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What is the Impact of Faith on Capitalism?

March 17, 2016 by  
Filed under News & Events

I would like to begin my reflections by clarifying the concepts I use in the title of my talk. Faith is not the same as religion. Faith is the personal conviction of transcendence and of a bond to God to whose revelation we respond. Religion is institutionally organized faith. Religion has the connation of being an affair among humans who organize the sacred sphere on earth, whereas faith refers to the supernatural virtue and the eternal results in heaven of our actions here below. Faith therefore has to do with the personal struggle for a holy life of virtue, work, and piety. As a Catholic, I believe that both concepts are connected not opposed: God in Christ has instituted his church so that we form the visible body of Christ on earth, which is a sacramental reality from where we receive the help we need for faith. Christian religion is at the service of faith.

Capitalism is not a faith but an economic and political system based on institutions and virtues. Throughout my talk I use the word capitalism in the sense of principled and virtuous entrepreneurship in opposition to rent seeking. In other words, I use St. John Paul II’s definition of “good capitalism”: “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”, which we could simply also call “a ‘business economy’, ‘market economy’ or simply ‘free economy’.” (CA, 42) This form of capitalism is not fully realized in late or advanced capitalism or financial capitalism because capitalism, on my view, is about enterprise. Financial services are an essential and necessary part of this. However, over the last decades, a class of rentiers has reemerged because, for whatever reason, asset growth has become bigger than economic growth. Academics who are clearly in favor of good capitalism have affirmed that “the link between the size of the financial sector and economic growth weakens – or even reverses – once countries become rich and reach the technological frontier. Now rent seeking in financial markets can lead to great private gains but have little impact on economic growth. Growth is actually harmed to the extent that talented risk takers are drawn into the financial sector to engage in rent transfers, rather than starting businesses and engaging in rent creation.”[1] These authors acknowledge that “there is no theoretical reason or empirical evidence to support the notion that all the growth of the financial sector in the last forty years has been beneficial to society,” because a major component of the growth of the financial sector has been “pure rent seeking,” i.e. activities that are only profitable for individuals without any correspondence to work or service to others.[2] All this has led to what seems to me to be an enormous financial bubble of the whole Western economic system. Good capitalism, and with it the free markets, have thus entered into a political and moral crisis of legitimacy. Entrepreneurship and the creation of new businesses have been politically discouraged or at least not encouraged. Entrepreneurs do not need a lot of incentives, they possess enough drive of their own. What they need is protection of their time, energy, and capital against undue strain. Free markets and entrepreneurship need protection because they are a cultural achievement, not merely an economic fact, and much less the spontaneous outcome of evolution. Free markets are the result of hard work, diligence, moral convictions, institutions like the joint stock companies and insurance. Freedom is a precious and fragile good. Truth alone makes us free.

Here in Washington DC the statue of liberty stands on the Capitol’s dome. The original model of the statue wore a Jacobin cap, thought to be the symbol of freed slaves. Congress had the model redone with the argument that Americans are not freed slaves: We are born free! Are we really free? Are we still free? Have we become slaves to money, unordered passions or to welfare?

Moral change towards ethical capitalism is possible: the majority of moral, righteous business people must form a network of virtuosity. The single person feels overwhelmed, and is in fear of losing the material basis of life. I have heard the story of a boy lost in an enormous cornfield. The parents were desperately searching for him, then the whole village helped, without avail. Finally, a woman had the idea to form a chain by joining hands and combing the field. When they found the boy, he was already dead: if they had only had the idea earlier. Join hands, form a chain of virtuosity in business!.


I would like to show the impact of Christian faith and virtues on capitalism as a system and not only on the individual businessperson’s actions.

