Two Capitalisms

by Napa Institute
Published In September 27, 2019

The growing interest in socialism among millennials seems to be motivating some to try once again to square the socialist circle with Catholicism – an impossible task. Articles in the Catholic press with titles like “The Catholic turn to socialism is something to celebrate,” “Yes, democratic socialism is compatible with Catholic social teaching,” and even “The Catholic Case for Communism” attempt to show how Catholic Social Doctrine is more supportive of socialism than it is of capitalism.

Catholic Social Doctrine (CSD), the body of the Church’s teachings on economic, social, and political matters, comprises documents issued by popes and councils over the past century and more. Collectively, these present something more like a set of reflections than a comprehensive, axiomatic system, and therefore can all too easily be cherry-picked to support one’s favorite economic or political system.

Take a recent article entitled “Can We Please Relax About ‘Socialism’?,” whose author claims to be “… a proud son of the European Christian socialist tradition, especially in its rich British variant, … but also in its continental expressions (see, for example, Pope Pius XI’s encyclical Quadragesimo Anno, with its prescient warnings against the dangers of unfettered capitalism).” It is true that Quadragesimo Anno, published in 1931 in the depths of the Great Depression, while affirming the right to private property also warned about the dangers of “unfettered capitalism” destroying the free market. But no-one who has read that document in full could possibly and sincerely claim it as any kind of expression of any “Christian socialist tradition”: “Socialism,” Pope Pius wrote there, is based “on a theory of human society peculiar to itself and irreconcilable with true Christianity. Religious socialism, Christian socialism, are contradictory terms; no one can be at the same time a good Catholic and a true socialist” (120).

This pattern, of unambiguous condemnations of socialism along with strong criticism of some aspects of capitalism and affirmation of others, carries throughout the Social Doctrine. Is it a case of “A plague o’ both your houses”—is the Church just uncomfortable with this-worldly economic life as a whole, criticizing both socialism and capitalism? No. While it does take a fair amount of disingenuousness to interpret the popes’ criticisms of capitalism as implicit approval of socialism, when they have expressed such explicit disapproval of socialism, it seems to me that it is possible to identify an approach to economic activity that is supported unequivocally by Catholic Social Doctrine.

To do this, we have to realize that the word “capitalism” covers two very different approaches to economic activity, one of which is antithetical to Catholic teaching while the other is quite compatible. Consider: every company does two things – create value and capture value. Both are necessary in order to be a business. If you create value without capturing any, then you are a charity, a not-for-profit. But if you capture value without creating any, then you are thief, not a business. While both creating and capturing value are necessary to be a business, one or the other will always be the primary motivator. And whichever is primary will determine which type of capitalism a firm is practicing. I call the two types Entrepreneurial Capitalism and Imperialistic Capitalism. A firm that strives first to create value, and then capture its share, is practicing Entrepreneurial Capitalism. A firm that seeks above all else to capture value, regardless of how much, if any, it is creating, is an Imperial Capitalist.

The Entrepreneurial Capitalist firm seeks to serve others – to serve their customers, and to serve the employees who serve their customers. This approach, sometimes called “Principled Entrepreneurship,” is entirely consistent with Catholic Social Doctrine. Pope Francis wrote that business is a “noble vocation, provided that those engaged in it see themselves challenged by a greater meaning in life; … to serve the common good by striving to increase the goods of this world and to make them more accessible to all.”

The Imperial Capitalist seeks to extract value above all else. They are crony capitalists, “vulture capitalists,” and firms who set profit maximization as their highest priority. But don’t business schools teach that profit maximization is the engine that drives capitalism? To they extent that they do, they are promoting a naïve and simplistic idea. Human motivation in business is much more complex and much richer than that. Pope St. John Paul II said it well when he wrote: “… the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society.” Profit, community, need satisfaction, and service – a firm exists to provide all these things. The Catholic business leaders I speak to, and especially the entrepreneurs, agree with this: you go into business to satisfy your own needs, to serve others, to be in community, and for profit. It isn’t just one thing.

It would be good for millennials to take a closer look at Entrepreneurial Capitalism. They will find there the commitment to service and the common good that they are searching for.

Andrew V. Abela, Ph. D.

Dean, Busch School of Business

The Catholic University of America

Your email address will not be published.

Socialism inevitably leads to a tyranny by bureaucracy as the quest for control by the state is ever increasing, de facto, stifling any entrepreneurial attempts. The great promises of equality and abundance for all become a general lowering of any and all standards. Average replaces excellence and mediocrity is the new paradigm. ‘Those who fail to learn from history are condemned to repeat it’ is where this could lead to, at worse, back to the days of the Soviets. Could emigration be a solution to be suggested? Many countries currently offer some various degrees of socialism. Our country needs continuous improvement not a shot at going back to the economic stone age.

Well conceived and articulated Dr. Abela. Understanding the exiting needs of clientele served, finding differentiated and novel ways to create customer- centric solutions, and efficaciously delivering added value to all of a businesses stakeholders is indeed a noble ambition for enlightened businesses. Profits reinvested in sustaining and expanding the positive impact of a business benefits everyone.

“As ye sow so shall ye reap!” Gala. 6:7 We are all ENCOURAGED TO WORK by Jesus! If one does not plants, one does not eats! Sow not, eat not! Thus, one plants not, one eats not! Is this Communism or Capitalism? Or, is it simply the ways of Nature! Roots must seeking water beneath the earth! Animals migrate with seasons… human beings must also toil for one’s own keep! No exceptions! It is the WAY of Nature! It is God’s Way!

This is a useful discussion. Thanks for posting.

I also appreciate seeing something from NAPA that references Pope Francis. Your quote is a good one and I appreciate the care it took to include it.

“Pope Francis wrote that business is a “noble vocation, provided that those engaged in it see themselves challenged by a greater meaning in life; … to serve the common good by striving to increase the goods of this world and to make them more accessible to all.”

I don’t see enough Catholic leaders on the right side of this argument. For too long they have ignored the cost of Capitalism – to labor, the environment, and communities. Entrepreneurial Capitalism is not what we see in the many public companies who over-compensate executives. Immoral compensation payments to executives lead to immoral decisions that impact customers and communities.

In Arizona – this has translated into an anti-tax group of business leaders that hoard instead of optimize the economic decisions that address the needs of all stakeholders. I think you are finding a unique voice and path – apart from Prager U that I find unhelpful and other voices that seem to ignore the peril of unregulated markets.

Keep up the good work!

Becoming part of our community

We send a monthly newsletter to the Napa community with recent news, reflections from our speakers, information on upcoming events and spiritual insights and prayers. Please sign up and tell your friends as a good way to introduce them to the Napa community.

Subscribe Form