the greater part of a household budget – are often made by a political system controlled only by quinquennial elections. Even decisions about housing (for about 30% of the population) are decided by the political system. As Acton said – I refer to the Protestant philosopher and not the Catholic historian – this makes the market economy look as if it is about ‘getting and spending’ when in fact it should be about meeting human needs in a system that is compatible with the real power and purpose of human creativity, human reason and the underlying nature of the human person. A market economy can only be a shallow institution without strong families and deep-rooted voluntary institutions in civil society.

If we give up our autonomy in the economic field to political institutions we become less human and less free. Of course, our economic decisions must always be subservient to the moral law and our spiritual needs. But delegating economic decisions to political society does not help us economically, morally or spiritually.

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Discussant: Russell Wilcox:

Thank you very much for that most interesting paper, the title of which was The Role of the State in Economic Life. I am going to sidestep much of that because I think you have stated admirably the argument against over-intervention by the industrial and post-industrial State. However, to have made the argument against State intervention as effectively as you have is not, I feel, quite the same thing as to have made the argument for the free market or the market economy. I should, therefore, like to tease out something that addresses the wider ambit of the book you have edited. I shall come at it from the viewpoint of a particular strand within Catholic social thinking that is critical of both the market economy and at the same time of the State-socialist or State-interventionist models. It is, in a sense, a ‘distributist’ case, but not necessarily so.

It is premised upon what I think a very important insight running through official statements of the Church. There is a fundamental distinction to be drawn between impersonal institutions, whether of the State or of the market, and smaller-scale personal or inter-personal institutions. From this standpoint it might be argued that the State institutions you have criticised are simply less efficient in constructing or running an impersonal system than the market.

I should like to request definitions for some of the terms you have used. Then I shall put to you a number of quotations for comment. Finally I shall try to explore some criticisms you have made of Church teaching in the area of aid with a view to eliciting whether or not, from your point of view, something can be redeemed.

First of all, how do you define a free market? Would you wish to draw a distinction between a free market, a market economy and a market society? If so, how would you go about this?

Prof. Philip Booth: There exist institutions that are not just distributist but written about also by, I think, Pope Pius XI and others, concerning which some commentators of a free market perspective would be suspicious. I would myself be content with them if they arose out of voluntary contract and the spontaneous wishes of people acting with free will. There are, then, some aspects of what distributists believe with which I am quite comfortable.

I would argue that a free market is really a market constrained by certain general principles of law that are quite well expressed in the Catechism of the Catholic Church: enforcement of contracts; proper definition and enforcement of property rights. These are principles of law providing a general framework within which economic activity takes place and not directing that economic activity; and so on. It should be regarded as something rather richer than simply providing goods and services. I would expand it to include all the voluntary institutions of society which sometimes cannot be separated from the market economy. If they are not controlled by the State they are simply best included in the rich tapestry of a free society. Is a charitable school not to be regarded as part of the free market when a profit-making school is so classified?  Both institutions can exist within a free society.

I have used the phrases ‘free market’ and ‘free society’ more or less interchangeably. I suppose a market is more to do with whether we are exchanging goods and services for payment. A free society is the wider society within which that market operates.

I do not, however, think we should get too hung up on definitions. There is an interesting passage in John Paul II’s Centesimus annus where he asks:

Returning now to the initial question: can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress?

The answer is obviously complex.

It goes on,

If by ‘capitalism’ is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative,

and I thought that was fine. The text then proceeds,

But if by ‘capitalism’ is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.

I do not recognise what is placed out of court here as capitalism. It seems to me a utilitarian consumerist ethic quite separate from the framework. The Pope actually writes of the acceptable form that it would perhaps be more appropriate to speak of a ‘business economy’, ‘market economy’ or simply ‘free economy’.

The Church seems not to like the word ‘capitalism’ and I think this goes back to disagreements with ‘Manchester Liberals’ in the nineteenth century.