Please note that the Catholic religion (understood as institutionally organized faith) must not be instrumentalized as steward or servant of capitalism. Faith and capitalism are two realities that belong to different spheres – the sacred and the profane – although there are important connections between them. Putting faith to the service of capitalism would be idolatry, a dance around the golden calf. The paramount aim of life is to give glory to God. Usually we can do so by doing well. However, there are crises in which we as Christians must be willing to renounce all wealth, even life, rather than renounce God. Christ and therefore the Church is not espoused to any single social system – Christ is always more and bigger. We have just recently shaken off the lethal embrace of the Constantine model of the State – Church relationship, in which the temporal power benignly protected the Church, and the Church in her turn was expected to legitimize and support temporal power. We do not wish to become entangled in a similar embrace by any political or economic system, be it socialist or capitalist. Christ is the big disturber of our balances and systems; and Christians are prophetic shock minorities, simply by unapologetically being Christians: we are supposed to be the salt of the earth and the light of the world. On the other hand, faith and reason are intimately united. The Gospel is not an immediately applicable social program but needs philosophy and social science to be rendered practicable. Religious enthusiasm without knowledge, experience and technology can be dangerous. In this sense, faith and virtues protect good capitalism as a human and cultural achievement.

Note, secondly, that I distinguish between social and individual ethics. Individual ethics describes the practices in which an individual person achieves the aim of personal happiness or flourishing. Social ethics is the way in which society is organized in order to achieve the common good understood as the rules of peaceful and just cooperation around a core of freely shared values. Virtues are also important for social ethics not only for the individual person, as I shall strive to demonstrate. Is present-day American capitalism a virtuous system? The answer is yes and no. There have been and there are many elements of virtue in American capitalism, but there are some negative aspects, which are actually alien to the original idea of capitalism. This is where we need a program of cultural transformation, and this is, I think, the mission of a Business School at a Catholic University. The late Cardinal Francis George explained new evangelization as a program of cultural transformation. I am convinced that it is a combination of values (truth), good practices (virtues), and institutions. Here I concentrate on the virtues.




Courage is the pre-formed inclination of our will to suffer when it is necessary in order to act well rather than renounce the good deed out of fear of pain. The virtue of courage avoids both recklessness and cowardice. Courage plays an important role in business in connection with risk. Alasdair MacIntyre has written that the inherent short-termism in finance destroys the inner good of courage: Learning to box is just as useless for a violin player as courage for somebody in finance because he is forced to take unreasonable risk. I cannot judge the factual truth of this accusation, however, I do think his principle on courage is sound. In order to be courageous, risk must be reasonable and at one’s own expense. We all tend not to want to suffer; therefore we prefer easy gain without risk, or at least that the risk might be borne by others. This is where moral hazard comes in. There has been too much moral hazard, created by a collusion of political and financial power: risks and negative externalities have been borne by others. In the aftermath of the last financial crisis, taxpayers have had to bail out bad management, at the same time witnessing enormous compensations for managers. This is something Pope Francis criticizes, and it destroys the trust in free markets because in a free market who makes the deal is the one who bears the risk. If you can’t fail, if your risk is minimized to zero, there is no free market only a quasi-market. Courage discovers moral hazard and eliminates it.

Courage is related to hope. In business there are ups and downs, crests and troughs: the dream of a linear upward growth line is an illusion. We need a motor to get over the troughs. Human hope keeps business going, supernatural hope keeps life going. The man who had been entrusted with one talent was not a thief or an embezzler. His crime was his fear of loss: he put his money in the safe, and was paralyzed by his lack of hope. This is the cause of his condemnation: “from the one who has not (the virtue of hope), even what he has will be taken away.” (Mt 25:29) Courage and hope help us start businesses.


The virtue of courage also avoids foolish debt for nonproductive reasons. There is such a lot of public and private debt. Throughout centuries the Church distinguished between money and capital. Capital was money in the hands of a merchant. It was productive, and therefore if he gave a loan he was entitled to interest. In contrast, money in a box was regarded as unfruitful. If somebody who was not a merchant gave a loan to a friend in need he was not entitled to any form of interest. This was strictly condemned as usury. This distinction was aimed at reducing unproductive, and therefore oftentimes foolish debt. Such a practice of debt avoidance echoes the Bible’s warning: “the borrower is the slave of the lender.”[3] This leads us to the virtue of temperance.




