The economic teachings of Pope Francis are a hot topic. People feel a need to weigh in on what he said whether they understand it or not. But it’s the simple fact that so many don’t understand where this comes from that is probably the most important point in the public debate.
To sum it up: Money should work for people, and not the other way around. That shouldn’t be controversial, but having forgotten this way of looking at things is may be at the heart of economic and social cycles. The simple answer is that it’s time we remembered. More to the point, that philosophy is at the heart of American tradition going back to our earliest days.
An Economy of People is not a radical teaching at all. Barataria has written on the topic in many different ways, especially outlining the difference between Capitalism, which we don’t really practice in its purest form, and Marketism. The latter is a belief in free markets and the power of people coming together freely to exchange for their own benefit. Capitalism, by contrast, is the belief that money will lead the way. The difference is not academic at all.
A free market is something of an ideal. Markets, by themselves, are almost never truly free. Anyone looking for an edge is going to take advantage of their unique position – or even build one to the best of their ability. There are many known “market failures” that cause markets to be less than free.
For example, let’s say you know something that no one else does. Perhaps you have developed a new way of building something or created a new invention that has not figured out yet. That’s an “Asymmetry of Information” that gives you an edge. It also means that your competition is at a disadvantage. Push this hard enough and you might even be able to develop a monopoly based on your ability to do or say something of value that no one else can.
Branding, as a marketing concept, is also about building a monopoly of sorts. If you can get into popular culture the idea that your purse, soft drink, or any other thing is the one true definition of coolness, then anyone who wants to be cool has to come to you to buy your product. You want “the real thing”? Buy it from the only place that has it.
Naturally, people learn from each other and knock off brands all the time. Given time and enough resources, markets will sort themselves out without a concerted effort to create a true monopoly through methods like buying out a resource in its entirety. But on the other end, not everyone necessarily has access to the same markets meaning that there is never true equality of opportunity.
That’s where the traditions of the United States come in, expressed through laws and programs throughout our history. Universal education became a standard in the 1820s in large part to give everyone the most basic access to markets. Slavery was outlawed for similar reasons, above and beyond the moral ones. The Sherman Anti-Trust Act of 1890 made explicit monopolies illegal. The New Deal re-organized many things, especially banking, to make sure that everyone had access to credit.
These examples from our history were chosen carefully. Each came at the end of a cycle of Depression. The first time that word was used was by President Monroe to describe the downturn of 1819. A serious downturn came in 1857 and had a lot to do with the Civil War. The Long Depression of the 1880s culminated with a renewed attention to the fair operation of business. The Great Depression of 1929 needed nearly everything to be sorted out before we could move forward.
It’s been noted here in the past that business cycles are getting longer, a fact neatly missed by Nikolai Kondratieff when he first proposed them. It seems as though as our life span increases everything is stretched out. That’s because they are more than business cycles – they are social and cultural turning points. The downturns occur when we conveniently forget what our Grandparents taught us, which were the lessons from the last Depression.
Here, in the fifth such Depression in US history, what we have forgotten is that money has to work for people. We let go of the ideal of a free market created not by natural forces but as a deliberate act of policy expressing our most basic values. Indeed, value and values are the same word – or at least they must be.
This Depression started because we forgot that money should be the slave of the Economy of People, not its master. The first step towards ending this cycle is simple to remember.