Russell Wilcox: So, a ‘market society’?

Prof. Philip Booth:  We can, as I have suggested already, get hung up on these definitions. The Pope does not like the term ‘capitalism’, nor, really, do I like using it myself.

Russell Wilcox: So there are some economic side-constraints on a free market? There must be some things not subjected to the market, for example some specifically sacred things.

Prof. Philip Booth: Yes, the economic sphere is a limited part of life.

Russell Wilcox: Some would say that the difficulty with the market economy is that it tends to have a colonising effect and to ‘commodify’ things which should not be so treated. Would you agree with that? To what extent do you think such a concern informs suspicions of the market?

Prof. Philip Booth: That certainly does inform suspicion of the market. Young people today seem often to be looking for what provides greatest immediate satisfaction, rather than for the truth.

Russell Wilcox: Can such a process of ‘commodification’ be halted?

Prof. Philip Booth: I do not think you can stop it by seeking to prevent the market operating in areas where it should not be. It can be halted only by proper formation of people’s consciences which will enable them to recognise the differences between areas legitimately within the economic sphere, others overlapping it like education, and those completely outside the economic sphere like pure research, seeking the truth, religion, etc. If you do not have a free economy in a free society then those things must be constrained. They can be constrained by conscience or by voluntary institutions, of which I am very much in favour, or by political society. In the latter case those things are politicised which is just as bad as commodifying them, I think!

Russell WilcoxAllow me to resort to the term ‘logical state apparatus’ of the old Marxist, Althusser, and apply it to the market. There has to be a certain ideology embedded in market institutions. To some extent, that must be acceptable. Beyond a certain point, however, and that is what we are addressing here, we find the process of ‘colonisation’ in place. Now, if one lives in an increasingly commodified society – in a sense, the result of past deficiencies in people’s consciences and sense of value – it becomes increasingly difficult to resist and to escape being formed in the wrong way..

Christopher Lash, a ‘social conservative’ who could also be considered a ‘man of the left’, has developed some very sophisticated explanations for this: the creation of a culture of narcissism and the disintegration of the family. Beyond a certain point it becomes very difficult for an individual to stand out because the ecology of associations and of the family has been damaged. Resistance is difficult.

Prof.  Philip Booth:  I do not deny that at all. The question is whether that arises essentially because conscience and absolute values and the concept of absolute truth have been eroded, or rather because of the development and growing ‘tentacles’ of the market economy which makes conspicuous consumption a lot easier? You might think of consumption as being a sort of mild drug, if you like.

Russell Wilcox: So you would say it is a case of the former and not of the latter?

Prof. Philip Booth: Yes. I think it is necessary to address the former problem. Consider: even if one tries to address the latter one must ask oneself what institutions can be used to address it? If they are sophisticated and prominent, socially conservative, free institutions of civil society then I have no problem. That is admirable. If, however, they are to be political institutions, the dangers are, I would suggest, greater than the potential benefits.

Ask yourself what institution has probably done more to undermine the family and family life in Britain today than any other? I should have thought many of those who examined our tax and benefit system and other aspects of the welfare system would conclude that it is the State itself. Not everyone might go straight to that conclusion and hold to it strongly but it is certainly an arguable position. The State is no longer a culturally benign and socially conservative force. If it ever was likely to be effective in this field, I do not think it is going to be so now.

Russell WilcoxThat leads me to a second area of clarification by way of definition.

Before moving on to that, however, I should just like to put forward, linking in with the previous discussion, a position taken up by people like Karl Polanyi, in describing the development of the market economy, and Amintore Fanfani who did not endorse State socialist materialism. They – and particularly Fanfani who, in his book Catholicism, Protestantism and Capitalism, argues it at a very sustained and intense level – would say that what distinguishes or marks the transition from the medieval to the modern is that in the former markets, while exhibiting considerable vibrancy, were contained within a non-State institutional apparatus. Consider guild associations, and so on. This ensured that they did not commodify what should not be commodified.

