CAPITALISM. – A term commonly used to denote the structure of the economy in modern and contemporary periods, understood in two different senses according as one considers the technical-productive aspect or the ethical-social aspect under which economic life may be viewed.
The tendency to replace human labour with mechanical means, a phenomenon almost continuously encountered and marking in a certain way the great stages of the economic history of humanity, was able to assert itself more strongly in recent times owing to the more extensive exploitation of natural sources of energy, the ever-wider application of scientific discoveries and the use of machinery in production methods. Considered in its technical-productive aspect, capitalism, or more precisely the capitalist economy, is the economic system corresponding to the different proportion in which the two factors were employed in the actual production and in the circulation of goods, with a growing predominance of the material factor (capital), in contrast to what had occurred in earlier periods, during which labour was more widely used. In this sense, there can be no doubt that capitalism deserves credit for having contributed enormously to the general welfare of humanity by lightening the burden of human toil, raising the productivity of labour, reducing production costs, accelerating the formation of savings and increasing world wealth. Yet this way of looking at capitalism is not of particular interest, since the gravest problems it has raised and still raises are not directly connected with the transformations introduced into the productive process, which constitute undeniable progress compared with the technically more backward methods of production previously in use.
Greater interest, on the other hand, attaches to the ethical-social aspect of capitalism, that is, the system of economic relations which the above-mentioned transformations have brought about, both between nations in the world and between the classes of producers, as well as between the owners of capital and the consuming public within individual countries. Taken in this sense, it may be said that, historically speaking, capitalism began with the rise of the enterprise, the complete productive unit of the modern economy. Unlike the small workshop of the craftsman, in which the factors of production were united in the same person, who was at once owner of the tools of work, worker himself with a few employees, and at the same time the responsible manager of production, in the enterprise the productive factors were divided into two distinct groups: on the one hand the owners of the instruments of production, on the other the mere workers, while the arbiter of production became the entrepreneur, a personality sometimes distinct, but more often and more generally identified with that of the owners of capital goods. The cause of this separation lay in the new requirements of production, whose greatly increased flow demanded investments of capital, both fixed (buildings, installations, machinery) and circulating (raw materials, financial means), not only on a large scale but also capable of being easily and skilfully handled in accordance with market fluctuations. Hence, especially in industry, the almost universal spread of wage-labour as a legal institution governing the economic relations between the classes of producers; the multiplication of joint-stock companies, which facilitated the gathering of large amounts of savings by distributing the risk of investment among a large number of savers; and the formation of a managerial class of administrators and entrepreneurs who freely disposed of substantial masses of wealth, whether they were entirely outside the ownership of the instruments of production or whether they participated in such ownership (share capital) to a sufficient extent to
In this way, there arose a tendency toward the progressive concentration of wealth in the hands of the ruling classes and a widespread impoverishment of the working classes (proletariat), which were sometimes exposed to actual unemployment and always to precariousness and economic insecurity in the face of the changing conditions of the labor market. These conditions were rendered permanently unfavorable to workers by the new and more substantial capital investments required by the necessity of continually reducing costs. In particular, the demand for labor underwent exceptional transitions during periods of economic growth, when the volume of production, significantly exceeding the market's capacity to absorb it, led to the cessation of productive activities and mass unemployment in certain sectors or throughout the national economy.
These phenomena, characteristic of capitalist economies, were made possible by the principle of unlimited individual freedom, which constitutes its innermost essence and distinguishes it from other social economic systems with which attempts have been made to address the inconveniences attributed to II. Capitalism indeed emerged from liberal economic doctrines, which put into practice the principle of perfect freedom of initiative and choice, recognized—at least in theory—as belonging to all economic subjects, though not necessarily to producers (capitalists and workers) no less than to consumers, under the assumption of a society governed by the right to private property. The concept of economic freedom, however, is highly equivocal and in reality amounts to a veritable servitude for those in a position of inferiority with respect to wealth, namely workers and all others who do not directly and independently participate in national production. Upon these, those in privileged positions ultimately exercise a despotic power for their exclusive advantage.
If it were possible to distinguish a theoretical capitalism from a historical capitalism, one would have to conclude that the former coincides with the theoretically perfect scientific constructions of classical economics, while the latter corresponds to an economic system that, while inspired by the ideal model of science, in practice deviated from it in many respects—not only in the strictly economic sphere but especially in the social. In this latter sphere, manifestations that may be attributed to capitalism and at the same time constitute its distinctive features were the systematic exploitation of human labor by entrepreneurs and the rise of de facto monopolies to the detriment of consumers.
