Virtue and Economic Life

By Morning's Minion | June 18, 2014

A claim often made by libertarians is that for markets to work, they need less interference from the outside and more virtue on the inside. This is certainly the view of the Acton Institute. A variant of this position can also be found in Cardinal Dolan’s recent op-ed in the Wall Street Journal.

At a basic level, this is surely right. But going beyond the basic level, we can see immediately that this tenet rests on flimsy foundations. Why? Because it’s not just about personal honesty—it’s also about purpose, about telos. Virtue without telos is hollow virtue.

We need to ask a basic question: what is the true purpose of business? Thankfully, Catholic social teaching has a lot to say about this. Understood properly, business is a noble vocation, but only if it serves the common good and supports human flourishing—in the words of the Vatican’s Vocation of the Business Leader, by producing goods that are truly good and services that truly serve.

Ultimately, the virtues needed to run a business cannot be divorced from the social purpose of business. It goes far beyond personal traits like honesty.

One of the most pernicious business strategies to gain favor over the past few decades is the idea that the sole goal of business is to maximize shareholder returns—in doing so, discounting other stakeholders like workers, suppliers, consumers, the natural environment, and society at large. This was a major theme of Pope Benedict XVI’s post-crisis encyclical, Caritas in Veritate.

So if a private equity firm is maximizing short-term profit by loading up companies with debt and firing workers, then something is wrong. If a vulture fund is buying up cheap debt from some of the most impoverished countries in the world and simultaneously seeking legal ways to make the country repay the full face value of the debt, then something is wrong. If a retailer like Wal-Mart refuses to pay its workers a living wage at a time it is earning record profits, then something is wrong. If a large corporation chooses a location to dodge taxes or skirt basic worker protections, then something is wrong.

And just as it rejects profit as the sole aim of business, Catholic social teaching also rejects self-interest as the sole motivating principle of the market economy. Instead, in the words of Pope Benedict XVI, “human relationships of friendship, solidarity, and reciprocity can also be conducted within economic activity, and not only outside it or after it”.

This really exposes the incompatibility between Catholicism and libertarianism at a deep anthropological level. For libertarians, self-interest is a virtue, as it leads to more effective and efficient outcomes. But for Catholics, service is always the starting point. A humane economy that supports human flourishing is an economy of communion, linked by the iron-clad bonds of reciprocity; not an economy of autonomy, linked only by the ephemeral grip of the invisible hand. That’s what true virtue in economic life is all about.

Editor’s note: This article is part of a series on “virtuous capitalism” designed to explore the topic in 500 words or less. The entire series may be found here.

Bill Maniotis

The problem with your viewpoint is that it takes partial truths and makes them the whole truth. I agree with many of the things you say here, but it is what you do not say that is telling. Things are often more complicated than the simplified examples you give in your “something is wrong” paragraph. There are plenty of private equity firms that attempt to maximize short-term profits just to survive as companies. You also assume that their share-holders are not “workers” who, as wise middle class investors have themselves invested in the stock market through purchase of stocks and/or as part of their retirement plans. You can’t always separate out or isolate things the way you do here. You fail to mention that Wal-Mart also provides low-priced goods that could not otherwise be obtained by millions of consumers. That may not forgive the sin of paying poor wages, but it can’t be simply dismissed-or not mentioned. Finally, you make no mention of the “virtue” involved with maximizing your individual worth to companies by working hard and being a productive, responsible worker. If you don’t think that laziness, poor moral choices and a poor work ethic contributes to poverty then you are being just as dishonest as some of the companies you rightly disparage for their immoral practices.
John Médaille

Slave labor provides low-cost goods. Does that make them virtuous?
Bill Maniotis

Of course not. But I am suggesting that it may not be so easy to separate out everything so neatly. Wal-Mart may be underpaying their workers, but I wouldn’t agree that we have “slave labor” at play. How much “blame” should individuals who are unskilled because of poor choices in their lives be apportioned?
John Médaille

Yes, I knew it was the slave’s fault. If only he had made better choices.