With industrialisation there was a change from a society in which markets operated to a society in which markets coordinated. In a sense, in this view, markets moved from the periphery, from a subordinate situation, to being embedded at the very heart of society, seeking to coordinate everything

Prof. Philip Booth: We could become rather bogged down in all of this. I shall put forward just two potential counter-points.

Firstly, the guild system, and all that went with it, was actually very exclusive in that it prevented those who wished to pursue certain types of profession from doing so. That is a cost arising out of such a socially hierarchical system.

Secondly, and in many cases very interestingly, these markets operated in what was essentially a system, if not quite of private law, certainly at least of competing municipal centres of law. I am not a historian but I think that broadly speaking the Hanseatic League, and other such bodies, operated on such a basis. It was a private co-ordination between different centres of more or less private law which arose spontaneously and with rather little direction from the State. It is, nonetheless, almost certainly true to say that the state and commercial law became very blurred and that eventually State law predominated.

Russell Wilcox: What about feast-days in the course of the year which prevented markets operating? There were also religious side-constraints.

Prof. Philip Booth: Yes, those issues were ambiguous but intrinsic.

Russell Wilcox: Might I ask you to elaborate on the distinction you drew between self-interest and selfishness? Why is one acceptable and the other not?

Prof. Philip Booth: Selfishness involves in effect the exclusion of others. It is clearly not a condition of which anybody should be proud. A moderate and restrained pursuit of self-interest with a view to bettering oneself and one’s condition, however, if not at the expense of others, is a reasonable part of human nature and necessary for the improvement of the human condition generally.

Russell WilcoxIn response, I have two sub-questions seeking clarification.

Firstly, you say selfishness is seeking one’s own interest to the exclusion of that of others. If it does not necessarily exclude using other people, surely one might then use other people for one’s own ends? Slavery is a prime example of extreme selfishness – using other people for one’s own ends.

Secondly, a Catholic viewpoint – correct me if I am wrong – sees the self as rightly fulfilled only insofar as it sacrifices itself for others, and in that very process. In other words there is potentially no conflict between self-fulfilment and the service of others, but rather perfect harmony. In that sense I understand your arguing for self-interest being in harmony with Catholic principles. But do you really think that is what the market means, or what the free market involves?

Prof. Philip Booth: It is certainly what Adam Smith meant. I am neither philosopher nor theologian but the problem with the classical economists is that they were fairly imprecise in their use of words (a problem, of course, with the English language generally). Smith wrote two big books: The Theory of Moral Sentiments and The Wealth of Nations. In the one he wrote of the natural sympathy and empathy that we have for one another in some situations; in the other about how self-interest drives a market economy and creates economic betterment. He saw no inconsistency.

Russell Wilcox: Can we bring in a classic quotation from Smith which I recognise a lot of people who are in favour of the free market regard as often misunderstood by those people who are against it. Could you, please, tell us what you make of it?

It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.

How can that be harmonised with a Christian ethic?

Prof. Philip Booth: I simply do not view it as out of sympathy with a Christian ethic. I do not want to be dependent on somebody else’s self-sacrifice. Surely it is reasonable to want this independence in the economic sphere rather than to be going about begging and dependent upon others. We can develop a system of voluntary contracting and free exchange.

Russell Wilcox: But it actually says, ‘not from their humanity’. Surely you can have a responsibility to work as hard as you like in your chosen sphere for the service of others rather than out of self-love? Surely Smith is saying here – making quite a profound psychological point – that the market just will not work that way? There are those who assert explicitly that private vice can redound to public virtue. Given the basic principle of Catholic teaching that one cannot do an evil so that good may come of it, is there not a problem here?