In countries where capital was scarce and labor abundant, individual economic freedom meant, for workers, low wages, excessively long working hours, and the employment of women and children in place of men—all to the advantage of entrepreneurs, who were intent on reducing production costs in any way possible, even at the expense of wage remuneration, with the aim of both increasing their profits and withstanding competition among themselves in the conquest of markets through the reduction of commodity prices. The conditions of workers were incomparably better in countries undergoing great economic development and well-endowed with capital, where the labor market assumed a configuration favorable to them. But even in these countries, competition among entrepreneurs led to the ruin of businesses in which price reduction was not preceded by a parallel reduction in costs, and their absorption by those economically better equipped, which succeeded in dominating the market more or less absolutely, depriving consumers of the benefits of competition. More often than not, market dominance fell into the hands of compact groups of entrepreneurs who, rather than continue in a struggle that had become often unfair and unrelenting, preferred to unite their enterprises into associated bodies (consortia, industrial syndicates, trusts, cartels) for the purpose of fixing commodity prices to be practiced in the market by common agreement and in the common interest.
Contrary to the liberal principle from which it had arisen, capitalist economics assumed everywhere—albeit to varying degrees—a monopolistic character, enabling the holders of capital to exercise arbitrary dominion, if not always directly over the working classes, then over the mass of consumers, that is, over the entire population, which was subjected economically and politically to a limited number of men whose economic power easily imposed itself upon the representatives of public authority. Among the capitalist monopolies, those headed by the leaders of high finance (large banks) deserve mention, as they were able, through their shareholdings in major industrial complexes, to dominate entire sectors and the entire national economy.
Similar phenomena to those described within individual countries were presented by capitalist economics in the international arena, both in terms of competition among capital goods producers for the conquest of markets—which transmitted investment and sparked political conflicts and armed conflicts among nations—and in terms of monopolies arising from the coalition of industrial complexes located in different countries or from the control of natural resources of worldwide interest by individual groups of owners. Finally, there was the unequal distribution of wealth among nations. Particularly regarding this last point, where capitalism has demonstrated its social failure, the very phenomenon of the concentration and rarefaction of wealth among the classes of a people is found among nations: some abounding in capital, in the form of land resources and major industrial facilities existing in their countries or in empires subject in some way to their influence, while others, far more numerous in population relative to the economic resources of their territory, suffer from scarcity.
The consequence of this imbalance between people and wealth is a stark inequality in the living standards of the respective populations and the periodic recurrence of world economic crises, to which reference has already been made. The crisis represents the high point of the curve of the so-called cyclical fluctuations, that is, those periods of expansion and depression in economic activity that recurred at nearly regular intervals over the two centuries of capitalist economic life. While acknowledging the serious social drawbacks arising from the downward phase of such fluctuations, economic theory nonetheless discerns positive effects in the upward phase and attributes the cause of the entire phenomenon to a state of imbalance between the flow of savings and the volume of investments, determined by the saturation of available markets at that time. The imbalance that first occurred in a given country then reverberated in others, linked to the first by trade relations, until the excess wealth was absorbed by normal consumption needs and the depression was overcome, thereby reopening profitable investment prospects for savings, allowing the resumption of productive activities and the beginning of a new economic cycle.
Yet the profound cause of cyclical fluctuations, more than the imbalance between savings and investments—which is only the immediate and, in a sense, local cause of the phenomenon—must properly be attributed to the liberalist practice as implemented by capitalism. The functioning of an international economic system based on the freedom of exchange is possible only under the assumption of a freedom that is in fact shared by all the elements constituting it, namely men, capital, and goods, and which at the same time obeys the exigencies of the system itself. This system must present a certain equilibrium between the availability of capital and the amount of population, and thus between labor productivity in individual countries—a necessary condition for stable
Among them, lasting currents of exchange developed, of more or less equal intensity in both directions. However, the criterion that governed the exercise of economic freedom in capitalist economies was the immediate advantages for the country and entrepreneurs, with no regard for future benefits or the just interests of other countries. Consequently, capital did not flow, as it should have, to the places most in need of it, given that the return, if not lower, was certainly more distant than it would have been elsewhere. Moreover, the movement of men and goods, objectively unfeasible in the form described, was actively hindered by certain classes of citizens who were concerned that economic life might undergo changes unfavorable to them. In particular, capitalist producers obstructed the entry of goods that threatened the development of domestic production; the working classes in well-endowed countries opposed the entry of new workers, whose presence would have driven wages downward. For their part, governments, while accommodating these demands from producer groups, also imposed other obstacles to the freedom of international trade for political reasons.
