The Humane Economy

A business is a community of persons, and it can offer every human person the opportunity to creatively apply and cultivate talents, as well as develop important virtues, such as diligence, industriousness, truthfulness, and reliability in interpersonal relationships, which are essential to living a fulfilling life.

FEATURED ARTICLE:
“The Humane Economy”
by Dr. Gregory M. A. Gronbacher

1. Introduction

The notion of a "humane economy" has existed since the time of Karl Marx. Indeed, it was Marx, and Catholic social thinkers of the late nineteenth century that gave birth to the term. Later, in the early- and mid-twentieth century, Wilhelm Röpke would borrow the term for his serious scholarship concerning culture, morality, and economic activity.

Yet, it would be fair to say that we still employ the term humane economy with a sense of expectation—namely, that it has not fully matured. There is near universal agreement on the part of scholars analyzing the ethical dimensions of economic science and market activity that we are still in search of the humane economy. We are moving ever so slowly toward this goal.

The goal we appear to be seeking is not immediately apparent. If, by a humane economy is meant the better treatment of workers, socially conscious investing, fair competition, and so forth—the practical aspects of a humane economy—then, given fallen human nature, we must continue to seek knowing that we will fall short of perfection. However, if by a humane economy is meant theoretical structures and economic models upon which to pattern a "third way" between capitalism and socialism, then I assert that we are sadly mistaken and chasing after illusions. The quest for a "third way" is an exercise in futility. Given the collapse of real socialism, our task must be to "humanize" capitalism because it is the only substantive game in town with which to play.

Furthermore, it would also be fair to say that the exact meaning of a humane economy remains undecided. What would it look like? Has anyone defined its essential characteristics? I think that the term humane economy is vague and unclear. The intentions of those who employ it are evident, but the exact horizon of their vision is not.

My intention in this short paper is to outline the parameters of the humane economy and briefly mention, what I believe, are some of its essential components. Merely describing its intellectual boundaries and essential characteristics will not provide the concrete, practical material of a humane economy. However, such a task is useful in that it serves, first, as a blueprint for those engaged in the concrete task of pursuing economic justice, and second, it helps to delineate useful scholarship on the subject from inappropriate models and polemics.

2. Intellectual Paradigms: The Meaning of the Term humane

The term humane immediately connotes a moral dimension. When we speak of the humane treatment of prisoners, or humane strategies for eliminating poverty, or even the humane treatment of animals, we directly sense that we are speaking about the moral implications of our behavior.

More exactly the term humane pertains to appropriate conduct and treatment for persons. There is the implicit recognition of the immense dignity of the human person and his or her metaphysical stature. The lofty status of personal existence carries with it an embedded moral dimension. The standard of morality becomes the nature of the human person and his or her fulfillment. This is one way of speaking of what has been traditionally been termed the natural law.

If we focus on the preceding definition of humane—as pertaining to the appropriate conduct and treatment of persons—we can see that the project of a humane economy is essentially a personalist one. By personalist, I am referring to a specific philosophical and theological tradition that places philosophical anthropology at the heart of the philosophical and theological enterprise. Indeed, the humane economy is really an attempt at an economic personalism—the generation of an economic theory that is in accord with human nature, affirms human dignity, and pertains to the appropriate conduct and treatment of persons.

Yet, for an economic personalism to generate a genuine humane economy, it must first take both components of the term seriously. We demand a theory that fully understands both economics and human dignity. Without a genuine synthesis of economic science and moral science, the enterprise of a humane economy slips into either pious sentiments without practical use, or an economic ideology masquerading as legitimate moral theory.

The rightful autonomy of both disciplines must be respected. The logic of the market and the logic of morality must be shown to intersect. The distinctions between moral science and economic science cannot be fused. Rather, it is the responsibility of any serious scholar to craft and develop a theory that is useful and coherent to both economists and moralists. The history of humane economics is filled with many failed attempts at synthesis. Nevertheless, it may be said that Wilhelm Röpke, perhaps, comes closest to a genuine synthesis of these sciences.

