Chesterton Theory contribution:

Together with Hilaire Belloc, Gilbert K. Chesterton formulated the theory of Distributism and is now considered one of the most influential thinkers in Christian and modern thought. While he is perhaps best known for his prolific contributions to literature, Chesterton’s intellectual accomplishments extended into the realm of economics. His economic theory, Distributism, emphasized the importance of widespread property ownership and sought to address the social and economic inequalities of his time, based on the God-oriented nature of men rather than on just materialistic considerations. Chesterton’s perspective continues to inspire contemporary thinkers as we keep on exploring alternative economic models.

His formulation of Distributism is born as a response to the Church’s social doctrine, offering an alternative to capitalism and socialism. It is based on an authentic social anthropology, in which the aim is to give back to the person all the centrality that should correspond to them in any process of political and economic organization of society, processes in which only the person can be taken as an end in himself, and never as a means[1]. In this sense, it is a theory formulated on the basis of the philosophical foundation of the Catholic Social Teaching. In fact, this theory is inspired by the principles laid down in the encyclical Rerum Novarum and the contribution of Leo XIII which sought a just and harmonious balance between capital and labor to protect the rights and dignity of workers.

The main tenet of Distributism is that the only way to build a just world is to distribute property so that it is not concentrated in very few hands, condemning ever larger masses of people to a life of misery[2]. In his own words: “Property is merely the art of democracy. It means that every man should have something that he can shape in his own image, as he is shaped in the image of heaven”[3]. Chesterton and the distributists also promoted the idea that property should be primarily small-scale and rooted in local communities. They encouraged family farming, family businesses and local cooperatives as forms of economic organization. The belief was that this would contribute to a more decentralized economy and greater community solidarity.

Chesterton’s Distributism often faced criticism for its perceived lack of practical application. Some argue that distributism may be overly idealistic and that implementing it on a large scale could lead to economic inefficiencies or hinder economic growth. Critics also point out that Chesterton’s distributism sometimes overlooks the challenges of transitioning from existing economic systems to a distributist model.

These criticisms may indeed hold merit within specific contexts. However, what distributism proposes is not a change of system, but a spiritual transformation. It does not constitute a ‘third way,’ as it is often labeled. Every economic theory and practice implicitly rest upon some underlying anthropological view. Chesterton and Belloc’s proposition seeks precisely to alter such foundation. While both capitalism and socialism are rooted in a materialistic and utilitarian worldview, distributism finds its basis in Christian anthropology, as interpreted in the practical directives of the encyclicals that serve as its inspiration. Consequently, the change is much deeper than just that of a system. From this perspective, the critique of a systemic shift is tempered by the fact that what is proposed is a full-scale conversion. It entails a transformation of motivations and priorities rather than an overhaul of the system.

Lastly, Chesterton firmly supported the principle of subsidiarity, one of the most important principles of the Catholic Social Teaching regarding economics, which asserted that matters should be handled at the local or community level whenever possible. The principle of subsidiarity is aligned with the distributist vision of economic and political decentralization. Chesterton saw subsidiarity as a way to empower local communities and enable them to make decisions that best suited their specific needs, rather than being dictated by a distant authority. In the same sense, a distributist system grants genuine freedom upon families, which is why it poses a threat to established powers. It is a system in which every household possesses the essential means for its subsistence, free from reliance on either public administrations or vast corporate conglomerates or financial authorities. In doing so, it undermines some of the most time-honored tools of mass subjugation. This is the reason Chesterton contends that “the word rebel understates our cause”[4].

In summary, G. K. Chesterton was an advocate of distributism, an economic and social theory that advocated for a more equitable distribution of property, the promotion of local small businesses, and economic decentralization. His ideas revolved around the significance of private ownership, subsidiarity, and criticism of both capitalism and socialism. While distributism has not become a dominant economic system, it has exerted influence on the social and economic thought of certain groups and thinkers over time.

