Can this man create a new wave of social consciousness?

Pope Benedict called on Tuesday, July 7, for a “world political authority” to manage the global economy and for more government regulation of national economies to pull the world out of the current crisis and avoid a repeat. He also called on increasing social responsibility and answerability in business, echoing social enterprises’ aims.

The pope made his call for a re-think of the way the world economy is run in a new encyclical which touched on a number of social issues but whose main connecting thread was how the current crisis has affected both rich and poor nations.

Parts of the encyclical, titled “Charity in Truth”, seemed bound to upset free marketeers because of its underlying rejection of unbridled capitalism and unregulated market forces, which he said had led to “thoroughly destructive” abuse of the system.

The pope said every economic decision had a moral consequence and called for “forms of redistribution” of wealth overseen by governments to help those most affected by crises.

The United Nations, economic institutions and international finance all had to be reformed “even in the midst of a global recession”, he said in the encyclical, a booklet of 141 pages.

The pope’s call for a supranational body to tackle global economic woes disturbed some Catholic capitalists.

“There is a difference between coordination and mandate … a reckless loan in the United States can and did impoverish people in Latvia. So obviously coordination is important as long as it is not mandates,” said Frank Keating, CEO of the American Council of Life Insurers and former Governor of Oklahoma.

Pope Benedict’s encyclical “Charity in Truth” is the latest in a long line of papal documents that criticise unbridled capitalism and stress human welfare and solidarity over the profit motive.

The Catholic social teaching expounded in these works respects private property and rejects collectivist ideologies but leans to the centre-left on the political spectrum in most industrialised countries.

An encyclical is the highest form of papal writing and gives the clearest indication to the world’s 1.1 billion Catholics — and to non-Catholics — of what the pope and the Vatican think about specific social and moral issues.

This one was addressed to all Catholics and “all people of good will” and was released on the eve of the start of the G8 summit in Italy and three days before the pope is due to discuss the global downturn with U.S. President Barack Obama.

The pope appeared to back government intervention “in correcting errors and malfunctions” in the economy, saying “one could foresee an increase in the new forms of political participation, nationally and internationally”.

“Today’s international economic scene, marked by grave deviations and failures, requires a profoundly new way of understanding business enterprise,” he said.

In other sections of the encyclical, his first on social issues since his 2005 election, he addressed topics such as development, migration, union rights, terrorism, sexual tourism, population issues, the environment, bioethics, and energy. (Additional reporting by Daniel Bases in New York)

The following are a selection of parts directly adressing social issues and civil society, with a particular critique of international development models in the last part.

 

40. Today’s international economic scene, marked by grave deviations and failures, requires a profoundly new way of understanding business enterprise. Old models are disappearing, but promising new ones are taking shape on the horizon. Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value. Owing to their growth in scale and the need for more and more capital, it is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and the results of his company, and it is becoming increasingly rare for businesses to depend on a single territory. Moreover, the so-called outsourcing of production can weaken the company’s sense of responsibility towards the stakeholders – namely the workers, the suppliers, the consumers, the natural environment and broader society – in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility. Today’s international capital market offers great freedom of action. Yet there is also increasing awareness of the need for greater social responsibility on the part of business. Even if the ethical considerations that currently inform debate on the social responsibility of the corporate world are not all acceptable from the perspective of the Church’s social doctrine, there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference. In recent years a new cosmopolitan class of managers has emerged, who are often answerable only to the shareholders generally consisting of anonymous funds which de facto determine their remuneration. By contrast, though, many far-sighted managers today are becoming increasingly aware of the profound links between their enterprise and the territory or territories in which it operates. Paul VI invited people to give serious attention to the damage that can be caused to one’s home country by the transfer abroad of capital purely for personal advantage. John Paul II taught that investment always has moral, as well as economic significance. All this – it should be stressed – is still valid today, despite the fact that the capital market has been significantly liberalized, and modern technological thinking can suggest that investment is merely a technical act, not a human and ethical one. There is no reason to deny that a certain amount of capital can do good, if invested abroad rather than at home. Yet the requirements of justice must be safeguarded, with due consideration for the way in which the capital was generated and the harm to individuals that will result if it is not used where it was produced. What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development. It is true that the export of investments and skills can benefit the populations of the receiving country. Labour and technical knowledge are a universal good. Yet it is not right to export these things merely for the sake of obtaining advantageous conditions, or worse, for purposes of exploitation, without making a real contribution to local society by helping to bring about a robust productive and social system, an essential factor for stable development.