The system bears no responsibility-ever. The oligarchs are never at fault.
Bill Maniotis

John-you are being obtuse. What I asked was what PORTION of the blame should go to SOME of the unskilled workers that have made poor choices. You are trying to creating a false dichotomy here. The “system” can bear a part of the responsibility-sometimes a much greater part. That doesn’t mean individuals escape responsibility. Are you saying individuals never bear any responsibility? How much? How little?
John Médaille

Ah, yes. When apportioning blame, let’s concentrate on the weakest. How, in my obtuseness could I have missed the “laziness, poor moral choices and a poor work ethic” of the poor on one hand, while ignoring the virtue of low prices, especially low prices for labor.

The problem is that we all make poor choices, but the consequences are not equal. The scion of a rich family that does cocaine will not any consequences; the poor boy who does a joint finds himself facing years in prison, perhaps in a for-profit prison. Those powerful enough to collapse an economy and cause suffering for literally billions of people are made whole, and even profit from the debacle; the rest get lectures on their work habits.
lws2012

The article is interesting and stimulating. I appreciate that 500 words limits context and nuance. However,trying to discuss spiritual restraint and virtue in the economic life is like talking about chastity in a brothel.

The central actor in capitalism is not the individual, it is the firm. The employee is paid and employed to be loyal to the firm and its objectives. Yes, an individual may (must) follow their conscience. However, the choice between living virtuously and hungrily or less virtuously and better fed is nearly always made for the latter.

What goes wrong is that the firms become corrupted in their goal (firms are amoral by design and intent) so that instead of serving the community or obeying the law, the firm uses the law to serve its purposes (see for example the work on tax evasion and tax avoidance (this perhaps more than anything shows the death of the common good)). What happens though is that senior managers then use the firm to serve their purposes. The process becomes inverted. Instead of man serving the firm so that the firm can serve the community. The community is there to serve the firm,(the community is its feeding ground), and the firm in turn serves the senior officers.

How to change this? The first step is what you have described. We must recognize the problem. Second, we need to educate our children to understand the common good, our common humanity, to see that the larger house, the extra car, are not life’s telos. In that sense, capitalism shows its spiritual emptiness. However, this requires us to get out of the brothel and find work that rewards spiritual restraint and virtue.

Will these changes work? No. We are too far gone to find a way back to a common good without a severe crisis on par with a global natural disaster (no I do not mean climate change) but on something on par with Canticle for Leibowitz scale. George Grant made a similar argument in his work. The fundamental, potentially insurmountable barrier, is that modern natural science has unleash man’s ingenuity so that any problem appears to be solvable which obviates the need for any spiritual reform or restraint. Why have chastity when you have condoms, birth control, abortions, and anti-biotics? Technology becomes our morality. Why have temperance when any consumer good is within reach and food scarcity is simply a problem awaiting its technological solution. Now we have 3D printers how soon before we have machines that can build whatever we imagine?

We may moderate the extremes so that we do not turn to the problem of what it means to be human, but how long can we resist technology’s lure?
Bill Maniotis

The assumptions you are making here are rather outlandish, John. All I asked you to do was to factor in individual moral choices into your thinking. The “scion of a rich family” may escape jail time (I can show you plenty of instances where that is not true, by way), but that doesn’t mean he escapes leaving a wake of destruction that he is directly responsible for, and that he will certainly have to answer for, if not in this life than the next. The “poor boy who does a joint” is not automatically a sympathetic figure, relatively speaking. If you want to argue that the “system” treats the two unequally, fine. That still doesn’t absolve the individual who makes poor choices.
John Médaille

“The “poor boy who does a joint” is not automatically a sympathetic figure, ” and this is important…how? He is certainly the victim of injustice, or at best unequal justice, which is unjust. I am sure you are correct that the unjust will suffer in the next world; but our concern is with this world.