[1] Sada, Daniel, Gilbert Keith Chesterton y el Distributismo Inglés en el Primer Tercio del Siglo XX, 2005, Fundación Universitaria Española. Available at: http://ddfv.ufv.es/bitstream/handle/10641/1304/chesterton-COMPLETO-02.pdf?sequence=5&isAllowed=y

[2] de Prada, Juan Manuel, Juan Manuel de Prada: “Chesterton disuelve las ideologías modernas”, 2019, Alfa y Omega. Available at: https://alfayomega.es/chesterton-disuelve-las-ideologias-modernas/

[3] Chesterton, G.K., What’s Wrong with the World, 1910.

[4] Chesterton, G.K., Utopia of Usurers, 2000. Available at: https://www.gutenberg.org/files/2134/2134-h/2134-h.htm

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“The economic system of giving”

In first place, Martin Rhonheimer is widely recognized for his significant contributions to the field of economics, with his theses closely aligned with both the Austrian School of Economics and the Salamanca School[1].

The author emphasizes the historical contribution of capitalism in Europe in liberating the masses from famine and misery, democratizing welfare. He argues that the differences in living standards between workers and billionaires are becoming smaller and smaller in terms of basic material needs[2] and defends capitalism as a generator of employment and wealth through private investment. He warns against attempts to achieve greater “social justice” by taxing the rich and criticizes state intervention as a cause of economic crises. Rhonheimer argues that global poverty has declined thanks to capitalism and the market economy, and that inequality is inherent in economic development, but what is crucial is the increase in absolute welfare, especially of the poorest classes, where there has been more capitalism and free markets.

This position aligns closely with the principles of solidarity and subsidiarity proposed by the Catholic Social Teaching (and which we explained in our previous article on Hienrich Pesch). He emphasizes the importance of a just and humane economic order where solidarity calls for a responsibility to care for the less fortunate, and subsidiarity underscores the need for decision-making to occur at the most localized and efficient level, avoiding unnecessary state intervention. Rhonheimer contends that these principles, when applied thoughtfully, can contribute to a more equitable and morally sound economic system that respects human dignity and promotes the common good.

Corporate Social Responsibility: a misconception?

Rhonheimer has also been vocal about corporate ethics. His perspective on Corporate Social Responsibility (CSR) aligns with the idea that CSR is not a misconception, but it should be driven by strategic reasoning within businesses. He emphasizes that entrepreneurs engage in CSR successfully when they perceive it as beneficial for their enterprises, provided it does not compromise their competitiveness. Rhonheimer suggests that CSR should be viewed as a more accurate vision of business itself, considering stakeholders’ needs and contentment, similar to the importance of consumer satisfaction. He argues that market forces, rather than regulations, should stimulate CSR efforts. In market economies, businesses have a natural incentive to improve working conditions and respect stakeholders’ interests to maintain a positive reputation, which is a valuable resource for any enterprise.

Martin Rhonheimer has also made significant contributions to bioethics by addressing complex moral dilemmas, including the ethics of assisted reproduction, euthanasia, and stem cell research, all from a robust ethical standpoint rooted in Catholic principles and Thomistic ethics. His unwavering stance on the sanctity of life, opposition to practices such as euthanasia and abortion, and advocacy for conscientious objection among healthcare professionals have all contributed to a more profound understanding of bioethical issues and their implications for humanity.

A Thomistic approach to Bioethics

In conclusion, Martin Rhonheimer’s contributions to the fields of economics, ethics, and bioethics stand as a testament to the influence of Catholic thinkers in shaping these critical fields. His insights into the ethical dimensions of economic systems, firmly grounded in principles of solidarity and subsidiarity, provide a compass for creating equitable and humane economic structures. Furthermore, his unwavering stance on the sanctity of life in bioethical debates underscores the enduring relevance of Catholic ethics in contemporary dilemmas. Martin Rhonheimer’s work serves as a valuable resource for those seeking ethical guidance and moral clarity in the multifaceted landscape of economics and bioethics.

