Pope Francis Understands Economics Better than Most Politicians
Pope Francis is a pontiff who has constructively broken all the rules of popery – so far to widespread acclaim. He's faulted the Catholic church for its negative obsession with gays and birth control, and now he has expanded his mandate to economics with a groundbreaking screed denouncing "the new idolatry of money".
As the Pope wrote in his "apostolic exhortation":
The worship of the ancient golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings.
His thoughts on income inequality are searing:
How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality.
The pope's screed on "the economy of exclusion and inequality" will disappoint those who considers themselves free-market capitalists, but they would do well to listen to the message. Francis gives form to the emotion and injustice of post-financial-crisis outrage in a way that has been rare since Occupy Wall Street disbanded. There has been a growing chorus of financial insiders – from the late Merrill Lynch executive Herb Allison to organizations like Better Markets – it's time for a change in how we approach capitalism. It's not about discarding capitalism, or hating money or profit; it's about pursuing profits ethically, and rejecting the premise that exploitation is at the center of profit. When 53% of financial executives say they can't get ahead without some cheating, even though they want to work for ethical organizations, there's a real problem.
Unlike Occupy, which turned its rage outward, Pope Francis bolstered his anger with two inward-facing emotions familiar to any Catholic-school graduate: shame and guilt, to make the economy a matter of personal responsibility.
This is important. Income inequality is not someone else's problem. Nearly all of us are likely to experience it. Inequality has been growing in the US since the 1970s. Economist Emmanuel Saez found that the incomes of the top 1% grew by 31.4% in the three years after the financial crisis, while the majority of people struggled with a disappointing economy. The other 99% of the population grew their incomes 0.4% during the same period.
As a result, federal and state spending on social welfare programs has been forced to grow to $1tn just to handle the volume of US households in trouble. Yet income inequality has been locked out of of the mainstream economic conversation, where it is seen largely as a sideshow for progressive bleeding hearts.
In the discussions of why the US is not recovering, economists often mention metrics like economic growth and housing. They rarely mention the metrics that directly tell us we are failing our economic goals, likepoverty and starvation. Those metrics of income inequality tell an accurate story of the depth of our economic malaise that new-home sales can't. One-fifth of Americans, or 47 million people, are on food stamps; 50% of children born to single mothers live in poverty; and over 13 million people are out of work. Children are now not likely to do as well as their parents did as downward mobility takes hold for the first time in generations.
The bottom line, which Pope Francis correctly identifies, is that inequality is the biggest economic issue of our time – for everyone, not just the poor. Nearly any major economic metric – unemployment, growth, consumer confidence – comes down to the fact that the vast majority of Americans are struggling in some way. You don't have to begrudge the rich their fortunes or ask for redistribution. It's just hard to justify ignoring the financial problems of 47 million people who don't have enough to eat. Until they have enough money to fill their pantries, we won't have a widespread economic recovery. You can't have a recovery if one-sixth of the world's economically leading country is eating on $1.50 a day.
It's only surprising that it took so long for anyone – in this case, Pope Francis – to become the first globally prominent figure to figure this out and bring attention to income inequality.
Income inequality is the issue that will govern whether we ever emerge from the struggling economy recovery and it determine elections in 2014. The support for Elizabeth Warren to rise above her seat in the US Senate, for instance, largely centers on her crusade against inequality. The White House's chirpy protestations that the economy is improving are not fooling anyone.
Into this morass of economic confusion steps Francis with clarifying force:
Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naÃ¯ve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.
It's a historic and bold statement, mainly because it's rarely heard from clergy. Money has always been at odds with religion, going back to the times when God had a fighting chance against Mammon. Moses grew enraged by the golden calf, Jesus by moneychangers in the temple, Muhammad by lending money at interest, or usury. It is easier for a camel to pass through the eye of a needle than for a rich man to go to heaven, the Bible tells us.
There have been criticisms from prominent men of religion before, but they didn't stick. in 2008, the Archbishop of Canterbury endorsed Marx against the forces of "unbridled capitalism", and the Archbishop of York disdained traders as "bank robbers and asset strippers", but those cries went unheeded in the subsequent flood of corporate profits.
At the time, those criticisms seemed extreme, throwing pitchforks into frozen ground. Francis is speaking at a when the ground has been thawed. Outrage against the financial sector is lurking so close to the surface that the US government can extract a $13bn fine from the nation's largest bank, throwing it into its first financial loss in nine years, and find significant approval.
Still, popes have been largely content to leave these particular issues of economic inequality behind in favor of focusing on social issues. There was, after all, a problem of throwing stones. The church's rich trappings and vast wealth, as well as its scandal-plagued Vatican bank, made an ill fit to preach too loudly about austerity.
Pope Francis, in his simple black shoes and unassuming car and house, is the first pontiff in a long time to reject flashy shows of power and live by the principle of simplicity. That makes him uniquely qualified to make the Vatican an outpost of Occupy Wall Street. His message about spiritual salvation applies mainly to Catholics but it would be sensible for economists and lawmakers to recognize his core message about the importance of income inequality applies to those even those who have no belief in religion.
Capitalism has always seen itself as an amoral pursuit, where the guiding stars were not "good" or "bad", but only "profit" and "loss". It's going to be harder to sustain that belief over the next few years.