3. Toward Economic Personalism

A genuine synthesis would require the conjoining of insights from personalism and an economic theory that has proved capable of such dialogue. Ideally, this would involve the least mathematical theory possible, since abstruse econometric models tend to confuse most philosophers and theologians. However, the same holds true for theologians and philosophers who are equally required to make their language and terminology more accessible to the economist.

Personalism is primarily a philosophical and theological response to the reductionist denigration of the person brought about by positivism, Hegelianism, Marxism, and Darwinism. These philosophical ideologies all treat the human person as a consequence of external historical and environmental forces. Such treatment reduces the human person to a mere reactionary organism without freedom and on metaphysical parity with other elements of the created order. The human person is no better than the animals and the environment of culture one-sidedly shapes the human person, rather than culture being engendered by the soul of the person.

Personalism arose simultaneously in three intellectual centers of Europe during the beginning of the twentieth century—Paris, France; Munich, Germany; and Lublin, Poland. Scholars from these centers of learning launched a project whose aim was a defense of human dignity and a fuller understanding of personal existence. Borrowing from the best in classical, scholastic, phenomenological, and existential philosophy, thinkers such as Emmanuel Mounier, Emil Brunner, Max Scheler, Karol Wojtyla, Jacques Maritain, and Gabriel Marcel analyzed the basic issues of human life and human purpose.

Although there are many differences of approach among these thinkers, they share a common unifying theme of the personalist maxim. This maxim states that the person should be affirmed for his or her own sake at all times. This affirmation implies that a human person never should be treated as a means to an end, and that human dignity be upheld and respected in the political, social, cultural, and economic spheres.

It is important to note that, traditionally, any economic discussion engaged in by personalists usually took on a leftist, or even Marxist flavor. Mounier, Scheler, and even at times Maritain, relied on and borrowed examples and themes from Marx and various thinkers of the Left. There existed an implicit and subtle demand for a command economy, the limitation of economic liberty, and the curtailment of competition and other market forces. This desire to limit economic liberty was of course motivated by a desire to protect the individual and the family from the harshness of market forces, and thus create economic structures that affirm human dignity.

However, if we examine the work of the second half of the twentieth century’s leading personalist—Karol Wojtyla, more commonly known as Pope John Paul II, we see a shift away from socialist ideas and a turn toward free-market economics as the economic model of choice for dialogue. This is clearly seen in the Pope’s 1991 social encyclical Centesimus Annus. In this insightful document, the Pope analyzes the fall of communism from a Catholic and Personalist perspective. He concludes that:

It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to human needs. (CA#34)

The Pope is careful, however, to avoid equivocating on the term free market. Later in the encyclical he qualifies his endorsement of free markets by pointing out essential personalistic features that must be present in order for the market to serve genuine human needs. For the Pope, a market that is genuinely free and personalistic is one that:

[R]ecognizes 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... (CA#42)

History, economic reality, and the work of John Paul II and other recent personalists such as Rocco Buttiglione, Josef Seifert, Robert Sirico, Michael Novak, and the work of the Center for Economic Personalism in Grand Rapids, Michigan, are now repudiating not the good intentions of the earlier personalists but their reliance on socialist economics to bring about the common good. Socialism, in its many forms, has been proven a disaster on the practical level—as the wrecked economies of Eastern Europe and Russia attest. Whereas, theoretically speaking, socialism has been shown to be anthropologically and theologically flawed. Again, I quote from Centesimus Annus:

[T]he fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. (CA#13)

This shift toward free-market economic theory is not, of course, an indiscriminate embrace of all that free-market thought contains. Indeed, there exist variations of free-market economic theory that are opposed to personalist principles and that insist on the superiority of market principles for all aspects of human life. This economic imperialism is a false theory of freedom and is not a contender for constructive dialogue with anyone serious about developing a humane economy.

However, as can be learned from the example of John Paul II, Christians, conservatives, and all those interested in humane economics can profit from a dialogue involving the better free-market theorists: Ludwig von Mises, F. A. Hayek, Carl Menger, Gary Becker, George Steigler, Frank Knight, James Buchanan, Gordon Tullock, and so on. The Austrian, Chicago, and Public Choice schools of economics have much to offer those committed to constructing an economic order that has the potential to affirm human dignity, lift people out of poverty, provide a solid basis for family life, and produce the necessary material goods and services for a good life.

