Wednesday, December 4, 2013

On the Pope’s criticism of today’s economic thinking

Last week the Pope published his text “Evangelii Gaudium”, in which he is giving different inputs for reorienting the Catholic Church. Although I am not Catholic, I was interested in his statements about the challenges of today’s world and especially in his criticism of our current economy.
In quite a positive way, he recognizes the improvement the economic system brought to “people’s welfare in areas such as healthcare, education and communication”. Yet he blames this economy of “exclusion and inequality”. He thus asks critically, “how can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” And he continues: “Today everything comes under the law of competition and the survival of the fittest, where the powerful feed upon the powerless.”

I was especially amazed by his criticism of issues that have also been discussed by the stakeholder theory for the past few years. One example is his critique of the free market. 
However, he makes no specific suggestions as to how extreme competitiveness could be limited. In contrast, the stakeholder theory proposes, for example, to focus more on the potential of cooperation among stakeholders, based on the resource based view of strategy, instead of pure competition: Through the cooperative pooling of resources, innovative solutions to issues, products and processes can be found, according to the stakeholder theory, which a single stakeholder who considers others only as competitors could not find. It would have been interesting to learn whether the Pope could in addition to this instrumental perspective on cooperation also offer a normative view, in his case based on the Catholic faith.

The same could be said about his criticism of the concept of human beings that prevails in economy. Certainly, many economists would agree with the Pope’s analysis that “the denial of the primacy of the human person” predominating classic economic theory is questionable or wrong. A growing number of publications are increasingly critical of the basic concepts of economic theory, in particular of the hypothesis of human self-interest. In this sense, the Pope states, “the socioeconomic system is unjust at its root.”
This criticism also calls for the question of which normative concept could form an adequate basis for a more realistic image of human nature. The Pope refers only summarily to the need for ethics: “Ethics – a non-ideological ethics – could make it possible to bring about balance and more human social order.” One can assume that he refers to Catholic social ethics. One can add here that there are also ethical approaches not tied to a specific denomination or religion, which are therefore also acceptable to non-Catholics.

Our reflections on stakeholder theory refer to a humanistic approach based on Kant. This approach considers human beings always as ends, not means, also in economic interactions. In this view, the different values, norms, interests and capabilities have to always be considered and taken into account in economic and business activities. Such a general humanistic approach not only addresses believers of a particular denomination, but its non-denominational claim makes it a fundamental norm also for economic activity.

Edwin Rühli

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