On the other hand, economic freedom, as understood and practiced in capitalist economies, while widening the gap between countries and accentuating the imbalance in the distribution of men and capital, gave rise—by natural consequence—to excesses of production. These were not due to inevitable miscalculations of market capacity but to the impossibility of operating a system founded essentially on the principle of a real balance of economic forces among its components. The weak point of capitalism in the field of international relations lies precisely in this constitutional contradiction between the requirements of equilibrium, imposed by the very logic of the system, and the need to maintain national economic life in conditions of stability—something in which populations have a stake—and an economic freedom that, left to itself, is neither able nor can be what those requirements demand.
For the same reason, all attempts made repeatedly between the two world wars to return to more or less moderate forms of freedom in international trade have failed, including, as far as can be foreseen, the latest one of 1948, undertaken by the International Trade Conference (I.T.O.), which nevertheless sought to reconcile the restoration of some freedom in economic relations among nations with the requirements of a policy of "full employment" within each country.
As a result of the drawbacks described above, as peoples—and especially the working classes—became increasingly aware of their social rights, the capitalist-liberal economy—which, moreover, never existed in a pure state—began to decline progressively. Even before the First World War, capitalism had been forced to retreat to less liberal positions within individual countries regarding the problem of relations among the classes of production. Employers' organizations, created to protect their own sectional interests, were met by similar organizations of workers pursuing the same goal. These transformed the labor market from a regime of near-monopoly, held by entrepreneurs, into one of bilateral monopoly, regulating these relations through collective bargaining. Public authorities also took care to protect the working classes with appropriate labor legislation, which regulated, even on a legal plane, the freedom of action of entrepreneurs vis-à-vis workers. During the interwar period, labor relations were also regulated through mixed union organizations (various forms of corporatism), more or less subject to the political influence of the state, in countries governed by totalitarian regimes, including Italy, which, at the end of the last conflict, reverted to the old system to which the countries governed by democratic governments had remained faithful.
At the end of the First World War, the problem of relations between capitalist producers and the consuming public was resolved differently according to the political and social order of each country. Where the institution of private property in the means of production was preserved—with limited exceptions—public authorities, abandoning the traditional laissez-faire stance advocated by liberal doctrine, increasingly intensified their intervention in the nation’s economic life. They did so in particular through the nationalization of enterprises of general interest (banks, means of communication, mines, etc.) and, especially after the last crisis, through various forms of regulated economy, more or less severely limiting the economic freedom of entrepreneurs in accordance with the political and social needs of the community. Where, instead, the communist regime succeeded in establishing itself, as occurred in the USSR from 1917 onward and, after the Second World War, in the countries beyond the "Iron Curtain," with the state and its agencies replacing private owners of the means of production to a very large extent, the relations between capitalist producers and the public, along with those among the classes of production, were effectively abolished and subsumed into the system of political relations between the citizen and the state, which became a supercapitalist state within communist society.
In the field of international relations, governments generally adopted a policy of protectionism and control of trade, particularly in recent decades, intensifying it during the years of the Great Depression of 1929, until they created a system of nearly closed economies within their own borders (autarky), with the aim of safeguarding the stability of national economic life, threatened by the entry of foreign men and goods. The movement of men and goods is now promoted through international agreements among various countries, sometimes encompassing entire groups of nations, as in the case of Western Europe, with a view to a future economic union among the countries adhering to the European Recovery Program (E.R.P.). Over time, these countries should acquire and maintain a structure that, by mutually integrating and through an orderly system of multilateral exchanges, allows for the most efficient use of the productive factors available in each and a state of equilibrium and improved well-being for all. A certain international equilibrium in the distribution of capital goods has been achieved in the present postwar period in a wholly new form, both in the principles that inspired it and in the particulars of its design, through the same European Recovery Program. Under this program, substantial wealth has been transferred by authority—openly contradicting liberal principles—from places where it abounds to places where it has greatly diminished, especially after the devastation wrought by the Second World War.