Temperance moderates the attraction of material goods, and is thus central for business. The selfless self-preservation afforded by temperance grants us balance along a middle line: neither greed nor profligacy, neither ostentation nor stinginess. Temperance helps tackle the difficult question of how much is enough because it nips insatiability in the bud.

One of the strong moral messages of Pope Francis to Western economies is his attack on consumerism that brings “desolation and anguish born of a complacent yet covetous heart, the feverish pursuit of frivolous pleasures, and a blunted conscience.”[4] Francis defines consumerism as the “self-centered culture of instant gratification”[5]: it takes “the waiting out of wanting” according to the slogan “Put it on not off!”

The Pope is not at all opposed to economic growth and consumption as such. Actually, his vision of an “ecology of daily life”[6] portrays the dreams of so many people of a dignified life in a middle-class society. Consumerism, however, takes consumption beyond its reasonable and moral limits by buying new things just out of the urge of acquisitiveness, replacing gadgets, machines and other items that still serve their purposes well only for the kick of possessing something new. Consumerism reduces investment, thrift and savings, thus undermining the basis of a good capitalist economy. It is an evil that certainly stimulates production in the short run but soaks up resources through waste and weakens moral stamina and resilience in our society. In contrast, “Christian spirituality proposes a growth marked by moderation and the capacity to be happy with little.”[7]


((Unintended effects of taxation can produce consumerism for instance if taxes favor interest paid on debt or on credits.

Compensation: caps distort the market, however, there is a moral duty to give back to society, and a political claim for taxation in order to avoid social tensions.))




The virtue of justice gives to the other what is his or her due. Justice is the stable attitude of the powerful and mighty that converts oppressive power into empowering authority. Power is the capacity to coerce someone to do something against his or her will. Authority is the capacity to move someone to do something that the common good requires. Power is the force of the robber who takes my money; authority the legal force of the policeman that fines me the same amount. Authority binds consciences, power chains bodies. Justice becomes really relevant in asymmetric relationships of power, which are frequent in politics, economy, means of communication, the family, schools, etc. when power needs to be curbed. Just authority is a wonderful and necessary gift in any organization.

Applied to business the virtue of justice promotes a system that produces goods that are really good, services that truly serve, and wealth that really creates value.

In such an economy the product is the aim, profit the means and the fruit. ((The traveling peddler who sold razor blades: razor blades are for making money not for shaving.))


Practical wisdom.

Practical wisdom is an intellectual virtue. It is a trained and permanent openness of our mind to know what is good. It is therefore the basis for all our moral life. Our moral convictions stem from three sources: first, from our experience of justice and injustice, of good and evil. We all have spontaneous moral experience. We then reason on it. This is the second source: reflection and reasoning, oftentimes in a non-systematic and non-scientific way. Many of our moral convictions stem from a third source: education and culture. All three sources of morality need to be developed and maintained open in business life. Moral experience requires the connaturality of virtue: only the virtuous person knows spontaneously what virtues require in a certain situation. Reflection needs time: Stop to think, every day, every week, every month: am I doing what is morally right, or am I succumbing to “necessities”, to the “rules of the (devil’s?) game”. We also need the lighthouse of the Church’s teaching. In a painful process the Church has learnt that she cannot impose her teaching but can only propose it as a free offer in a free society. She is like a lighthouse on the coast or a control tower at an airport: nobody in his right mind would consider it to limit his freedom – it shows the way to safety!


I have left the biggest virtue for the end: love. Bringing love into business, that’s the challenge. I would like to approach this challenge by posing a series of academic questions: Are we aware of the trade offs implied in modern capitalism? Are we aware that there have been many other forms of economy not based on gain? What does the enlightenment mean for us?