Again, I am not advocating a blind acceptance of all variations of free-market economics. I am a personalist first, and only positive about free-market economic theory in light of what it offers those truly seeking a genuine synthesis of economic science and moral science. These free-market economic theories are worthy dialogue partners in the on-going conversation of constructing a humane economic order.

4. The Moral Necessity of Economic Freedom

The economy, or the market, can be understood as that metaphor for the totality of the production, distribution, and consumption of material goods and services. This means the totality of all voluntary exchange of goods and services. All the buying and selling, renting, trading, and so forth, that becomes institutionalized in banking, corporations, the stock market, and so on.

The primary social function of the market is to produce the necessary goods and services that make for survival and comfort. The economy directly provides housing, food, clothing, transportation, and even the materials necessary for most cultural amenities. Excess wealth generated can be used for charity, investment, economic expansion, and other public projects.

A humane economy would be one that is able to produce an abundant amount of wealth. This wealth would be produced justly, avoiding greed, deceit, and fraud. That the processes of production and indeed the entire economy would be open—resisting the erection of barriers to entry based on unjust discriminations. Wealth would be put to constructive uses to benefit the greatest numbers of individuals. And, finally, that those who cannot participate in creative enterprise will maintain some sense of self-sufficiency and be provided for through charity.

History has strongly attested to these goals being best attained through the promotion of economic liberty. Those most free to engage in creative enterprise, control their own property, and determine for themselves how to best apply their resources—tend to be the most prosperous and even economically just. In addition, the poor and marginalized also fair better in economies that thrive on free enterprise. Any survey of history and economic theory will offer enough evidence to support these statements. As we speak, the socialist, command economies of Cuba, North Korea, and other nations that limit economic freedom suffer from deprivation, and even starvation.

Economic liberty consists in the following: (1) A defense and recognition of the right to private property. The entire Western tradition promotes this tenet. Individuals have a right to the fruit of their labor, and have a natural justified ability to call something mine. Of course, this right, like others is not absolute and carries with it other important corresponding duties. Yet, it is a right that must be vigorously defended for the sake of the common good. (2) Economic liberty further implies that individuals have the ability to exercise economic initiative—utilizing their property, time, talent, and other resources as they see fit, unhampered by excessive regulation and restrictions. Through a process of voluntary exchanges individuals tend to improve their lot, increasing the efficiency and quality of their lives and resources. (3) In order to ensure that mutually beneficial exchanges are not unduly restricted, thus hampering people from being productive and improving their own and others situations, external systematic restrictions need to be limited. This includes excessive taxation, reckless government monetary policy, unnecessary barriers to trade, ineffective safety regulations, complicated and unfair employment policies, and expensive licensing requirements. In all of these cases, the limitations of economic freedom come from unnecessary government intervention in the economic sphere.

In fact, free markets are defined precisely in relation to the amount of government control present in the economy. The freer the market, the less government intervenes. Although government interventions are often attempted for good, and sometimes even noble reasons, most economists admit to the disruptive and even damaging effect of these interventions. Now, clearly, some intervention is required. A strong juridical framework is required for the market to operate effectively. The political institutions need to form symbiotic relationships with market institutions. Only an economic ideologue would call for absolute government noninvolvement.

Yet, we live in a statist day and age. Statism—the unhealthy reliance of a society on the political institutions to solve what are essentially moral and social problems—problems outside of the natural scope of government and therefore generally unresponsive to government action—is the normal state of affairs. When faced with the uncertainty and complexity of modern economic reality—from banking to foreign aid, from employment issues to tax policy, from mortgage laws to money funds—the desire for control, safety, and predictability is strong. It is frequently the government that is called upon to enforce this so-called stability.