The system of regulated economy, adopted as an extraordinary measure during the years of crisis and then continued without interruption through the emergency periods of war and reconstruction, is destined to persist in the internal life of nations, at least with regard to the countries of Western Europe. The European economic union to which they aspire indeed presupposes effective state action to regulate and direct individual activities toward a harmonious coordination of the various national economies, with the aim of raising production and the well-being of all countries. In this respect too, the classic postulates of liberal economics must now be considered obsolete. According to these postulates, under the stimulus of individual interest, economic freedom is the most suitable means of achieving the highest level of production, which would constitute the end of economics. On the contrary, as is now widely acknowledged, the end of economics is not so much the increase of wealth as its distribution according to justice among the various social classes.
social issues in various countries around the world, to which economic freedom has proven incapable of attaining on its own. The problem of the survival of capitalism, often discussed, must be viewed within this different framework of the entire economic issue. Having moved beyond the principles of traditional liberalism—of maximum indiscriminate production and the private interest of the entrepreneur as the sole end and criterion of economic activity, from which arose what was called the "spirit" of capitalism, entirely devoted to its exploitation and materialism—there is now a widespread affirmation, both in theory and in political practice, of the more humane and just principle of collective well-being, to which individual interest must be subordinated and therefore contained within well-defined limits. The issue is not one of abolishing the ownership of the means of production and private initiative, replacing the old capitalism with an even more extreme state capitalism; nor is it a matter of halting economic evolution or reverting to more backward production methods. Rather, it is about determining in which sectors and to what extent, given the technical progress achieved by the economy, the means of production and economic choices should be left to the discretion of private owners and entrepreneurs, so that they may contribute to the public well-being, to a more perfect social justice, and to a sufficiently widespread prosperity within society. The question is not so much one of the survival or definitive demise of capitalism, but rather of identifying what should be preserved from capitalism because it has proven useful to humanity, and what, for the opposite reason, should undergo a more or less radical process of revision. As can be seen, this is a question of limits, as well as of the means to be employed, in order to resolve the issue in the best way, taking into account the natural end of the economy and the factual conditions of the national and international environment in which the problem arises.
Among the means currently employed in democratic countries, in addition to the direct and indirect action of the State in the nation’s economic life and the control of public opinion over its external manifestations, mention should be made of the so-called structural reforms, which are still in their early stages. These reforms aim to transform the wage relationship into some form of partnership contract, involving workers in the management and profits of the enterprise alongside owners and entrepreneurs. In other words, seeking to avoid the drawbacks of both old-style private capitalism and recent state capitalism, an attempt is being made to chart a "third way," intermediate between the two extremes, along which the economy should proceed. This would allow private initiative to operate within a well-defined scope that does not hinder the achievement of the social ends inherent in economic life. With the necessary limitations on individual freedom, capitalism is therefore not destined to disappear entirely, but to renew itself in the awareness of a more deeply felt social responsibility on the part of those who possess wealth. There is no alternative to this, other than state supercapitalism, which, along with the loss of economic freedom, leads to the loss of all other individual freedoms.
THE CHURCH’S THOUGHT ON CAPITALISM – The previously expressed judgment of a revision, rather than total abolition, of capitalism aligns with the Church’s thought on this matter. The two social encyclicals of Leo XIII and Pius XI, *Rerum Novarum* and *Quadragesimo Anno*, important also for the completeness of the synthesis with which capitalism is described in its historical manifestations, and more recently certain letters, messages, and speeches of Pius XII, do not condemn capitalism in itself as a technically advanced economic system based on individual initiative and the private ownership of the means of production. Therefore, they took a stand against the communist system and the extreme forms of regulated economies found in totalitarian states. Indeed, given the current tendency of the State to encroach upon the natural sphere of individual activities, the Supreme Pontiffs have repeatedly denounced the danger of excessive interventions and unjustified substitutions of public authorities in the economic sector and labor relations. They have expressed disfavor toward the nationalization of enterprises when not required by the common good, as well as toward political systems that render "practically impossible or void the right to property, both in consumer goods and in the means of production." They have also affirmed the right of citizens to associate, within the bounds of the law, into autonomous organizations for the defense of their professional interests.
