There are many arguments for and against capitalism or the free market economy.  Is it good, is it bad, does it exploit people, or does it support human development?

Very simply a free market is a market where the price of each item or service is arranged by the mutual consent of sellers and buyers; i.e. supply and demand determine the price. The higher the demand for something; the higher the price.

If there is excess supply of something the lower the price as the owners need to encourage persons to purchase it. The opposite is a controlled market, where supply and price are set by a government and where decisions regarding production, distribution, and pricing are a matter of governmental control.

However, while a free market necessitates that government does not dictate prices, it also requires the traders themselves do not coerce or defraud each other, so that all trades are morally voluntary. In other words, a free market economy is “an economic system in which individuals, rather than government, make the majority of decisions regarding economic activities and transactions”.

The Church’s position is that “If by ‘capitalism’ is meant an economic system which recognises 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, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a ‘business economy’, ‘market economy’ or simply ‘free economy’.” 

What we have to ask ourselves is, is this is the case or is this indeed possible with capitalism? If we look at history there has been evidence that both on a world scale and within individual countries, capitalist development can be uneven.

Some countries grew rapidly while others remained poor. Industrial leadership shifted from Britain to Germany and the United States at the end of the nineteenth century; they in turn faced new challengers in the twentieth. Within countries, industrial regions boomed, often we hear terms such as uneven distribution of income within countries and the disappearance of the middle class. 

The capitalism that the Church supports is one where economic activity and growth provide for the needs of human beings. Economic life is not meant solely to multiply goods produced and increase profit or power; it is ordered first of all to the service of persons, of the whole person, and of the entire human community.

Economic activity, conducted according to its own proper methods, is to be exercised within the limits of the moral order, in keeping with social justice so as to correspond to God's plan for us.

For this to occur the responsibility of the state and business enterprises must be emphasised.

The state’s principal task is to ensure that business is conducted in a manner that guarantees the security of individual freedom and the possibility of owning private property, as well as a stable currency and efficient public services. The state must ensure that those who work and produce can enjoy the fruits of their labours and feel encouraged to work efficiently and honestly. 

Those responsible for business enterprises are responsible to society for the economic and ecological effects of their operations. They have an obligation to consider the good of persons and not only the increase of profits.

Profits are necessary, however. They make possible the investments that ensure the future of a business and they guarantee employment

The doctrine of the Church states: “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 which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.”

 In this way a Christian perspective is defined regarding social and political conditions of economic activity, not only its rules but also its moral quality and its meaning.”

Next week we move into discussions on Private and Business Initiatives.

Interested in purchasing the Compendium of the Social Doctrine of the Church? Please contact the Catholic Commission for Social Justice, Archbishop’s House – 622-6680.