[Editor’s Note: Dr. Mary Hirschfeld is Associate Professor of Economics and Theology in the Department of Humanities at Villanova University. She holds Ph.D.s in economics (Harvard, 1989) and theology (Notre Dame, 2013). Her work is along the borderline between economics and theology. In addition to having published numerous articles, she is the author of Aquinas and the Market: Toward a Humane Economy (Harvard University Press, 2018), which has been awarded the 2019 Economy and Society International Award by the Fondazione Centesimus Annus Pro Pontifice. She spoke to Charles Camosy about the current debate over socialism and capitalism taking place in the United States.] 

Camosy: Lots of talk about socialism in the news these days. Bernie Sanders is a front-runner for president. Younger people say they are increasingly skeptical of capitalism and much more open to socialism. But I also get the sense that these terms aren’t being used with much precision. Speaking as a student of economics, what is socialism?

Hirschfeld: “Socialism” is not an analytical term in economics. Instead, economists would use more precise terms to pick up various institutional features one might call “socialism.” So you can find economic analysis of central planning, or state-run enterprises, or the size of government-run welfare programs and the like. I should add that the term “capitalism” is much the same – a word that figures in public discourse much more than it does in economic analysis.

In light of that, what are your thoughts about how people are using the term “socialism” in our current political context? Would you suggest different language be used?

Like many of our political labels, the word socialism means different things to different people. If we think about economic questions in terms of having to choose between markets or government, the term “socialism” signals a preference for more government. But that could range anywhere from a more progressive tax code and a larger social safety net such as one might find in the Scandinavian countries to the centrally planned economies that existed in Eastern Europe before the collapse of the Iron Curtain. Emotively, when the term is used positively it signals a concern for equity, and when it is used pejoratively it signals a fear of the inefficiency and potential for abuse of centralized power.

One often hears that Catholic social teaching comes down hard on both capitalism and socialism. Others say that economic policies need to be prudentially connected to particular contexts such that there can’t be a hard and fast teaching. Can you summarize your views on this question?

On my reading, the Church’s social teaching does not map neatly onto secular debates about the balance between markets and government. Most importantly, in secular debates we tend to think in terms of economic outcomes – economic growth, measures of income or wealth inequality and so on.

The Church tends to think more in terms of the human goods that the economy is meant to serve. The value of markets is that they allow individuals to exercise the agency that is essential to the development of the human person. They provide scope for creativity and allow us to contribute goods and services to the community through the work we do.

The principle of subsidiarity thus suggests that we assign the responsibility for making decisions at the lowest level of organization possible given the particular sets of decisions we are thinking about. Thus, it is proper for me to direct my day-to-day affairs in the household and in my work. But when it comes to something like the local school, it is proper for the local community to make decisions through an organization like a school board. Other human needs require even larger organizations. The need for defense, for example, requires a national government. And global concerns necessitate some international organizations.

This principle taken alone would suggest that we should have some mix of markets and government, with a particular concern that we assign to government only those undertakings that require a larger communal organization. The principle also stresses that we should encourage intermediate forms of organizations – church communities, social clubs, and so on. All of these forms of organization give us the opportunity to exercise agency both as individuals and in collaboration with our community.

At the same time, the Church teaches that human individuals have a social dimension, which it expresses through the principle of solidarity. As a member of a community, I have a personal interest in and concern for the well-being of all the other members of the community, with a particular concern for the weaker or more marginal members of my community. This solidarity can be expressed through governmental structures of some sort – we can set up a social safety net. But the principle is not limited to the question of the right mix of government and market. Rather, all of my decisions whether as an individual or as a citizen participating in government and other organizations should be directed not simply to securing my own well-being, but also that of my neighbor.

With that brief background, we can get a better sense of why the Church’s teachings are “hard” on both capitalism and socialism. There are some defenses of capitalism that treat humans as atomistic individuals who are assumed to care only for their own wellbeing. In a society with that form of capitalism, individuals will have little scope for exercising the aspect of human agency that works in and for the community. It will also leave some members marginalized.

