How Is Warren Buffett Like the Pope?
They are both dead wrong on economic policy.
The terrible economic news from both Europe and the United States has led to much soul-searching on both sides of the Atlantic. How did we get here, and how can we get out of this jam? A successful and sustainable political order requires stable legal and economic policies that reward innovation, spur growth, and maximize the ability of rich and poor alike to enter into voluntary arrangements. Limited government, low rates of taxation, and strong property rights are the guiding principles.
Unfortunately, many spiritual and economic leaders are working overtime to push social policy in the exact opposite direction. At the top of the list are two prominent figures: Pope Benedict XVI and financier Warren Buffett.
The Pope was on his way to recession-torn Spain—to lead the Roman Catholic Church’s weeklong celebration of World Youth Day—when he denounced those nameless persons who put "profits before people." He told journalists, "The economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man." Standing alone, these words mirror the refrains of countless Spanish socialists, whose relations with the Pope have soured in recent years. Their shared premises help explain why Spain finds itself in such a sorry state.
Denouncing those who put ‘profits before people’ may stir the masses, but it is a wickedly deformed foundation for social policy.
A similarly harsh verdict must be rendered on Warren Buffett, whose much discussed editorial in the New York Times foolishly condemns the very economic system that allowed him to flourish as an extraordinary investor. In Buffett’s utopian world, higher taxes, including higher capital gains taxes, magically generate the revenues needed to eliminate the current massive deficit. He couldn’t be more wrong.
I explain why over at Defining Ideas.
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Jun '10
Re: How Is Warren Buffett Like the Pope?
Clearly a case where two wrongs don't make a right. They make a hard turn into leftist social policy.
Re: How Is Warren Buffett Like the Pope?
Ah, Richard, you beat me to it. I was just about to post it.
Sep '10
Re: How Is Warren Buffett Like the Pope?
Richard,
While no Catholic in good standing should believe that any Pope is inerrant when he speaks on matters outside of his direct expertise as part of the Church's teaching magisterium on faith and morals, I've learned over the years to be extremely suspicious of quotes by any media of the Pope's off the cuff remarks to reporters. They've been caught before playing games with the translations of his remarks from one language to another and I'll wait to see some additional commentary before weighing in with my thoughts.
And I'd also be remiss if I didn't point out that the Vatican curia is fairly obviously populated by European clerics who have no direct experience of the economic systems or thinkers that you and I are familiar with. Unfortunate, but true.
With all that said, properly understood, the Catholic Church's social teaching does differ from straight out libertarian thinking (which I'm sure you've encountered in your discussions with Fr Siricio from the Acton Institute. I refer you to this 2009 NRO piece that he wrote, still pertinent today.
Edited on Aug 23, 2011 at 5:01amSep '10
Re: How Is Warren Buffett Like the Pope?
As to Warren Buffett, I think he's simply gone all George Soros on us, a fate which seems to befall aging wealthy investment gurus. Of course, Warren is a big advocate along with bridge partner Bill Gates of third world population control of the typical kind, a topic I leave to another thread.
Dec '10
Re: How Is Warren Buffett Like the Pope?
Sorry, Richard. I make decisions all the time in the marketplace that are informed by me treating people like human beings rather than economic units with which to maximize my profitability. I am reasonably certain that:
1) The world is a better place for it, and
2) This is actually a perfectly rational economic decision.
This is coming from someone who really likes Ron Paul, for context.
Example? I buy food, when I can, from local farmers. It is more expensive. But I like that there are farms in my community and want to support them. Another? I take the blame for cock-ups at work, sometimes, that can be laid at the feet of subordinates or contractors. Why? Because I can more easily take the heat than they can, and hence our aggregate serenity is increased.
I understand the broader point you're making: Free markets *are* ethical choices in the long run. But I understand the Pope's point, too.
Apr '11
Re: How Is Warren Buffett Like the Pope?
It seems to me the error the Holy Father and the Sage of Omaha make is simply this: They fail to recognize that "maximum profit" EQUALS "the common good". That's capitalism, and they can't get their heads around it. They are setting up a straw-man argument with a false dichotomy between profit and people.
May '10
Re: How Is Warren Buffett Like the Pope?
Richard Epstein:
"The economy cannot be measured by the maximum profit but by the common good. The economy cannot function only with mercantile self-regulation but needs an ethical reason in order to work for man." Standing alone, these words mirror the refrains of countless Spanish socialists, whose relations with the Pope have soured in recent years. Their shared premises help explain why Spain finds itself in such a sorry state.
Seems to me you're not letting them stand alone, much less interpreting them in the light of Catholic social teaching of the last 100 + years, but are rather interpreting them in the light of socialism.
I hate and despise socialism (more for its inhumanity than its bad economics.) I am a free marketeer. And I find nothing wrong in these words. Of course the economy cannot be measured only by maximum profit. Of course it has an ethical dimension, of course it has to be seen and judged in the light of the common good.
As for putting people before profits, don't we all believe this? If not, why do we oppose slave labor and child labor and sweat shops?
Edited on Aug 23, 2011 at 5:33amDec '10
Re: How Is Warren Buffett Like the Pope?
Do tell, Pseudo. Lordy, why doesn't the population control thing throw up huge red flags in the Church? I've been around Catholics who talk about running out of resources, unsustainable populations, etc. One party wants to kill off unsustainable programs. The other wants to kill off people!
You are right to be wary of "quotes" from the Pope. Please let us know what you find out.
Apr '11
Re: How Is Warren Buffett Like the Pope?