Prof. Philip Booth: No; because I do not think pursuing self-interest in the market is an evil. It was not evil for me to come here today by tube. I do not think it was evil for me to go to the butcher’s to buy some sausages. Neither is it evil for him to provide me with sausages. Although the greatest expression of goodness may be to give your life wholly to others, we are destined to live in this imperfect world where some people will be selfish. The market is an effective way of ensuring that selfishness is put to at least some good. Now that is not the same as somebody saying, ‘Ah, I will be selfish here so that some good will come of it’, but, if someone is going to behave selfishly, I should rather it was in running a butcher’s shop than in being Secretary of the KGB!

Russell Wilcox: So it is, in a sense, a way of containing vice?

Prof. Philip Booth: Yes, of course.

Russell Wilcox: That is very illuminating. I should like now to present you with another quotation, this time making the argument from prudence or practicality. The market economy, from your point of view, does not necessarily endorse vice (even though some of its proponents may argue that it does and they are wrong to say that) but practically speaking it is a way of containing and channelling vice, or of challenging the results of vice…

Prof. Philip Booth: Yes, but not of vice only, but also of the absence of omniscience. There is no all-knowing person on earth or in government who can allocate economic resources in an efficient way. It is a good way of dealing with that problem as well as dealing with flawed human nature.

Russell WilcoxThe quotation to which I referred is from a more-or-less left-wing Catholic philosopher, the late Jacques Maritain:

[B]ourgeois liberalism with its ambition to ground everything in the unchecked initiative of the individual, conceived as little God, and the absolute liberty of property, business and pleasure, inevitably ends in statism. The rule of the Number [economic community, national or racial state] produces the omnipotence of the State. The indispensable condition for building a city out of liberties, beholden only to themselves, is that each member surrender his personal will to the General Will in a contract. which according to Rousseau gives birth to society. But since man in his material individuality is a part, not a whole, and since, further, in this system, the State takes the place of the genuine community, the individual is forced ultimately to transfer both his responsibilities and the care of his destiny to the artificial whole which has been superimposed upon him and to which he is bound mechanically. Of course his liberty will remain complete and unhampered, but in an illusory fashion and in a world of dreams. At the same time, he will exact from the State the satisfaction of his greeds and anarchistically reject the conditions of social life; not realising that in this way society is driven to the insurrection of the parts against the whole, of which Auguste Comte used to speak, to the tragic isolation of each one in his own selfishness or helplessness. The very notion of the common good and the common work disappears. [from The Person and the Common Good]

Prof. Philip Booth: I should need rather more time to absorb that but it seems to me, first of all, to be a parody buttressed with assertions. The quotation was doubtless either preceded by or followed by empirical evidence which made his case better…

Chairman: Dr. Andrew Hegarty: I think we should perhaps bring others into the discussion at this point…


General discussion

Sir Harold Walker: I was interested in your powerful arguments against the aid process (government-to-government, or aid of the type coming from financial institutions). You would, I presume, hold that good Christians in rich countries should want to help people in poor countries. What is your preferred aid-process? Should we say to the people of these countries, ‘Tough luck till you get a better government!’, or are we to take it that aid via NGOs, and certain kinds of governmental aid, may be useful?

Prof. Philip Booth: Well, in the book and also in other lectures, presentations and articles, I have posed a few questions. I am just beginning to formulate answers. The questions do need posing because there is a serious danger, as I have suggested, that aid may do more harm than good (by which I mean development aid and not famine relief or that sort of thing). There is absolutely no doubt at all that Christian people should aid others, whether they be Christian or not, and I think that probably best achieved through organisations and projects that are transparent. There are, nonetheless, dangers in any type of welfare operation, charitable or otherwise.

Indiscriminate government-to-government aid should certainly now be abandoned. That leads to two difficult questions about which I readily admit that I have not fully made up my mind.

One of these is whether or not governments should offer aid through NGOs, or what used to be called charities. Aid given through those organisations is almost certainly better than government-to-government aid in the same situations. What really concerns me, however, is the way in which this can come to distort the priorities and organisation of these organisations, because instead of looking downwards to the people for their resources they tend look upwards to government. Instead of looking downwards to the people they have a strong incentive to campaign on political issues about which their donors are not necessarily united in order to increase the government aid they are receiving.

