Welcome to Venture Fidelis, where we seek to inject faithful and informed Catholic teaching into the field of business, economics, and public policy. This week, I'm your host, Philip Nielsen, and I'm the Director of Research at the Center of Evangelical Catholicism and Venture Fidelis. Today's topic is The Principle of Subsidiarity. This podcast is brought to you by Venture Fidelis, an initiative of the Center for Evangelical Catholicism.
Venture Fidelis exists to provide American business entities the opportunity to possess and exhibit the clearly defined, explicitly stated, and legally expressed Catholic identity. For more information, visit www.venturefidelis.com. Last week, TJ started off by giving a brief introduction to the seven principles of Catholic business. Though we describe these as Catholic principles for business, more broadly, they are principles of Catholic social teaching.
As such, they are as much political principles as business principles, and we should think of them as fundamentals of how to act in the public forum. If you remember, we describe these seven principles as, one, the sanctity of life and the dignity of the human person, two, the dignity of work, three, support for the family as the building block of society, four, the principle of subsidiarity, five, the role of private property, six, the need to get past materialism and the sin of greed, and seven, the good of charitable giving. Today, I want to zoom in on number four and five, the principle of subsidiarity and the Catholic approach to private property in the free market. This, in turn, leads to the question of capitalism in church teaching.
So let's review quickly what we mean by these terms. First, subsidiarity. Subsidiarity is an organizing principle for the way Catholics understand the public order. It states that societal matters ought to be handled by the smallest, most local, or least centralized competent authority, starting with the family as the building block of society.
Only when the family cannot deal with an issue does it move down the ladder of authority to the neighborhood, local government, etc., and devolving into national or international issues as a last resort. Listen carefully how this works. The highest God-given authority in society, the building block of society, is the family. This seems backwards from what many people subconsciously think, that families and local governments pick up the slack for what the national government cannot do.
But the reverse is true. As Pope Pius XI put it, in places in the United States, and is currently the law in countries such as Germany, Brazil, the Netherlands, Cuba, and many others. In these countries, the state legally has to grant exceptions to a blanket law against homeschooling. We can describe these totalitarian laws fairly as fundamentally non-Catholic, since this is the exact opposite of how a subsidiarity-based approach would work.
A truly subsidiarity-based approach would acknowledge the parents' right to educate their children as they see fit, and a local government should not be able to force the family to forego this right without first meeting a very high burden of proof. This is because the parents have the primary God-given duty to raise and educate their children. Since they have the duty to do so, the state must recognize their right to do so. This is the meaning of subsidiarity.
As such, the Oxford English Dictionary defines subsidiarity as, In this sense, the central authorities are not higher authorities that honor starts with the family. What subsidiarity does is it respects each person's contribution to the community, where statism and the welfare state do the opposite. As Benedict XVI puts it in his encyclical on charity, Subsidiarity respects personal dignity by recognizing in the person a subject who is always capable of giving something to others. By considering reciprocity at the heart of what it is to be a human being, subsidiarity is the most effective antidote against any form of all-encompassing welfare statism.
It is able to take into account both of the manifold articulation of plans, and therefore of the plurality of subjects, as well as the coordination of those plans. End quote. Subsidiarity, as a body of church teaching, has many implications for business. Subsidiarity recognizes the importance of small businesses and self-governance as practices that strengthen the capacity of society for dealing with issues on a more local level.
Small business ownership or the local entrepreneur ideally develop both an increased neighborhood awareness and responsibility that strengthens society's ability to deal with issues on the local level. Local private property ownership may not be economically viable. It may be that larger-scale businesses provide the cheapest means to the production of specific goods. In such cases, and in a free market, they may go out of business.
This creative destruction caused by the market might even be good if it means that poor families can afford needed items like books or shoes more easily. What Subsidiarity does point out, however, is that the loss of private ownership or family or local businesses or local control hold a hidden cost. This cost has fundamental implications for the local societies. This takes us to the question of private property.
Namely, the Catholic Church has always had a very strong opinion in favor of private property. If we take this in the context of Subsidiarity, we start to understand why. Because strong private property laws have the potential to affirm human freedom, the authority of the family, and local engagement. We all know how much cleaner, safer, and better maintained neighborhoods of privately owned homes tend to be than rental neighborhoods.
This also tends to result in better stewardship of God's creation, what we can speak of as authentic environmentalism. There is a reason that the greatest environmental degradations in the history of our world took place in communist bloc countries. Meanwhile, all the greatest success stories of environmental cleanup, or rivers or landfills, have tended to originate in local initiatives or clubs of concerned citizens. This explains the quote from the Catechism that TJ mentioned last week, that, quote, In the beginning, God entrusted the earth and its resources to the common stewardship of mankind to take care of them, master them by labor, and enjoy their fruits.
God gave, end quote, God gave the goods of creation to the human race as a whole. It does not, as the socialist and communist thinkers would have it, oppose the concept of private property. But rather, private ownership is the normal means by which this principle of common use is realized. As the Catechism of the Catholic Church says, the appropriation of private property is legitimate for guaranteeing the freedom and dignity of persons, and for helping each of them to meet his basic needs and the needs of those in his charge.