[1] Gómez Rivas, León, Campeones de la Libertad, 2019, Unión Editorial, p.208

[2] Rhonheimer, Martin, Libertad Económica, Capitalismo y Ética Cristiana, 2017, Unión Editorial, p.39

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From his application of ethics and justice in economic affairs, Covarrubias firmly believed in the importance of fair trade and the responsibility of individuals and institutions to act with integrity in their transactions. His vision emphasized the need for investors and entrepreneurs to consider not only the financial benefits, but also the social and human impact of their decisions.

His main economic contribution was to pioneer the formulation of the subjective theory of value[2] in his work, a contribution that was later inherited by the Austrian School, mainly by the German economist Carl Menger. The entire free market economy revolves around this idea[3]. Covarrubias affirms that “the value of a thing does not depend on its objective nature but on the subjective estimation of men, even if such estimation is crazy“[4]. Thus, he gave the example of wheat: “in the Indies wheat is valued more than in Spain because there, men value it more, and this in spite of the fact that the nature of wheat is the same in both places“[5]. Therefore, the great contribution of this thinker is to have anticipated concepts of economic liberalism such as market pricing (supply and demand, or in the words of the time “free competition”)[6]. This notion stands in opposition to the objective theory of value that would later form the basis of the Marxist theory of surplus value and much of modern economic thought.

Moreover, he was a precursor of Juan de Mariana’s thinking on the value of currency and devaluation, a theory that we exposed a few months ago to the Jesuit thinker. Covarrubias was an advocate of the thesis that manipulating the currency meant an artificial alteration that did not respect the natural dynamics of the market[7].

Like all these Spanish theorists, Covarrubias believed that individual owners of goods had inviolable rights over them[8]. A defense of private property that is fully in line with the Social Doctrine of the Church and ultimately with Natural Law. Finally, Diego de Covarrubias not only contributed to economics, but he is also a very relevant thinker in other fields, mainly legal. In this sense, he defended the causes of just war, the titles of conquest or the concept of the law of nations, being considered one of the greatest experts in Roman law[9].

In this way, the thought of Diego de Covarrubias once again highlights the importance of morality in economics, or more specifically, economics as a moral science. Thus, Covarrubias’ work is relevant to the present day insofar as it bears witness to the importance of applying ethics to economic activity.

[1] Gómez Rivas, León, Don Diego de Covarrubias, 2022, Unión Editorial, p.35.

[2] Huerta de Soto, Jesús, Estudios de Economía Política, 2020, Unión Editorial, p.45.

[3] Ibid, p.153

[4] De Covarrubias, Diego, Omnia Opera, «Veterum Collatio Numismatum, cum his, quae modo expenduntur, publica, et Regia authoritate perpensa», 1604, pp. 669-710.

[5] Ibid.

[6] Gómez Rivas, León, Campeones de la Libertad, 2019, Unión Editorial, p.150

[7] Ibid.

[8] Rockwell, Llewellyn, The True Founders of Economics: The School of Salamanca, 2018, Mises Institute. Disponible en internet: https://mises.org/wire/true-founders-economics-school-salamanca

[9] Rothbard, Murray N, Historia del Pensamiento Económico, 2013, Unión Editorial, p.144.

Altum Faithful Investing

The great contribution of the German Jesuit was to develop a social and economic system around the principle of solidarity[1], trying to find a “third way” between socialism and individualistic capitalism[2]. Solidarism is a social philosophy derived from the natural law tradition that claims to be the proper interpretation of human nature and the philosophical-social and economic conclusions to be drawn from it[3]. This development also responded to the objective of systematizing the incipient Social Catholic Teaching that was being forged at the time, proof of which is the aforementioned influence of Pesch’s work in Quadragesimo Anno.

