Paul Ryan's Catholic Capitalism
Senior Editor, CNBC.com
I suppose it was inevitable that the selection of a Roman Catholic as Mitt Romney’s running-mate would revive the long-running debate about the role of markets in the teaching of the Church. (See: Who Is Paul Ryan, and What Does He Stand For?)
Let’s be clear. Paul Ryan invited religious critiques of his economic positions when he said it was more accurate to say that he follows the philosophy of Saint Thomas Aquinas than that of Ayn Rand.
It’s this article by the National Review's Robert Costa that people are citing most widely. Note that Ryan’s remarks were made before he was tapped as Romney’s pick for vice president. But its certainly fair to suppose that Ryan knew he was at least under consideration for the job.
Here’s what Ryan actually said:
“I, like millions of young people in America, read Rand’s novels when I was young. I enjoyed them,” Ryan says. “They spurred an interest in economics, in the Chicago School and Milton Friedman,” a subject he eventually studied as an undergraduate at Miami University in Ohio. “But it’s a big stretch to suggest that a person is therefore an Objectivist.”
“I reject her philosophy,” Ryan says firmly. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas,” who believed that man needs divine help in the pursuit of knowledge.
This has prompted some to claim that Ryan must be being disingenuous on the specious grounds that no one could hold his views about the economy and be a good Catholic or Christian.
Here’s how Victoria Beklempis at the Village Voice puts it:
Of course, this is complete bull[___]. He hasn't abandoned his interpretation of Rand's economic policies (see first link). More importantly, though, there's no way Ryan could read Aquinas — and adhere to his beliefs — without lying to himself and/or doing some serious mental gymnastics. And that's because Aquinas would have [___]ing hated Ryan's capitalism.
The problem is that the portion of Aquinas’ Summa Theologica that Beklempis cites to support this claim does no such thing. At the very least, it can be read in non-gymnastic ways that very much give support to capitalism. In particular, Summa Theologica gives strong support to the practices and rules that prevail in most modern financial markets.
The first questions Aquinas takes up is whether it is lawful to sell something for more than it is worth. According to Aquinas, civil law at the time he was writing claimed it was lawful for sellers and buyers to deceive one another. Aquinas argues that this violates the golden rule of doing unto others. No one would wish to be cheated, so no one should cheat anyone else.
This problem of fair pricing, of course, is precisely what our highly developed public securities markets address so well. Prices for stocks and bonds are posted on exchanges so that neither buyers nor sellers are deceived about the “just price.” When you buy shares of Apple, e.g., there’s no chance the seller is deceiving you about the value of the shares because you never actually deal with the seller, you just buy them at the market price.
Of course, it’s possible that someone may attempt to manipulate the price of items on financial markets. And Aquinas clearly would condemn this as deceit. But market manipulation is banned by a whole host of securities laws and regulations. In rejecting manipulation, Aquinas and financial capitalism are comrades.
Aquinas also argues that it is unlawful, theologically speaking, to knowing sell a faulty good. His examples of this are precious metals and fine wines that have been diluted, putting your finger on the scale to change the weight of something, or something (like a horse) sold as healthy that is in fact unhealthy.
All of these practices are also banned by securities laws. Goldman Sachs, for example, paid $550 million in fines to settle a case where it was accused of selling a mortgage-related security that regulators believed was designed to fail (which is akin to selling a lame horse as a healthy one). Barclays paid huge fines and lost top executives for lying about interest rates—the modern equivalent of a finger on the scale. (See: Barclays Employees Watch Film on How NOT to Rig Libor)
Aquinas goes on the explain under what circumstances a seller is obliged to disclose defects and hazards to the buyer. If the buyer is somehow “subject” to the seller, defects must be disclosed. But if the buyer is sophisticated and can get advice about possible defects from others, or if the defects would be obvious to the buyer, or if there’s a secondary market that wouldn’t discount the price by as much as this particular buyer might due to the defect, there’s no obligation to disclose.
This scaling obligation of disclosure is embodied in modern securities laws. If anything, our securities laws require far more disclosure than Aquinas would. Aquinas, in this case, is more capitalist than modern practices.
Finally, and perhaps most importantly, Aquinas vindicates the basis of modern financial markets by arguing in favor of selling something at a greater price than what was paid—in other words, buying low and selling high—so long as person making a profit puts it to good use, including the upkeep of his household and the prosperity of his country.
“Thus, for instance, a man may intend the moderate gain which he seeks to acquire by trading for the upkeep of his household, or for the assistance of the needy: or again, a man may take to trade for some public advantage, for instance, lest his country lack the necessaries of life, and seek gain, not as an end, but as payment for his labor,” Aquinas writes.
Look. I’m not saying that there is a clear and indisputable Catholic economic position on every issue, much less that the Catholic Church is a bastion of free-markets. The truth is that Catholics are free to adopt a variety of economic positions—and throughout history they certainly have.
But arguing that Ryan cannot be a good Catholic and hold his views about economics is to bathe in the wash of hogs. (Related: Wall Street's Big Concern: Can Ryan Help Romney Win?)
(The Romney-Ryan campaign did not immediately respond to a request for comment.)
by CNBC.com senior editor John Carney
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