The other issue – one upon which Paul Collier at the University of Oxford has developed some interesting thoughts – is how government aid from rich countries can best be used to solve some of underlying problems, such as: the disincentives of there being high levels of natural resources in otherwise poor countries; the problems of civil war and general disorder; those of land-locked countries surrounded by very badly governed countries. Collier argues that the poorest in the world now live in such countries in Africa. He has some quite specific ideas on conflict-resolution and other matters which are interesting and deserving of commentary from the Church in their own right but which also lead into other fields such as that of ‘just war theory’. We may call United Nations troops ‘peacekeepers’, but if they are really going to be doing the job in hand they must, sometimes at least, engage in fighting themselves.

Russell Wilcox: Do you see that in itself as potentially a form of aid?

Prof. Philip Booth: If we view aid as tied to a process of conflict-resolution we move seamlessly on from a debate about aid to one about the appropriate use of force in circumstances where the nation supplying it is not itself directly threatened. These are interesting and important issues because conflict and civil war dominate the world’s poorest countries.

Russell Wilcox: So the Vatican documents may not have been wrong to say it all depends on what type of aid is being considered?

Prof. Philip Booth: Well, yes; you might say that.

 

Zubin Mistry: To what extent does being a proponent of free-market thought go hand-in-hand with a more comprehensive liberalism, by which I mean something along the lines of libertarianism? In America the market for ‘adult’ movies now dwarfs the market for Hollywood films. After your eloquent dissection of state action might you find yourself awkwardly placed to discuss with non-Catholic proponents of the free market an issue like that of pornography?

Prof. Philip Booth: These are very difficult issues and it is of course important for an economic liberal to orientate himself correctly, in other words to consider how economic liberalism fits into his view of wider truths –  just as it is important for left-leaning Christians not to use religious vehicles for political purposes. The Institute of Economic Affairs is just about to publish a book on prohibitions. It includes prohibitions on prostitution, pornography and, probably, boxing. The IEA attempts to produce intelligent analysis of the economic aspects of these subjects, trying not to get involved with the wider moral dimension.

A good example might be that of drugs. Long before my time, the IEA produced a very good analysis of the economic impact of drug criminalisation. A quite scholarly book came to the conclusion that if drugs were decriminalised in the U.K. there would be serious economic benefits, significant reductions in crime, and so on. It has to be asked: What is the role of the State here? Even strongly conservative Catholics will not argue that everything that is immoral should be outlawed. We do believe that abortion should be outlawed because it is the role of the State to protect life. We do not necessarily believe that contraception should be outlawed. I would say that pornography and prostitution may be similar. If prostitution is outlawed, will it make any difference? I take it that practical considerations are important in weighing these things up, but that takes me outside of the economic sphere which is my own.

Libertarians come in all sorts of shapes and sizes. I think most liberals would look to a liberal philosophy that is rather looser than Marxism which claims, ‘Here is the analysis and these are the answers’.

 

Emilia Klepacka: I am afraid I wish to carry on in this vein a little bit. I have just moved back here after three years in Brussels and a lot of the debates in which I have recently been engaged are concerned with the principle of non-commercialisation of the human body. There is a principle in the human tissues directive against the selling of human tissues and organs, but now it is being systematically undermined.

You suggested that there are some areas where you think there should be some constraints on the market economy but you were against politicising these. How do you distinguish the rule of law and the role of law where there are very good legal principles or ethical principles reflected in international legislation or European legislation? Surely these things must be upheld and they do impact directly on the market? You seem to be quite sceptical about the political sphere.