The principle of solidarity constitutes a fundamental pillar in the Social Catholic Teaching that has two dimensions: being a social principle and being a moral virtue. Solidarity as a social principle has the value of ordering institutions towards the common good[4]. Solidarity in Pesch’s words is “social interdependence and real reciprocal dependence among people”[5]. In this way, he develops an economic philosophy focused on applying solidarity at all economic levels: between employee and employer, between citizens of the same state and between different nations[6].

This solidarity is materialized in harmonizing individual welfare with the common welfare. A system that contemplates that the market and private property are legitimate and useful tools for economic development but must be subject to ethical principles that prevent abuse. These principles are the obligations of citizens to society, of society to its citizens or of citizens to each other as individuals, respectively: legal justice, distributive justice, and commutative justice[7].

For practical purposes, this theory is embodied in certain positions that are still relevant today. In the first place, Pesch defended the limited action of the State based on the principle of subsidiarity, its role being to reach where people, by their own personal capacities, cannot reach. Instead, he proposed orderly protection of their rights, effective assistance, and complementarity of their needs with the power that the citizens of a State have when they act in concert[8].

Secondly, for Pesch private property, derived from natural law, has both economic and moral value and is subject to certain obligations. In his own words:

“There is no “right” which, as such or in the ownership and acquisition of material goods in the way it is exercised, is independent of the moral order operating in the world”[9].

Finally, a fundamental issue for Pesch is the relationship of the employer to the employee. In Rerum Novarum, Pope Leo XIII addresses the workers’ question with an impassioned defense of the inalienable dignity of workers[10]. This spirit is picked up by Pesch affirming the idea of a just and equitable cooperation between both parties. Pesch advocated an economic system in which workers received fair wages and adequate working conditions, and in which employers assumed their social responsibility towards their employees. This position constitutes one of the pillars on which Pius XI would rely in writing Quadragesimo Anno.

The importance of Pesch’s work lies in his ability to systematize the essence of the Social Catholic Teaching in an economic system that starts from the natural law and places the person at the center. In the words of Pope John Paul II in Sollicitudo Rei Socialis “the exercise of solidarity within each society is valid only when its members recognize one another as persons”[11].

[1] Ederer, J. Rupert, Heinrich Pesch, Solidarity, And Social Encyclicals, 1991, Review of Social Economy, 49:4, 596-610. Available at: https://doi.org/10.1080/00346769100000050

[2] Ronheimer, Martin, Market Capitalism and Christian Social Ethics: A Contradiction?, 2019, Austrian Institute Paper Nr. 27, p.2. Available at: https://austrian-institute.org/wp-content/uploads/2020/02/Rhonheimer-Market-Capitalism-and-Christian-Social-Ethics-Ai-Paper-27-2019.pdf

[3] Koslowski, Peter. Solidarism, Capitalism, and Economic Ethics in Hienrich Pesch, 2000, The Theory of Capitalism in the German Economic Tradition. Studies in Economic Ethics and Philosophy, Springe. Available at: https://doi.org/10.1007/978-3-662-04084-3_10

[4] DSI

[5] Ederer, J. Rupert, John Paul II, Hienrich Pesch and the Christian Virtue of Solidarity, 1997, Faith and Reason: The Journal of Christendom College, Vol. XXIII, No. 2. Available at: https://media.christendom.edu/1996/06/john-paul-ii-heinrich-pesch-and-the-christian-virtue-of-solidarity/

[6] Messner, Johannes, Hienrich Pesch, Das Neue Reich, 1926, vol. 8.

[7] Ederer, J. Rupert, John Paul II, Hienrich Pesch and the Christian Virtue of Solidarity, 1997, Faith and Reason: The Journal of Christendom College, Vol. XXIII, No. 2. Available at: https://media.christendom.edu/1996/06/john-paul-ii-heinrich-pesch-and-the-christian-virtue-of-solidarity/

[8] Pesch, Heinrich, S.J., Ethics and the National Economy, 2004, HIS Press, Norfolk, VA, P.52.

[9] Ibid, p.75.