If I think the purpose of business is simply to maximize profits, I will tend to not see others as the human persons they are. Rather, I will see them as customers who can enhance my revenues, or as employees who are part of my cost of doing business. It should be obvious why the Church condemns such a capitalist spirit. By the same token, there are forms of socialism that deny the agency that is proper to the individual. That is both directly bad for the development of the human person, and it also tends to inefficiency, because decisions are taken by central planners who lack the on-the-ground knowledge to make the right decisions for localized problems. Also, some forms of socialism can crowd out or displace informal organizations which play an important role in an authentically human community.

So what does this mean for the current U.S. debate over socialism? What sorts of values and principles, in your view, should Catholics bring to this debate?

First and foremost, Catholics need to resist taking sides. As the principles I outlined above suggest, Catholics should see the value of both the market and the state. In addition, Catholics should see the value of intermediate organizations: churches, unions, clubs, leagues.

Everyone should remember that the question about the relative mix of markets and the state is at the end of the day an instrumental question. It’s about how best to achieve desirable goals. A person who is genuinely committed to achieving the desirable goals should be open to all possibilities, picking the one that works best for a given goal in a given place at a given time.

The fact that we polarize around an instrumental question suggests that we are actually more interested in something other than the problem we say we are arguing about.

Let me give an example. One question of the day is whether we should have a minimum wage. There seems to be a trade-off involved in minimum wages. On the one hand, they boost the earnings of the working poor. Most people think that’s a desirable goal. On the other hand, wages set above the market clearing level can cause unemployment, which in turn will disproportionally impact the working poor. The empirical work on the question of whether minimum wages help the working poor on balance or hurt is mixed. Most people end up citing the work that supports their position on the issue and criticizing or ignoring work that goes the other way.

But collectively, we should all recognize that given that the evidence is mixed, the right question isn’t whether the minimum wage helps or hurts. The question is when does the minimum wage help and when does it hurt. But nobody asks that question. Proponents of the minimum wage thus strike me as too cavalier about the problem of causing unemployment. And opponents of the minimum wage are insufficiently concerned about low wages being paid in conditions when higher wages really could be supported.

If we really cared about the working poor, we would be worried about both unemployment and low wages, and we would want to know what the best thing to do in a given location is. In an area where a few firms have power in the labor market, a minimum wage might well help. In an area that is more competitive, a minimum wage might hurt. We should be anxious to learn more about what factors determine whether a minimum wage is more helpful or hurtful, not the broad question of whether it is good or bad.

The same goes for other economic issues. Poverty is a complex phenomenon. Is the answer freer markets, more government, or more work from community organizations? Surely the answer depends on the sort of poverty that afflicts a given community.

The second contribution Catholics can and should make to current debates is to insist that we discuss the issues in human terms. We care about the development of human persons and human communities. Income is instrumental to those goods. On any given issue, the question should always be about finding paths that promote human dignity and human solidarity. Income and wealth are part of that – but they are always of interest only insofar as they promote the authentic human goods.

I worry that by focusing so much on the economic dimensions of our social problems that we risk reinforcing the tendency to mistake income and wealth as the highest goods.

For example, I don’t think the main problem with rising income inequality is that some people have ridiculously large houses. If we had a good understanding of the value of wealth, we would just laugh at people who foolishly think it’s desirable to live in an enormous echoing house. Rather, the problem with rising income inequality has to do with the fracturing of the community and the growing tendency to make invidious distinctions between people based on economic criteria. The problem with being lower down on the socio-economic ladder is not so much a matter of material deprivation. It’s a matter of loss of dignity and respect. As Pope Francis puts it, the urgent concern is our tendency to exclude and marginalize. It’s the social and human dimension that matters. Not the dollars and cents. The great contribution to contemporary debates from the Catholic tradition should be the steady and unrelenting reminder that the economy is meant to serve the human.