Now let's look at two possible objections to the Catholic principle of subsidiary. The first objection that people sometimes make is that in a free market, being able to do things on a big scale matters. In economics, this is called economies of scale. The idea being that a big business can buy and sell things more cheaply, or with a smaller margin of profit, and be able to drive the little businesses out of existence.
This is obviously true in certain fields, like steel production, and has tended to be true in fields like book sales, where the product is the same no matter what the size of the business. Thus, local bookstores will have a hard time competing with Amazon. This is true and indisputable to a degree, and the solution is certainly not to make Amazon.com illegal. But defenders of subsidiarity can make two important points.
First, there is a difference between true and false economies of scale. When an industry that does not need to be heavily regulated becomes heavily regulated, it becomes harder and harder for local businesses, even businesses that have thrived until then, to compete. This is exactly what happened to the banking industry, for example, when the Dodd-Frank bill was passed in response to the recession of 2008. Many local banks were forced to close because they could not keep up with the 2,200 pages of new regulations.
This had a trickle-down effect, because though small banks only account for 22% of loans in general, these small local banks account for three-quarters of local farm loans and small business loans. In other words, one batch of federal regulation pushed local farms out of existence, which then made it harder for local businesses and local farmers to get their needed loans, which in turn made it harder for them to compete with factory farms and bigger businesses. This, in turn, took power away from the local companies. Was more regulation of banks necessary?
Maybe. But we can rest assured that nobody was debating the principle of subsidiarity or the cost of local business or communities. This is why the principle of subsidiarity demands a healthy skepticism about new regulations. It may sound good on paper.
It may hope to address a problem. But it may also have the hidden cost of a false economy of scale. It may make it harder for local businesses to compete. Another way to think about this is that the Catholic Church defends private property because it defends the freedom of human persons and wishes to protect their ability to fulfill their duties to provide for their families, etc.
To defend private property also means to defend the free market because a person's labor is one of the goods that they possess and can trade on the market. But we also have to remember that Catholic social thought is above all practical and pastoral. Just because we defend the free market and free enterprise does not mean that we do not understand how free markets tend to become less free. How does this happen?
Well, most obviously and most typically, those in power will try to distort the market to give themselves a competitive advantage. This means that countries with free market economies will tend, over time, to become less free in the direction of bigger businesses with bigger lobbies. When contemporary Catholic thinkers argue against big banks or big businesses, more often than not, they are arguing against what in modern usage we call crony capitalism, that is, in the bending of laws in favor of those with political power over the local control of families and communities. Now, before we turn to today's book reviews, a word about Venture Fidelis.
Venture Fidelis, an initiative of the center of evangelical Catholicism, exists to provide American business entities the opportunity to possess and exhibit a clearly defined, explicitly stated, and legally expressed Catholic identity. To this end, Venture Fidelis seeks to, one, inform business choices in light of Catholic theology, two, provide a means of a legally articulated Catholic identity, and three, allow for networking with other businesses, either as an operator, employee, or consumer, for other businesses for whom a Catholic identity is a priority. For more information or to give, visit www.venturefidelis.com. Okay, time for book reviews.
Today I have two books. The first is an introduction to Catholic social teaching in general. It is called Reclaiming Catholic Social Teaching by Anthony Esalen. Now, I found this work to be very helpful in two ways.
First, he's a serious scholar, so he drills down to the foundational text of Catholic social teaching, and as the title suggests, he reclaims these teachings from those that might give the vague impression that the church's social teachings favor a vast welfare state. Secondly, Esalen writes with a powerful, clear, and engaging style suitable for those with a variety of levels of knowledge on the topic. As I say, the book is really helpful for framing discussion of social teaching. The only complaint I have about this book, and it's admittedly unfair complaint, is that it does not discuss current political or social applications of the church's teachings.
As I said, this is an unfair critique because though it may have been helpful on one level, Esalen's approach makes it for a much higher work. The second book I wanted to highlight is by an Eastern Orthodox economist and philosopher named Nassim Taleb, and it's called Anti-Fragile Things That Gain From Disorder. Now, in many ways, I would say that this work is the most creative and ingenious defense of subsidiarity written in the last 80 years. This is largely because though he argues for many of the things supported by Catholic thinkers, such as small business ownership, local governance, artisan economies, and even discusses subsidiarity as a concept, he does so from the perspective of economics rather than morality.
This is very helpful because he helps to point out the many reasons why subsidiarity makes for a healthier economies and cultures, and why subsidiarity pairs well with free markets to make stronger and in a phrase he coins anti-fragile economies. I love this book, but my only warning is that for an economist to let can be a little salty with his language. Next time, we will be looking at the Catholic understanding of capitalism, a topic that certainly has confused people in recent years. If you have any questions about the Catholic Church's view of politics, social issues, business, or economics, please email them to cec at evangelicalcatholicism.com.
That is cec at evangelicalcatholicism.com. If you've enjoyed this podcast, please remember to leave a review on iTunes or SoundCloud or wherever you hate your podcasts. Good reviews help us promote this content and the church's teachings in these forums. If you hated this podcast, please forget I said anything.