In particular, Pius XII, following in the footsteps of his predecessors, pointed to the most effective remedy for healing one of the most serious social ills caused by the dissociation of the factors of production—namely, the subordination of workers to entrepreneurs and their mutual distrust and hostility—in the establishment of professional and corporative organizations of employers and workers. These organizations would be founded on the commonality of interests and responsibilities, and through them, workers would be called to participate in the direction of the national economy in accordance with the dignity of their role as conscious contributors to production.
Indeed, once the legitimacy of the institution of private property is acknowledged—and given that the dissociation of the productive factors cannot be entirely eliminated from the current economic structure, even if it can be reduced by expanding cooperative or quasi-cooperative forms (worker shareholding, etc.) in the ownership and management of enterprises—the best solution for correcting the abuses of capitalism in labor relations appears to be one that, without resorting to direct state action, creates the climate and provides the means for constant collaboration between classes, based on the convergence of interests concerning the development of production. For the same reasons, the legitimacy of the wage contract must also be affirmed. The *Quadragesimo Anno* denies that this contract is "by its nature unjust," although it prudently suggests that, "as far as possible, it should be tempered somewhat by a partnership contract"—provided that it ensures a just remuneration for the work performed. This remuneration should, taking into account the particular conditions of the enterprise and the general state of the national economy, allow the worker and his family not only a decent livelihood but also the opportunity to improve their standard of living and, through savings, to acquire property of their own.
Pius XII also used two felicitous expressions to highlight the irreducible opposition between Catholic social doctrine and communist doctrine regarding their respective goals and the methods of action they propose to achieve them: "Not all proletarians, but all property owners"; "not revolution, but evolution"—an evolution that is "concordant, ... progressive and prudent, courageous and consonant with nature, enlightened and guided by the holy norms of justice and charity." Although the two phrases signi-
Open condemnation of communist aims and methods
implicitly includes reproof of the fundamental principles and
practice of capitalism regarding the purpose of the economy,
the concept of national wealth, and the means and forms
required to achieve it more effectively. According to Catholic
doctrine, “the economic wealth of a people does not properly
consist in the abundance of goods, measured according to a
pure reckoning and the material price of their value, but in
what such abundance represents and actually and effectively
provides as the sufficient material basis for the due personal
development of its members.” Moreover, “national economy,
as it is the fruit of the activities of men who work united in
the state community, aims at nothing other than to secure
without interruption the material conditions in which the
individual life of citizens may fully develop.”
Catholic doctrine therefore rejects, both on the scientific
plane (classical theory) and on the practical plane (liberal
capitalist economy), a conception of the economy that seeks
to resolve the problem of production separately and
independently from the problem of the distribution of wealth
based on the foundations of true social justice. A science that
studies how the wealth of nations is increased, drawing from
the natural exigencies of man and considering economic
subjects almost as simple centres of force, without due
recognition of their dignity as persons and their moral duties,
in an exclusively materialistic view of social reality, is a science
that Pius XI defined as being built upon “false opinions” and
“fallacious suppositions.” Nor can Christian conscience in any
way accept an economic system that, inspired by the principles
of such a science, generates or perpetuates social inequalities
incompatible with the natural purpose of material goods,
thereby arousing within national and international society
rivalries and conflicts between classes and peoples. The
Church has therefore reproved “as contrary to the law of
nature” traditional capitalism, inasmuch as it causes, on the
one hand, “excessive concentrations of economic goods, which,
often hidden under anonymous forms, succeed in evading their
social duties and almost render it impossible for the worker
to form any real property of his own”; and on the other, “an
immense multitude of those who, deprived of any direct or
indirect security for their lives, no longer take an interest in
the true and lofty values of the spirit, which no one promises
them in any way bread and tranquillity.” Capitalist economy
vainly boasts on its credit side of having accumulated vast
amounts of savings, which have made possible an unprecedented
increase in production in history, by which the needs of a
markedly enlarged humanity could be satisfied during the last
century. This, however, does not diminish the gravity of the
charge that such savings were too often the fruit of unspeakable
renunciations by workers, to which they were subjected for a
long period, until, only later, when associated in trade union
organizations, they succeeded in tipping the scales of justice in
their favour in the distribution of the product.
