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Uneconomic thinking

4 December 2014 By Edward Hadas

Pope Francis insulted Europe last week. The leader of the Roman Catholic Church said the continent is fearful, self-absorbed, haggard and pessimistic. Sadly, his diagnosis is basically accurate. The accusations are also apt for almost all developed nations. This cultural malady has ominous economic implications.

The Pope’s criticism of Europe for giving migrants a cold reception shows that there is still much that is right about the culture. Many people from poorer countries are still desperate to move to some rich country. Migrants would not want to come to Europe, or any rich nation, if the countries were wastelands. Indeed, these places offer the highest available levels of peace, prosperity and economic opportunity.

Still, the Pope is on to something. People in rich countries are worried too much about wealth. Residents, almost all extraordinarily rich by the current global standard, fear that immigrants will take away a tiny bit of their wealth. Even if migration had that effect, such a trivial economic worry should not displace the much more important benefits of immigration: the advancement of human dignity and the co-existence of cultures.

People in rich countries also seem to have a faulty understanding of the economic good shown, for example in most discussions of unemployment. Yes, many will agree that too many people in Europe, especially young people, are deprived of what Francis called the “dignity conferred by work.” However, politicians and other policymakers tend to treat the creation of worthy jobs as less important than fiscal rectitude, smaller government and fears of detrimental effects on those who already have employment. In other words, money, ideology and greed take precedence.

Economies in rich countries can be seen to suffer from the decay of the prevailing cultural mores. It is true that anti-moderns have been making this claim for at least two centuries, and have been wrong. But as Francis points out, the appeal of what might be called “great ideas,” both religious and secular, seems to have faded away in the last few decades.

Instead, the Pope complains, countries are dominated by an uninspiring “functionalistic and privatised mindset” which is obsessed with “bureaucratic technicalities.” Great projects and bold ideas will get stuck in this grey world. The development of the internet, much of it available at almost no cost to the user, weakens such pessimistic arguments. But inadequate state and private investment, policy paralysis and the rise of a largely parasitic financial sector argue strongly in favour.

The rich country disorder is curable. Francis hinted at one helpful idea last week. Solidarity should be placed above efficiency in the hierarchy of economic goods. In rich countries, making more from less usually improves life in poor countries. And where people already live well materially, more efficiency adds little. It may subtract from the quality of life by reducing personal contacts.

Social solidarity is a prerequisite for solving rich countries’ biggest economic problems. There will never be enough jobs until the employed feel moved to help the unemployed. Economic inequality will increase until the richest and most powerful members of society are tightly bound to those who have less. Excessive debt will pose a permanent threat until lenders and borrowers recognise their mutual dependence.

Pope Benedict XVI, Francis’s predecessor, had another valuable idea, although its name, the “principle of gratuitousness,” sounds awkward in English. This vision of giving freely starts with gratitude, for the great gift of life, innate abilities and the whole world. The religious believe that the gifts come from God, but non-believers can share the sense of wonder at the given world. In return for the gifts, we should freely and cheerfully offer all that we make of these gifts back to our communities, and ultimately to everyone. What we take should be much less important than what we give.

That may sound mushy, but it is a good description of what modern economies can achieve. When entrepreneurs build and when companies invest, they follow this principle, because customers will inevitably take most of the true value that they create. Producers too anxious for their own profits show a lack of gratitude and gratuitousness. That attitude will eventually lead to a more meagre economy.

You don’t have to be Catholic or even religious to like the economic agenda of more solidarity and gratuitousness with less emphasis on efficiency and profit-seeking. Yet there may be a catch for secularists. Francis believes that Europe’s fundamental cultural problem is that it is “no longer open to the transcendent dimension of life.”

In other words, the Pope sees a spiritual decay which is spreading through all of society, including the economy. Most economists are professional materialists who find such talk incomprehensible. But if Francis is right, the rich country disorder can only be cured by calling on ideas that fall outside the normal ambit of economics.

 

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