Prof. Philip Booth: The answer is not very different from that which I gave to the first question although that may not have been well expressed. I really do not know. It falls outside my knowledge. I think there is a chapter in that forthcoming book on prohibitions of organ sales while one of the early IEA monographs was called The Price of Blood and it concerned the sale rather than voluntary donation of blood. My predecessor Arthur Seldon nearly died in a hospital in the Isle of Wight as a result of having a rare blood-type not ‘served’ by the voluntary blood transfusion service. In the end somebody managed to find a bus-driver in London who donated the blood which effectively saved his life.

I would have thought that something like the sale of body parts – I stand ready to be corrected if there are overriding moral reasons to assume otherwise – is a field where it is ambiguous whether the law should intervene. I am not ambiguous about things like abortion and human embryo experimentation because the law is there to protect human life and to protect the weak. Whether the law should actually intervene to protect me from selling my own kidney involves a weighing up of various elements.

Zubin Mistry: I have just recently been flicking through a book by Lewis Hyde called The Gift and there is a discussion of organ donation (written, I think, in the Eighties). One interesting point he makes is that this is about commodification: the commodifying of certain sacred things which should not be so treated. A very interesting point he makes is that in most cases organ donations are made by a family member or friend and it is psychologically considered a kind of noble and reasonable gift-exchange.

It is very rare for it to be considered market-exchange but I think this raises questions: are there not certain markets which even someone holding your standpoint would rather did not exist?; secondly, would you not, in certain contexts, be willing to go down the road of politicisation?

Prof. Philip Booth: I think I have already said that there are some markets which I would be happy to see not existing or which I should prefer not to exist.

Zubin Mistry: What are the principles of negotiating as a Catholic proponent of the free market? What are the principles by which you are at least loosely to deliberate over which markets are immoral (even if not everything can be legislated against)? What are the principles which guide your thinking here?

Prof. Philip Booth: Russell speaks of prudence. I do not know and it is not my field. All I can do is to point out the economic, and sometimes the social, cost of prohibiting a market in a particular field even if you regard all transactions in that market as immoral. If Arthur Seldon had had a supply of blood which would have stopped him from dying because the N.H.S. had paid people to give blood, would that have been immoral and should the transaction be outlawed? I do not know. It is not my field.

Emilia Klepacka: Surely social costs cannot be readily analysed given globalisation and global markets. The economist in Britain may not take into account the full social cost of reproductive technologies, which may involve for example, making payments to women who agree to have their egg cells harvested. The social costs associated with organ and cell trade are likely to arise abroad in countries such as Romania or the Ukraine where there is now a huge market for foetal organs and foetal stem cells. This is encouraging women to abort or to give up new-born babies for organs which can produce up to $12,000. Should that, given globalisation, not force us to reconsider our approach in the sense that this question of conscience cannot just be left to the private sphere? We must try to reconcile conscientious objection and the principles of conscience with political discourse.

Russell Wilcox: May I say something in Prof. Booth’s defence here? He would seem not to disagree with that. The question is about how to make the judgement about what is to be taken out the market. There clearly is a difference between saying that one would rather a certain kind of market – e.g., for prostitution – did not exist, and asserting that it ought to be criminalised. As I understand Catholic principles, the State is essentially a practical tool of government. Now, if, after taking everything into account, it could be shown – and this is the important point – that fewer people might be murdered with no prohibition on murder, there might be an argument for suggesting that it should not be against the law. The level of practical judgement required is in fact so elevated that the State will always keep murder illegal. In a sense, especially in these other areas where the context has changed with globalisation, etc., it is a case of making global judgements. You may need to hold to heuristic principles presupposing that certain things should be banned by the State unless proved otherwise

Prof. Philip Booth: That is fair enough. That line of argument does, however, confuse various strands of the issue. For example, I would not argue that abortion and embryo experimentation be legal in Romania. If a particular trade arises only because of an activity which should be illegal in any humane State, it is not unreasonable to ban that activity. In regard of social costs being transferred, that requires economic judgement. That is not a judgement of conscience, but a judgement about costs and benefits. Let me give you another example of the application of prudence.