It suffices to recall that, limited to Italy, before 1898—the
year in which the Zanardelli penal code came into force—the
strike was considered a crime; while the first official
international affirmation of importance, denying that labour
could be considered a mere commodity, was pronounced by
the newly founded League of Nations some years after the
First World War had yielded its harvest of blood shed on the
battlefields of an entire continent. The Church did not ignore
the indispensable function of savings in the economic process;
indeed, it exhorts savings as an expression of the natural
virtue of temperance. But it denies that savings should be the
privilege of a few, and moreover of those who, in the scale of
individual needs, have reached such a high degree of
satisfaction as to be equivalent to the lack of basic necessities
for large masses of the population. The compensation due to
the owner of the means of production and to the entrepreneur
must indeed be higher than that of the other collaborators,
since they bear the responsibility of the enterprise and assume
a greater risk in the initiative of production. Yet they also
have a duty, more than others, “to contribute through savings
to the increase of national capital.” Since it must not be
forgotten that it is extremely advantageous for a sound social
economy that such an increase in capital should come from
the widest possible sources, it is highly desirable, as Pius XII
stated, “that workers too may participate, through the fruit of
their savings, in the formation of national capital.” The
advocates of liberal economy object in this regard that, in
solving the problem of distribution according to Catholic
principles, it would not be possible to obtain a quantity of
savings such as would be required by the needs of production,
particularly in capital-poor countries, since the working classes
are more inclined to allocate their income to immediate
consumption needs. The objection, however, loses much of its
force under the hypothesis that savings, especially if modest,
are suitably encouraged and effectively protected by institutions
of both private and, above all, public character, since it is the
general task of public authorities to meet and assist or even
replace private initiative when it proves insufficient to procure
the common good of society, which in the case in question
consists in an equitable distribution of national wealth.
This last point concerns more directly the method by which
the Catholic and capitalist conceptions believe they must
proceed in order to achieve the end of the economy. Born and
developed in the early period of its existence at the time of the
so-called “industrial revolution,” capitalism has remained in a
certain sense revolutionary in the way it has implemented its
programme of maximum production in absolute terms. Classical
theory had indeed demonstrated that individual freedom and
private interest, through a very dense network of apparently
disconnected and disorderly actions, would bring the economic
system into a position of equilibrium, provided that the ideal
conditions it supposed were met (one need only think of the
“economic harmonies” of Bastiat). On the contrary, since
those conditions are not met at all or only very imperfectly, the
capitalist economy has given rise to a varied and continuous
series of imbalances not only of a social nature (imbalances in
the distribution of incomes within a single country, in the
distribution of capital and wealth among the regions of a single
country and among the nations of the world), but also of an
economic nature (imbalances between savings and investments,
between production and consumption), the former
manifested in a more or less unequal participation of citizens
in the enjoyment of material goods and other advantages of
economic progress, the latter in a loss of wealth in the form of
underutilized productive factors and consumer goods. Recent
and more accurate investigations in economic thought, more
closely adhering to reality, have therefore led to the conclusion
that imbalance constitutes the normality of economic life and
that, in particular, the cyclical fluctuations previously described,
being precisely the consequence of the aforementioned economic
imbalances, should not be regarded, as in the past, as phenomena
The pathological character is merely physiological, under the assumption, of course, of a market economy. Economic development would thus naturally follow a wave-like pattern, in which phases of expansion alternate with those of depression, determined first and foremost in the countries that at any given time hold the initiative in world economic affairs, and consequently spreading to other countries as well. The concept of “order,” which appears to be a genuine achievement of primitive economic thought—and certainly was so on the strictly scientific plane of pure economics and under the hypothesis of an ideal world—has repeatedly been contradicted by the facts. Today one speaks rather of an “order sui generis,” which in practice amounts to a veritable disorder, generating economic as well as social distress both within individual countries and in the international community. Its cause is traced back to the principle of individual freedom and private interest, which, so to speak, constituted the soul and driving force of capitalism.
Catholic doctrine does not accept an economic freedom placed exclusively at the service of individual interest, indifferent to the social needs of the community and especially of the economically weaker classes; nor does it accept a market economy, the collective expression of that freedom, which allows only the strongest to survive, only later, under the weight of their own strength—as is readily visible in times of crisis, when the excessive production of periods of prosperity is exhausted. “Those very few, who seem to hold in their hands, together with greater riches, the fate of the world; those very few men—observed Pius XI in the encyclical *Caritate Christi compulsi*, while the great crisis of 1929 raged—who with their speculations have been or are largely the cause of so much evil, are themselves very often the first and most clamorous victims, dragging down with them into the abyss the fortunes of countless others.” Catholic doctrine cannot accept either, if only for the disastrous social and political consequences it entails in the field of international relations, the concept of economic progress advancing by shocks and jolts, causing various countries to swing from great prosperity to great indigence even amid an abundance of previously accumulated goods, owing to the undisciplined freedom of action of entrepreneurs who drive and direct its course.
