When the social encyclical Centesimus Annus (One Hundred Years) by Pope John Paul II was published in 1989 after the fall of communism in Eastern Europe, some people in the press and the media have reported that the Pope has finally become a capitalist. Briefly, capitalism is an economic system where the means of production of goods or capital are owned and controlled by the private sector or entrepreneurs, and the motive for production of goods and services is to earn profit or money. With the Pope’s endorsement of some positive as aspects of capitalism, the advocates of neoliberalism and free trade thought that capitalism is a better economic system than socialism, a system adopted by many communist countries where productive capital is controlled or owned by the state or communist party with social use as the main motive for production.
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These reports are misleading if one reads the texts of the encyclical. In Centesimus Annus, the Pope praises some positive traits of capitalism but he also condemns its excesses. He never endorses capitalism as the victorious economic model over socialism that developing countries ought to follow to achieve economic goals and attain progress. The Pope’s answer to the query whether capitalism is the indeed the preferred system or not is explained with qualifications. He says:
“The answer is complex. If by capitalism is meant an economic system which recognizes the fundamental and positive role of business, the market, private property, as well as free human creativity in the economic sector, the answer is certainly in the affirmative…But, if by ‘capitalism,’ is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative (Centesimus Annus, n. 42).”
What the Pope is praising in capitalism is its recognition of the positive role of business, the market, private ownership and free human creativity in the economy. These traits are obviously lacking in a socialist system where the state largely controls the business sector and private ownership and impedes freedom of its citizens to engage in business. However, the Pope qualifies his endorsement in the text. These traits are only praiseworthy if they are circumscribed within a strong juridical framework.
In other words, the Pope is recommending that brand of capitalism that provides an effective and strong state intervention which is enough to regulate unbridled and unscrupulous capital accumulation to protect the common good from the excesses of free enterprise. A type of capitalism such as liberal or neo-liberal capitalism that lacks state intervention in protecting the common good from abuses of free trade, big business, and free market is what the Pope rejected. Pope John Paul II calls the latter as “idolatry of the market” that jeopardizes the common good. To him,
“[e]conomic activity, especially the activity of a market economy, cannot be conducted in an institutional, juridical or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public service. Hence the principal task of the State is to guarantee this security so that those who work and produce can enjoy the fruits of their labors and thus feel encouraged to work efficiently and honestly (Centesimus Annus, n. 48).”
The Pope, however, clarified that this state intervention must not be absolute and encompassing–such in the case of communist countries–so as not to curtail people’s freedom to engage in business. The primary responsibility for overseeing and directing the exercise of human rights in the economic sector belongs not to the State but to individuals and to various groups and associations that make up society (CA 48).
The State’s duty in this sphere is only to sustain business activities by creating conditions which will ensure job opportunities where they are lacking or by supporting them in moments of crises (Ibid). It also has a duty to dismantle monopolies that create delays or obstacles to development. It can also exercise a substitute function when social sectors or business systems are too weak or are just getting under way, and are not equal to the task at hand. However, this supplementary intervention that protects the common good must be brief as possible “so as not to remove from society and business systems the functions which are properly theirs, and so as to avoid enlarging excessively the spheres of State intervention to the detriment of both economic and civil freedom” (Ibid).
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