[10] Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, Biblioteca de Autores Cristianos, 2019, p. 138 (n.268).

[11] Pope John Paul II, Sollicitudo Reis Socialis, The Holy See, 1987, n.39. Available at: https://www.vatican.va/content/john-paul-ii/es/encyclicals/documents/hf_jp-ii_enc_30121987_sollicitudo-rei-socialis.html

Altum Faithful Investing

Michael Novak (1933-2017) undertook the task of reconciling capitalism with Christian values by defending this system from the perspective of morality. Advisor to St. John Paul II and correspondent at the Second Vatican Council, Michael Novak was an American philosopher and theologian whose work has had a great impact on the economic thought of the last decade.

At a time in history when socialism was triumphing in the world, Novak understood the importance of reconciling Christian values with economic freedom. Novak’s great contribution is The Spirit of Democratic Capitalism (1982), which proposes the model of “democratic capitalism” based on freedom and social responsibility. Concepts that at first glance may seem opposed are in fact two sides of the same coin since freedom always implies responsibility for one’s actions. For Novak, the market is not an end, but a means, and as such, it must be placed at the service of human benefit[1]. This point is reaffirmed by John Paul II in Centesimus Annus[2] when he states that companies constitute a group at the service of society[3].

Novak’s perspectives expanded our conceptual grasp of economic liberty beyond dry formulas to include a more complete picture of the creative, human, and virtuous nature of entrepreneurship[4]. A vision he inherits in some ways from Ludwig Von Mises (1881-1973) and Israel Kirnzer (1930) and is fully consonant with the “creative human action” developed by John Paul II in his doctoral thesis Person and Action (1969)[5]. That human action is the entrepreneurial initiative of individuals and their consumption and investment decisions in the market. This positive vision of the market is the foundation of his theory of democratic capitalism: a social order favorable to inventiveness, discovery, and entrepreneurial creativity[6].

In this sense, Novak understood capitalism as a gear composed of three parts[7]:

1. A political system composed of governmental institutions.
2. A moral/cultural system composed of schools, churches and.
3. An economic system composed primarily of businesses.

Each of these parts interacts in such a way that each system controls the other and they need each other to function properly. Thus, Novakian capitalism is not a set of formal principles, but has a moral content: all decisions and actions that take place in the market have a meaning. Individuals, influenced by the moral/cultural system, through their consumption or investment decisions, influence the activity of companies, making it not a “ruthless system” but a system that pivots around morality.

Anyone could argue that the vision provided by the American thinker is naïve or idealistic, however, Novak, in one of his most famous quotes, acknowledges how capitalism, like any human institution, is not without flaws:

“Capitalism is neither the Kingdom of God nor without sin. Such hope as we have for alleviating poverty and for removing oppressive tyranny – perhaps our last, best hope – lies in this much despised system“[8]

Novak’s work shows a notable influence of the Austrian thinker par excellence F.A. Hayek (1899-1992), and in turn a clear influence of the School of Salamanca, of which we spoke in last month’s article. Hayek also inspired John Paul II in the writing of Centesimus Annus, as Novak himself, who witnessed their meeting, revealed[9].

Novak’s contribution is yet another example of the concern for morality in the field of economics, demonstrating that they are not watertight compartments. Thus, this reconciliation between Christian values and capitalism can guide us in the consumption and investment decisions we make, since it is these decisions that control the activity of companies.

[1] Novak, Michael, Juan Pablo II: La Nueva Ética Empresarial, 1992. Available at: https://www.ancmyp.org.ar/user/CONTINUACION-ANALES/14_TOMO%20XXI.PDF

[2] Acton Institute, Autor Michael Novak, 2023. Available at: https://www.acton.org/about/author/michael-novak

[3] Pope John Paul II, Centesimus Annus, 1991, n.35. Avbailable at: https://www.vatican.va/content/john-paul-ii/en/encyclicals/documents/hf_jp-ii_enc_01051991_centesimus-annus.html