There seems to be much misunderstanding concerning unbridled capitalism and the extent and supposed harshness of market forces. Many have images of an unrestrained market wreaking havoc and destruction in family life, confusing moral understanding, and creating poverty through exploitation of the vulnerable. Terms such as radical individualism, consumerism, greed, and alienation are employed to give expression to these sentiments. And again, government intervention is sought to limit the destructive forces of the unbridled market.

Yet, the reality is that we live in a very bridled market. Our economy, as most economies of the West, is far from unrestrained. In fact, all of the Nobel Prize winning economists of the past twenty years, as well as the overwhelming number of economists and economic professors, cite excessive and unnecessary government intervention as the cause of many of our economic woes, and call for a drastic reduction in such interventions. Study after study continues to demonstrate that economic liberty when maximized produces greater amounts of wealth and tends to create a better social environment where human needs are met.

Underlying this philosophy of interventionism is a mechanistic understanding of the economy. It is viewed as a thing to be manipulated or controlled. If only those in government can pull the right strings, raise the correct levers, and push the right buttons, then the economy would function well. Yet, the economy is not a machine to be programmed or operated. Even if it were it is evident that those in government are often the least well equipped to operate the machinery. Rather, the economy is a complex web of relationships. These relationships by their very nature resist manipulation. Indeed, the freedom that each human person possesses by his or her very nature demands an economic outlet. We tamper with the forces unleashed by these relationships at our peril.

Statism consists in more than economic restriction; it also comes in a moral variety. Increasing governmental imperialism has led to the encroachment of the political institutions into all social spheres. Government is now the largest provider of charitable efforts, educational efforts, and soon to be day-care efforts. The nanny state is alive, strong, and still increasing its reach. In doing so, it weakens the culture at large by disrupting other social institutions and then robbing them of their natural functions. The end result is a weakened culture, confused, and incapable of immediate decisive action.

I need to be clear on this point: I am not calling for an unrestrained market, nor championing unbridled capitalism. No sane defender of a humane economy could do so. Rather, I am recognizing the situation, which we have an over-restrained market that in many cases interferes with the emergence of a humane economy. In addition, there is the subtler point that not all market restraints need be governmental. There exist other social institutions that can exert pressure on the market: families, voluntary organizations, not-for-profits, religious organizations, and educational organizations. Each of these sectors of civil society is capable of being a moral voice and presenting a strong moral challenge to market excesses. There are, and need to be, more restraints on the market, yet these need to be moral restraints.

Economic Personalism advises that markets be freed from the restraints of statism and yet contained by strong legal and moral frameworks. Markets do not exist in a vacuum. Laws providing fair employment practices, just competition, recourse to fraud, protection of property, the enforcement of contracts, and the provision of certain public goods are necessary to a free market. A moral voice calling for charity, service to others, and fairness, while warning against greed and idolatry of wealth are also necessary. Indeed, personalism offers a theoretical structure for discussing the moral requirements of market activity. The detailed anthropological insights of the personalists can greatly aid us in the creation of economic structures that affirm human dignity. Such a dual framework of moral and political restraints does not hamper freedom but rather reinforces it, providing a safe space for its operation.

Generally speaking, the principle of subsidiarity is the guideline for determining the relationship between government and market. Yet, it is also recognized that there will be legitimate disagreements concerning the exact application of subsidiarity. People of good intention will disagree about prudential matters. What policies are required to reform welfare? What process should be implemented for taxi licensing? Which safety measures actually protect the consumer and avoid reducing productivity? On these matters people will rightfully disagree and the right course of action only becomes clear after periods of trial and error.

In fact, it is in the realm of prudence that most supporters of a humane economy disagree. There are those who favor a larger degree of intervention into the economy than I do. And there are those who believe that my own set of policy choices would prove too intrusive. Our disagreements primarily concern matters of application and practice, and rarely erupt over theory or principle.

Yet, it is still my contention that at some point aggressive calls for intervention into the marketplace result from ignorance of economics and lead to policies that do not resonate with human nature itself. Indeed, human nature itself appears to attest to the need for a healthy dose of economic liberty. Free people require such economic structures in order to thrive. To desire a command economy is to misunderstand both the market and human nature.

