It seems today everyone has come to weigh a plan for the economy (even the Pope). This week, as G8 leaders gathered to argue about the best ways to heal the economic ills facing the world, the Vatican presented their own plan: share and be nice to each other.

The idea of economic and social cooperation (in fact, a description of reality that is all around us but rarely noticed) has been around for centuries. It was first observed by the ancients. It was first mentioned with rigor by the late medieval monks working in Spain. They gave scientific precision in the classical period and is the basis of progress in social theory in the 20th century.

In fact, it is an essential part of the case for freedom. It was the basis for the creed of our ancestors that they could rid themselves of tyrannical rule and still not descend into poverty and chaos. Failure to understand this idea is at the root of the pervasive bias against freedom and free enterprise in our time of the false “left versus right” paradigm.

According to the 144-page document released by The Vatican, called Charity In Truth, capitalism should not be like Tennyson’s nature, all red teeth and claws . The Pope says the economy “depends on the co-operation of the human family. ” Indeed, the Pope is not a fan of “pure” market by greed. He said that the idea of the market “must be shielded from influences of a moral character, has led man to abuse the economic process in a thoroughly destructive way.”

Many will likely scoff at the idea of a Catholic Pope’s analysis of the world economy or might dismiss the notion of “morality in markets.” Other might also condemn the Vatican in wielding economic advice, and admonish them to stay in their own area, that being organized religion. The reality of the situation is that the Pope is actually ahead of the curve, and religions like Christianity have been on the forefront of economic analysis since Day 1, since it is pervasively true that capitalism is a social system of trading relationships between individuals rather than a central authority delegating individuals.

The division of labor, also known as the law of comparative advantage or the law of comparative cost, and also known as the law of association are probably the single greatest contribution that economics has made to human understanding. This law – a law like gravity, not a law like the speed limit – is a description of why people cooperate and why pervasive conditions led to this cooperation. If you can take a few minutes to learn, you will understand how societies function and grow even richer without the visible hand to direct its path. You’ll also see how the criticism that the market economy led to a strong domination of the weak is a sham.

It seems the media and general populace, the latter being burned by business models based solely upon greed, has made its impasse about two years ago when the financial scandals started pouring in. While there is still a sacred place for competition in the economic model, it is becoming increasingly clear that, at many levels, homo economicus was made for cooperation. Rather than being governed by a kind of pure law of the jungle, the most prosperous economies are those where people work together.

This law of division of labor shows how it is that people can become self-sufficient and above poverty, physically and in every other sense, by working together rather than working in isolation. People working in this arrangement do not only gain an emotional level of satisfaction by helping others in their community, but also gain by amasssing goods and services (ie. wealth).

Dikes of the Netherlands and paddy agriculture in South Asia were the first examples of cooperation for mutual benefit. Only by working together, farmers could create huge complexes of drainage and irrigation, and this complex built in turn of local governments that have led to other benefits.
Moreover, they gain more than the sum of their parts; through cooperation and exchange, we can produce more than if we work in isolation. This applies in the simplest of economic parameters as well as more complex. Indeed, it appears that successful organizations are led by a core of people who always tend to cooperate on the one hand, stimulate each other to greater success, while non-co-operators are victims ostracized and left to run themselves.

The Pope’s timed release of his report was well-planned, for if it was released two years ago, when the Vatican began to prepare for this economic letter, most of the world would have dismissed the idea that greed was bad. ‘In those days,’ markets were unethical engines of prosperity. The so called free markets made the moral versions of capitalism as the lofty high-tax Nordic countries and denigrated. Indeed, crony capitalism is the true naked entity cloaked under the “capitalist” paradigm.

Critics of capitalism (also called state corporatism), including the Socialists and other anti-capitalists, often argue that crony capitalism is the inevitable result of any capitalist system. Jane Jacobs described it as a natural consequence of collusion between the government and those managing the business; since businesses make money and money leads to political power, business will inevitably use their power to influence governments. Indeed, much of the impetus for reform of campaign financing in the United States and other countries is an attempt to prevent economic power being used to gain political power.

A Christian concept of corporatism is traced to Saint Paul who in I Corinthians 12:12-31 uses the human body as a metaphor for the “Body of Christ” (the Church) whereby each part is integrated with a functional role.[12] Christian notions of brotherhood of people also sponsored the concept of a family connection of humans into groups.

During the Middle Ages, the Roman Catholic Church sponsored the creation of various institutions including brotherhoods, monastaries, religious orders, and military associations, especially during the Crusades to sponsor connection between these groups. In Italy, various function-based groups and institutions were created in the Middle Ages, such as universities, guilds for artisans and craftspeople, and other professional associations. The creation of the guild system is a particularly important aspect of the history of corporatism because it involved the allocation of power to regulate trade and prices to guilds, which is an important aspect of corporatist economic models of economic management and class collaboration.

Now, after the crash of all those focusing on the greed of banks and hedge funds, the Pope has an audience prepared to listen. Moreover, the mainstream media couldn’t predict the biggest bear market in 100 years; how do you expect them to anticipate what will unfold next? Watch this quick video clip from financial analyst and sought-after speaker Steven Hochberg about why you should challenge the consensus view about “the free market.”

Maybe the Vatican really is saying that the world should be like a giant Sweden. Maybe it is that sharing with the poor does not make us poorer, but that this increases the number of rich people. Maybe it is that being ethical, cooperative, and helping others to succeed is not failure. maybe this is what it takes to make the world more efficient and a little more better place to live.

One Response to “What The Pope Knows About Business”