[4] Robert, James M., Michael Novak, Friend of Economic Freedom, 2017, Heritage Foundation. Available at: https://www.heritage.org/economic-and-property-rights/commentary/michael-novak-friend-economic-freedom

[5] Huerta de Soto, Jesús., La doctrina social de la Iglesia Católica y la aportación de Kirzner, 2023. Available at: https://www.jesushuertadesoto.com/articulos/articulos-en-ingles/ethics-capitalism/6-the-social-doctrine-of-the-catholic-church-and-kirzners-contribution/

[6] Robert, James M., Michael Novak, Friend of Economic Freedom, 2017, Heritage Foundation. Available at: https://www.heritage.org/economic-and-property-rights/commentary/michael-novak-friend-economic-freedom

[7] Tiemstra, John P. “Economic Analysis and the Spirit of Democratic Capitalism” CrossCurrents, vol. 43, no. 4, 1993, pp. 545–49. Available at: http://www.jstor.org/stable/24459455

[8] Novak, Michael, The Spirit of Democratic Capitalsim, 1982.

[9] Huerta de Soto, Jesús., La doctrina social de la Iglesia Católica y la aportación de Kirzner, 2023. Available at: https://www.jesushuertadesoto.com/articulos/articulos-en-ingles/ethics-capitalism/6-the-social-doctrine-of-the-catholic-church-and-kirzners-contribution/

Altum Faithful Investing

More about Juan de Mariana

A defender of free market, Juan de Mariana’s main economic contribution was the defense of a balanced budget, a sound currency[1]and free competition as the best way to achieve economic prosperity and welfare of society. The central concern of Juan de Mariana’s thought is monetary theory and the issue of hyperinflation. For him, “if money falls below its legal value, all merchandise rises without remedy, at the same rate that the currency fell and everything goes to one account“[2], emphasizing the negative impact of inflation on consumption. The increase of the monetary mass had originated a situation of hyperinflation in Castile that considerably reduced the purchasing power of the people and damaged commerce. This situation was particularly pronounced among the lower classes of society.

Beyond his technical contribution, in Juan de Mariana’s work one can sense an intention to find solutions by giving vital importance to morality. An economic thought focused, as a Catholic, on achieving the welfare of society and the protection of the weakest. Such is de Mariana’s moral concern for the economy, that instead of devaluation he speaks of “debasement of the currency”[3], bringing up that moral dimension: good and evil. This concern reflects the Church’s notion of how the economy should be at the service of man and not the other way around.

In this sense, the Magisterium of the Church considers the economy as an eminently moral phenomenon, since man acts and decides in freedom, his decisions are moral acts. Thus, John Paul II, in his encyclical letter Centesimus Annus, considers the market economy as a phenomenon that must be subordinated to ethical and moral principles in order to guarantee the benefit of the whole society, especially the poorest and most marginalized.

In conclusion, we begin our Altum Thinker project whose objective is to bring the Social Doctrine of the Church closer to the world of investment and economics through different thinkers that we will bring in the future. The monetary thought of Father Juan de Mariana highlights the importance of stability and confidence in the currency, and its moral background can be very relevant in the current context of inflation. He reminds us that the economy and the currency must be at the service of society and its welfare, and that stability and confidence in the currency are fundamental for this.

[1] Instituto Juan de Mariana. 2002. “Juan de Mariana y la Escuela de Salamanca” available at: https://juandemariana.org/el-ijm/juan-de-mariana/

[2] Mariana, Juan de. 1609. Tratado y discurso de la Moneda de Vellón (De Monetae mutatione). Juan de Mariana, trans.

[3] Torras, Luis. 2019. “Juan de Mariana, la Hiperinflación Castellana y el nacimiento de la Teoría Monetaria Moderna” available at: https://juandemariana.org/ijm-actualidad/analisis-diario/juan-de-mariana-la-hiperinflacion-castellana-y-el-nacimiento-de-la-teoria-monetaria-moderna/