 

 

41. In the context of this discussion, it is helpful to observe that business enterprise involves a wide range of values, becoming wider all the time. The continuing hegemony of the binary model of market-plus-State has accustomed us to think only in terms of the private business leader of a capitalistic bent on the one hand, and the State director on the other. In reality, business has to be understood in an articulated way. There are a number of reasons, of a meta-economic kind, for saying this. Business activity has a human significance, prior to its professional one. It is present in all work, understood as a personal action, an “actus personae“, which is why every worker should have the chance to make his contribution knowing that in some way “he is working ‘for himself'”. With good reason, Paul VI taught that “everyone who works is a creator”. It is in response to the needs and the dignity of the worker, as well as the needs of society, that there exist various types of business enterprise, over and above the simple distinction between “private” and “public”. Each of them requires and expresses a specific business capacity. In order to construct an economy that will soon be in a position to serve the national and global common good, it is appropriate to take account of this broader significance of business activity. It favours cross-fertilization between different types of business activity, with shifting of competences from the “non-profit” world to the “profit” world and vice versa, from the public world to that of civil society, from advanced economies to developing countries.

 

 

46. When we consider the issues involved in the relationship between business and ethics, as well as the evolution currently taking place in methods of production, it would appear that the traditionally valid distinction between profit-based companies and non-profit organizations can no longer do full justice to reality, or offer practical direction for the future. In recent decades a broad intermediate area has emerged between the two types of enterprise. It is made up of traditional companies which nonetheless subscribe to social aid agreements in support of underdeveloped countries, charitable foundations associated with individual companies, groups of companies oriented towards social welfare, and the diversified world of the so-called “civil economy” and the “economy of communion”. This is not merely a matter of a “third sector”, but of a broad new composite reality embracing the private and public spheres, one which does not exclude profit, but instead considers it a means for achieving human and social ends. Whether such companies distribute dividends or not, whether their juridical structure corresponds to one or other of the established forms, becomes secondary in relation to their willingness to view profit as a means of achieving the goal of a more humane market and society. It is to be hoped that these new kinds of enterprise will succeed in finding a suitable juridical and fiscal structure in every country. Without prejudice to the importance and the economic and social benefits of the more traditional forms of business, they steer the system towards a clearer and more complete assumption of duties on the part of economic subjects. And not only that. The very plurality of institutional forms of business gives rise to a market which is not only more civilized but also more competitive.

47. The strengthening of different types of businesses, especially those capable of viewing profit as a means for achieving the goal of a more humane market and society, must also be pursued in those countries that are excluded or marginalized from the influential circles of the global economy. In these countries it is very important to move ahead with projects based on subsidiarity, suitably planned and managed, aimed at affirming rights yet also providing for the assumption of corresponding responsibilities. In development programmes, the principle of the centrality of the human person, as the subject primarily responsible for development, must be preserved. The principal concern must be to improve the actual living conditions of the people in a given region, thus enabling them to carry out those duties which their poverty does not presently allow them to fulfil. Social concern must never be an abstract attitude. Development programmes, if they are to be adapted to individual situations, need to be flexible; and the people who benefit from them ought to be directly involved in their planning and implementation. The criteria to be applied should aspire towards incremental development in a context of solidarity – with careful monitoring of results – inasmuch as there are no universally valid solutions. Much depends on the way programmes are managed in practice. “The peoples themselves have the prime responsibility to work for their own development. But they will not bring this about in isolation”. These words of Paul VI are all the more timely nowadays, as our world becomes progressively more integrated. The dynamics of inclusion are hardly automatic. Solutions need to be carefully designed to correspond to people’s concrete lives, based on a prudential evaluation of each situation. Alongside macro-projects, there is a place for micro-projects, and above all there is need for the active mobilization of all the subjects of civil society, both juridical and physical persons.

International cooperation requires people who can be part of the process of economic and human development through the solidarity of their presence, supervision, training and respect. From this standpoint, international organizations might question the actual effectiveness of their bureaucratic and administrative machinery, which is often excessively costly. At times it happens that those who receive aid become subordinate to the aid-givers, and the poor serve to perpetuate expensive bureaucracies which consume an excessively high percentage of funds intended for development. Hence it is to be hoped that all international agencies and non-governmental organizations will commit themselves to complete transparency, informing donors and the public of the percentage of their income allocated to programmes of cooperation, the actual content of those programmes and, finally, the detailed expenditure of the institution itself.

 

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