Modern capitalism is a fruit of the commercial society and the enlightenment. The two are not essentially the same but are historically connected. As Catholic intellectuals, we need to continue the serious reflection on the merits and limits of the Enlightenment started by Benedict XVI and many other thinkers. Vatican II has incorporated some of its elements into the Church’s teaching, for instance secularity or the emancipation of earthly affairs from ecclesiastical tutelage. The Enlightenment was a process of Cultural transfer and thus of cultural transformation of Christian values into a non-Christian (non Trinitarian) framework. Christian values, like human dignity, equality, freedom, and others, where transferred into a non-Christian epistemological framework that was not teleological, and excluded supernatural intervention in history, thus a form of Gnosticism. Let me refer to the icon of liberal economists: Adam Smith. Contrary to enlightened orthodoxy he was teleological in a Stoic sense, but he was a Deist and not a Christian thinker. That is why I do not agree with the continuity theory that draws an undented line from the Catholic School of Salamanca to the liberalism of Adam Smith. There is an enormous epistemological gap, which I cannot get into here.


The liberal system of the Enlightenment is characterized by harmony, mutual complementarity, and exchange in a commercial society. However, two tradeoffs pay for this new society: 1. justice – charity (love, benevolence, solidarity beyond family and friends); 2. loss of heroism.

In the feudal society, charity stood side by side with justice as a structuring social principle. Friendship was experienced as an element of the macrosocial structures not only of the microstructures (family and circle of friends): you did not work for gain but because you were born into a role and a position in society with its preestablished duties. In the commercial society justice is the exclusive social principle: We are a society of strangers that peacefully sell each other goods and services. In such a society, heroes are a nuisance. A commercial society basically consists of prudent men and women who take care of their own interests. I prefer the commercial society because it is difficult to be free in a static society, like the feudal one. However, we need to resolve the problem of social cohesion of our liberal societies. Without love this is not possible. Several solutions fall short.


  1. Game theory as an aspect of mutual utility cannot explain social cohesion beyond utility. We are all appalled at misery and hunger, exclusion. Social cohesion is a result of heroic charity, that gives not only what is his or her due but what is mine. The social project of the Enlightenment, in which we live, needs the leavening of heroic charity in order to survive.
  2. The liberal system is based on justice, private property, markets and exchange, and freedom. Justice, private property and just exchange presuppose an answer to the question: why should the powerful and mighty renounce their capacity of domination? The liberal system must acknowledge the existence of an unsymmetrical gift at its foundation. Gift is love. Gift is not identical with a present. A present is a metaphor of gift and love but not is consummated reality.
  3. My third query refers to freedom. Both metaphysics and the enlightenment have proved themselves incapable of thinking the human person correctly in her relational interiority and freedom. Metaphysics applied categories like substance and causality taken from the physical world to the human person, and thus misdescribes her not grasping interiority. The Enlightenment, uneasy with this order of thinking, extended interiority to physics, simply reversing the system by setting it on its head. In order to understand human agency as free and imbued with spiritual meaning not only technical efficiency, we need a hermeneutical approach that understands sense and not only explains facts.


Let me return to the mission of a Business School at a Catholic University: it is involved in the new evangelization of business, which is a program of cultural transformation. Its great challenge is to discover how to insert charity into the economy by offering a hermeneutic that makes us discover our brother and sister in the people we deal with, as clients, consumers, producers or in whatever capacity we might encounter them.

[1] Dennis C. Mueller, “Introduction: The Good, the Bad, and the Ugly,” in Dennis C. Mueller (ed.), The Oxford Handbook of Capitalism, Oxford: Oxford University Press, 2012, 1–14, 7.

[2] See Luigi Zingales, “Does Finance Benefit Society?” http://www.nber.org/papers/w20894, 3.

[3] Prov 22:7.

[4] Francis, Evangelii gaudium, n. 2.

[5] Francis, Laudato Si’, n. 162.

[6] Ibidem, n. 147 – 154.

[7] Ibidem, n. 222.

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