It seems on the face of it that the U.K. government’s banning of the possession of pistols in 1997 (or whenever it was) has been a catastrophe in the sense that we have experienced a dramatic increase in gun ownership. If you want a gun now, whether for leisure purposes or otherwise, you can effectively obtain it only from a criminal unless you go through certain very strict procedures for licensing. It certainly has not reduced gun ownership while it has raised the value of a commodity in abundant supply among criminals. What we have here is the creation of a market and an income stream for those we would rather did not have either.

I might be wrong, and I have said ‘on the face of it’. It is always very difficult to run counterfactuals in treating of what is itself illegal because there are no official data. However, it appears that here a determination to ban guns, other than under very strict conditions, for the best of reasons has done great harm. I certainly do not deny your problem but what do we do about these grey areas?

Emilia Klepacka: I am not sure if I explained myself adequately. I was trying to make the point that a more refined, or higher, level of conscientious and rigorous analysis of the impact of our decisions is needed given the context in which we now live and the context of the market. Decisions we take over what seem to be purely market questions on the domestic terrain may have social costs elsewhere.

Prof. Philip Booth: I would not disagree with that, but even an immoral activity might have apparent social benefits. Somebody might be able to send his child to school in India simply because I buy his kidney.

 

Stephen Barrie: The worry I have is that it seems like free market economics somewhat lacks inherent, structural moral constraints or values.  That is the appeal I find in distributism – it includes, structurally, some of the prudential judgements we need to make and should be making; it builds some content, other than pure selfishness, into what we take as being in our self-interest when it suggests our self-interest is multifaceted, including community relations, etc.; it builds some values, some Catholic-friendly values, into an economic system. After all, economics should not be just about money!

Dr. Andrew Hegarty: Surely not all distributists have been Catholics?

Stephen Barrie: That is, of course, true.

Prof. Philip Booth: The market economy is very much more constrained in certain fields than it was 60 or 70 years ago. In other fields such as foreign exchange it is rather more liberalised than 20 or 30 years ago. I think I am right in believing that distributists favour rather low levels of taxation. In terms of taxation, in what we are allowed to spend ourselves in pensions, insurances, health, education, housing and so on, we have never been more socialised. It is easy to say we have a free market in many areas and a consumerist society today, and to argue that this is responsible for the breakdown of morality, the development of obesity, the increase of promiscuity and all the rest of it. You might argue that centralisation of power in political society leads to the same results.

I am no expert on distributism but two things do strike me about it. The first is what would happen if distributism existed in a moral vacuum like that of today. You might argue that that it could not happen… Consider also what might happen if you had a relatively liberal economy with strong moral constraints? I think (being a socially conservative person myself) that it would certainly be a far better place. It would, moreover, improve the material human condition significantly more than distributism could ever do, for distributism significantly reduces not only our ability for beneficial market exchange – thereby making us poorer materially – but it also makes us poorer in other ways by limiting the range of relationships we can have. One could imagine certain forms of discrimination in a distributist society. I would far rather live in a free market society.

Russell Wilcox: Do you think no one discriminates against Catholics or traditional believers in this society of ours?

Prof. Philip Booth: I am not saying that. It is, however, far easier to escape from such problems in a market society then it is in a distributist one. A distributist society is rather limiting both economically and socially.

Stephen Barrie: Why should it be easier to escape from discrimination in a free market society? Is it because everything comes down essentially to money and economic relations?

Russell Wilcox: And is it really easier to escape discrimination there? If something is programmed into a market society then where else have you got to go? In a small scale autonomous community you might always move to another such.

Prof. Philip Booth: I respond that it is partially because the impersonal nature of a market economy brings with it certain benefits. I have absolutely no idea whether the person who made this jacket of mine is Jewish, black, English or whatever. That must surely be something for which some Jewish communities are very thankful.

 

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