5. Essential Characteristics of A Humane Economy

The essential characteristics of a humane economy are not many, but each is an important facet in the pursuit for economic justice. While it can perhaps be argued that not each of the following characteristics are equally as important, none of them can be neglected without great peril to economic liberty, and thus human dignity.

(1) The necessity of private property. Accurate reflection on human nature yields an insight into the capacity for ownership. The ancient Jews, Aristotle, Muslim theologians, the writers of the Christian Scriptures, the Scholastics, and the papal authors of Catholic social teaching have shared this insight. Human nature requires private ownership for the successful navigation of the material world, for the care of family members and the weak, and the acquisition of virtue through generosity and good stewardship. The corresponding duties that accompany this right include the call to generosity, the requirement of good stewardship, and the vocation of productivity and creativity.

(2) The foundation of human capital. Each human individual is created in the image and likeness of God. Each human individual is called to a vocation that mirrors that of the Creator through sharing in creative activity. Human capital is the essential economic resource. Human ingenuity, intelligence, labor, and virtue are the fundamental capital available to humanity. This capital must be developed, nurtured, and protected. Education, humane working conditions, just wages, and moral instruction are all essential aspects of supporting human capital. The recognition of human capital coincides with the recognition of the centrality of the human person. Indeed, the economic system exists for the benefit of humanity, not humanity to serve the economic system.

(3) Maximization of market participation. The human person is social by nature. Self-sufficiency is a myth. In order to flourish, individuals need one another. Cut off from family life, voluntary associations, friends, and other social manifestations, the human person becomes vulnerable, lonely, isolated, stunted, and eventually succumbs to one threat or another. The social order provides the context for safety, meaning, and flourishing for the human person.

The economic order reflects this social reality. Cooperation, mutual assistance, and service to others are the hallmarks to a free economy. In order for nearly all to benefit from the great abundance of a free market, there must be nearly full participation in the market. This requires that all barriers to market participation be removed. Barriers such as racism, sexism, and ageism must be eliminated. Those who do not possess sufficient material capital for market entry must be aided, preferably by private charitable means to obtain the goods necessary for full participation. Education must be effective and available to all so that skills can be accumulated for market participation.

To be marginalized from market participation is to be cut-off from the benefits of the productive sector. The result of being removed from the productive sector is poverty in one form or another. Human dignity insists that human capital be allowed every opportunity to participate in the market so that a modicum of self-sufficiency can be maintained and a genuine sense of self-determination can be exercised.

(4) Ample provision for the needy and marginalized. A free economy that is also humane would require a radical commitment to the care of the poor. This care should be comprehensive so that all human need is met to the highest degree possible. This would require the generosity of all in terms not only of money, but also time, love, and talent. The poor require much more than material assistance. They also require personal support, education, love, and other personal and spiritual efforts.

As demonstrated above, the poor are best cared for when a free market is left relatively unhampered to produce excess wealth that can be distributed to those in need through effective private means. An economy is only humane to the degree that it aids those who are marginalized, both through their own faults, and no faults of their own.

(5) Prudent intervention though the proper application of subsidiarity. Striving for a social order that is decentralized will most likely insure a society of thriving social institutions, including a healthy and humane market. This requires that we first abandon our mechanistic views of the market and allow individuals to creatively engage in free economic associations and relationships. Government intervention must be limited and we must stop seeking governmental solutions to moral, spiritual, and economic problems.

6. Concluding Remarks

A humane economy needs to be the goal of each and every civilized man and woman. The preceding principles and discussion serve to provide the motivation and guidelines for such action. The dignity of all requires a vigorous and energetic effort on the part of those who craft economic policy, perform scholarship in either economics, social theology, or philosophy, and above all, by anyone directly in contact with the productive sector.

This humane economy, where human dignity is affirmed can only be achieved by a genuine synthesis of economic truth and moral truth. Sentiments cannot replace real principles of economics, nor can such principles be imperialistically applied to non-economic aspects of human life. Still, an economic and moral theory useful to both economists and moral scholars is necessary if progress is to be made. An economic personalism supplies an advantageous paradigm for such progress and work.