Liberal economists are wont to observe that precisely in periods of expansion, when initiatives multiply progressively under the stimulus of large profits, economic progress takes its most decisive steps toward further improvements, which remain permanently acquired by humanity once the period of depression is overcome. The reply is that the same occurs in periods of war, when the imperatives of military offense and defense impart a strongly accelerated motion to technology, though at costs too high for all humanity, even if they ultimately redound to its benefit in times of peace. Similarly, one may say of the progress that the world economy usually records in periods of expansion, too harshly paid for in those of depression; hence it is certainly preferable to have “a progressive and prudent, courageous and nature-conforming evolution, enlightened and guided by the holy norms of justice and charity,” even if less rapid, yet more continuous and constructive, rather than a “revolution”—to which, in a certain sense, the more or less profound innovations in production techniques that individual freedom achieves in the ascending phase of the economic cycle may be compared.
The supreme pontiffs, from Leo XIII to Pius XII, have repeatedly pronounced against the concept of economic freedom and the free market, the field of action and guiding principle of such freedom, as it was understood in the two centuries of capitalism’s existence, and all the more energetically as the negative effects that ensued outweighed the positive. “Free competition, although certainly a fair and useful thing if kept within well-defined limits, can in no case be the rudder of the economy,” wrote Pius XI in *Quadragesimo Anno*; “nor can that directive function be assumed by that economic supremacy which in recent times has been replacing free competition; for being a blind force and a violent energy, it must be wisely restrained and guided if it is to become useful to men... It is necessary that free competition, confined within reasonable and just limits, and even more that economic power, be in fact subjected to public authority in what concerns the office of this latter. Finally, the institutions of peoples must adapt the whole of society to the exigencies of the common good, that is to say, to the laws of social justice; so that it will necessarily follow that such an important sector of social life as economic activity will in turn be brought back to a sound and well-balanced order.” In recent years Pius XII has again condemned that capitalism which arrogates to itself an unlimited right over property, without any subordination to the common good; he has also denounced in contemporary society “some agglomeration of wealth which, far from conforming to nature, is opposed to the order of God and to the purpose He has assigned to earthly goods,” against which the worker’s effort to improve his conditions collides. The internal institutions of nations and the action of public authorities must therefore jointly guide national economies toward the attainment of the common good of a wealth equitably distributed among the population, in particular by eliminating the gravest degenerations of an undisciplined freedom, such as monopolies, and in general by erecting barriers around the freedom of the stronger, which naturally tends to overstep the bounds of justice.
The overcoming of capitalism is therefore, according to the social thought of the Church, not an undertaking reserved exclusively to public authorities, as is maintained by Communist doctrine and the advocates of a merely centralized economy, nor by liberal doctrine, which vainly invokes it against monopolies in order to keep the market as far as possible in conditions of competition. It must also and above all be the result of new juridical institutions that impose upon the classes of production, directly concerned with the solution of the problem, a mutual renunciation of unlimited freedom and of their own exclusive individual interests, thus creating the premises for effective and lasting collaboration in justice and social peace. Regarding the sphere of international economic relations, Pius XII has affirmed the necessity of a return “to the wise and unshakable norms of a social order, which on the national plane as on the international one erect an effective barrier against the abuse of freedom, no differently than against the abuse of power.” In this new order, “founded on moral principles, there is no room for narrow egoistic calculations aimed at monopolizing the economic sources and the materials held in common, so that the nations less favored by nature are excluded.” After the vain attempts made in the interwar period at economic isolation to escape the exceptionally harmful consequences of capitalism in the international arena, the two experiences of the last war—originated in large part, like that one—
It preceded them, economic motives have prompted the various governments to recognize the necessity of implementing the principles promulgated by the Church, re-examining the principle of the absolute sovereignty of the State in defense of nationalistic interests and laying the groundwork for economic cooperation among the countries of an entire continent, the first step toward a future and broader international economic cooperation.