If you apportion blame proportionately (which is that “to apportion” means) I suspect you will have very little time to worry about the bad habits of the poor, given that the bad habits of the rich do so much more damage. The poor man’s poor habits may hurt himself, his family, his neighbors; but the rich man’s poor habits can destroy whole nations, whole civilizations. Is it really “outlandish” to point that out?
Matthew Shadle

I am not sure why the point that many stockholders are also “workers’ negates the fact that the interests of stockholders need to be balanced by the interests of other stakeholders, which is the author’s point. Also, the reality is that 90% of stocks and mutual funds are owned by the top 10% in terms of wealth, so…
Bill Maniotis

No-I just wish that you had pointed it out in that way earlier. A rich man’s poor habits can do great damage to a nation. A rich man’s good habits can do great good, too. And as for our concerns, they are with both worlds simultaneously. Are we not in this world but not of it? When we fail to hold ourselves individually accountable for our poor choices-and when the “systems” we promote fail to adequately do so, like most “socialist” systems historically have-we do a great deal of harm as well. Let’s not forget that every system is run by an individual or group that is just as apt to be as corrupt and inept as the “rich oligarchs” you are blaming for messing up this system of ours…
Bill Maniotis

I never argued that it “negated” any such fact. What I suggested was that the article can’t separate things out so neatly, which it can’t.
Gary Houchens

Two comments here:
1. I am becoming a bit dismayed with the writers here at Ethika Politika who insist on grossly oversimplifying the libertarian philosophy. Not everyone who describes himself or herself as a libertarian is also an Ayn Rand objectivist. I enjoy this website because it often offers nuanced perspectives on complex issues. If I want everything framed in binaries I can turn to the rest of the media, thank you.
2. Many libertarians would share your conclusion that if a company does not pay its workers a living wage, then something has indeed gone wrong in the moral decision making of the managers and stockholders in this corporation. What does NOT logically follow from that is there is a government solution to this moral error that would address the manner is a just way without also creating a host of new problems. Which is not to say that there aren’t a host of other, non-coercive means of addressing this moral error, many of which libertarians might also champion.
Perhaps I’m also reducing the issue to binaries by concluding that the writers here favor a governmental approach. But no third way is suggested, so if that’s not what the writers intend, I encourage them to extend their arguments into solutions.
Margaret Kelly

The specialization of work and the common distance between the worker and the aims pursued by the organizations of which he or she is a part contributes to this, I think. There could be many cases in which a person of perfect character serves the purposes of an organization that is responsible for terrible things. Imagine an administrative assistant working for the branch of a large company. Say this particular branch is in charge of systematically killing a population in a far-off country to clear space for building a factory to service the company. The administrative assistant could do his duties - filing, scheduling appointments for his boss, sorting mail, processing invoices, and so on - with perfect virtue. He may also act with perfect virtue outside of the office, attend religious services regularly, lovingly support a thriving family, contribute to charity, vote ethically, and actively contribute to the civic life of the town where he lives. But he would still be working towards genocide. There’s no use championing virtue without encouraging people to consider whether the ends their jobs are designed to serve are just.
Margaret Kelly

“The central actor in capitalism is not the individual, it is the firm.” Yes! So how can virtue be the (only) solution if the actors in question are not human beings?
John Médaille

“A rich man’s good habits can do great good, too.” There is as much danger-or more-in the monopolization of philanthropy as there is in the monopolization of business. The Rockefeller Foundation did more damage than the Standard Oil Trust that funded it.

” Let’s not forget that every system is run by an individual or group that is just as apt to be as corrupt and inept as the “rich oligarchs” you are blaming for messing up this system of ours…” I don’t understand. The “rich oligarchs” are not the individuals responsible for messing up this system of ours?
lws2012

Easy, you make the firm accountable for ethical choices. Corporate Social Responsibility is such a (minor) attempt. However, this starts to create something less than capitalism, which in its pure form is so brutal no one (not even a capitalist) would want to live with it. Adam Smith understood this quite clearly when he wrote the Theory of Moral Sentiments.
We accept the market because it delivers efficiency, yet like the humble bumble bee that somehow flies despite being less than aerodynamically sound, we are able to live with a less than efficient market.
It is time we accept that reining in the firm and capitalism is not socialism. To put it directly, if a corporation can have human rights, then it can have human responsibilities to act ethically and support the common good.
sythe100

Legally, the interests of other stakeholders must be ignored. Firms have a fiduciary responsibility to their shareholders only. A firm failing to take action to maximize profit could conceivably be sued for failing in their fiduciary responsibility. I am not saying that this is good, in fact the opposite. Laws that require firms to put profit first are one of the first things that need to be dealt with before we can ask people to be more just and moral.