To understand contemporary Catholic thinking on capitalism you must be familiar with two papal encyclicals: Rerum Novarum, issued by Pope Leo XIII which was a criticism of Marxist thinking; and Centissimus Annus written by JPII on the 100th Anniversary of Rerum Novarum which conceded the premise that paid work conferred human dignity upon the working man.
It's hard to see Benedict's words as anything more than a restatement of Kant's Categorical Imperative, "Never treat man as a means to an end but always as an end unto himself."
Jun '10
Re: How Is Warren Buffett Like the Pope?
The Pope is not just the Pope of Europe and the United States. He's also the Pope of all those Third World parts of Asia and Africa where people really do get exploited. In fact, Africa represents the fastest growing part of the Catholic Church. So, I think it's more of a "if the shoe fits, wear it" statement. Economists warn us about fiscal dangers. Church leaders warn us about different dangers.
Jan '11
Re: How Is Warren Buffett Like the Pope?
That's because it's not true. There are all sorts of unethical ways to maximize profit which are counter to the common good. Manufacturers can use substandard materials that are much cheaper but which hurt consumers, for example. This type of thing has happened innumerable times. Corporations also do unethical things to crowd out competition and reduce consumer choice. Believing that capitalists never screw the consumer or it's own workers and get away with it is simply blind. I believe this is what the Pope is referring to, in part anyway.
I would, however, say that in socialist countries with a high corporate tax, high personal tax, and large government spending on social services, a corporation might be forgiven for thinking that they're already doing plenty to provide for the common good.
Edited on Aug 23, 2011 at 6:15amJun '10
Re: How Is Warren Buffett Like the Pope?
Ah, yes, the infamous single quote from the Pope used to interpret his entire philosophy of economics. I feel like I'm reading the New York Times. It's laughable that you would take a single quote, Richard, to compare the Pope with the socialists of Spain. Even the slightest glance at the writings of the past two Popes would inform you of the Church's firm stance against socialism and communism.
The Pope's concern is with human dignity, and it is indeed true that human dignity can be and is compromised by certain strict free markets situations. The compromise is not necessary or inherent in the system, but it can be a consequence. Fortunately, many business owners are indeed concerned with employees' well being, even if only as a means to a profit.
It's "wickedly deformed" to read one quotation aside from the vast array of encyclicals and writings of this and past Popes and read it as the Pope's foundation for an economic system.
Pretty disappointing to find such error here, though one can certainly understand the benefits of "stirring the masses" on Ricochet, especially with as many Catholics as we have.
Aug '11
Re: How Is Warren Buffett Like the Pope?
Perhaps Prof. Epstein saw the "Jesus was a socialist" bumper sticker on a car in front of him the other day, no doubt turning into the Unitarian church parking lot?
EDIT: The car in front, that is. I never would imply that Prof. Epstein would associate with Unitarians, at least on purpose.
Edited on Aug 23, 2011 at 6:37amJan '11
Re: How Is Warren Buffett Like the Pope?
Let me echo Pseudodionysius and others. First, [what the Pope says] and [what the press reports] are two different things. Second, the Pope wasn't in New York to deliver an analysis on capitalist economic theory - he was speaking in very general terms about very general principles to the Spanish, whose socialist economic system has already collapsed and are looking at economic chaos.
Calling the Pope "dead wrong" may attract attention, but it isn't entirely fair.
When Benedict urges putting profits over people, he's saying basically the same thing as what Richard says by a win-win. We capitalists promote the idea that everyone does better when individuals follow their rational self-interest, but remember, we're promoting it because everyone does better. We don't promote capitalism just because a lucky few win; we promote it because we think that everyone wins.
The morality of capitalism isn't "every man for himself." Unscrupulous rich people, seeking their own advantage, are quite likely to choke off others' opportunities to guarantee their own position. Capitalism attacks that selfishness, and protects open opportunity.
Where did anyone get the idea that promoting the welfare of humanity is only a socialist idea?
May '11
Re: How Is Warren Buffett Like the Pope?
Herkybird: To understand contemporary Catholic thinking on capitalism you must be familiar with two papal encyclicals: Rerum Novarum, issued by Pope Leo XIII which was a criticism of Marxist thinking; and Centissimus Annus written by JPII on the 100th Anniversary of Rerum Novarum which conceded the premise that paid work conferred human dignity upon the working man.
It's hard to see Benedict's words as anything more than a restatement of Kant's Categorical Imperative, "Never treat man as a means to an end but always as an end unto himself." · Aug 23 at 5:49am
Thank you for pointing out these two encyclicals to save me the hassle of digging them up myself. I don't think that JPII had to concede any point, he lived through the evils of communism and saw the fruits of freedom and liberty produced by democracy and free markets. Richard is going off the rails by inferring something about a simple "be a good person" comment. Of course it is perfectly legitimate to ask ourselves if our economic system makes the general population better off than under an alternative system.
Sep '10
Re: How Is Warren Buffett Like the Pope?
Might I suggest that the GOP should adopt Buffet’s suggestion in a heartbeat? He is advocating that the Bush tax cuts be made permanent for 99.7% of the population. Having this tax rate made permanent would have a positive impact on economic activity. Raising the rates temporarily on the .003% as he suggests would have only a minimal effect on the economy. Who cares if it raises any revenue? It would serve to get the tax the rich canard off the table.
Apr '11
Re: How Is Warren Buffett Like the Pope?
Regardless of whether you believe the Pope's statements to be truthfully his or a misinterpretation misses, I believe, the most important implied point. Whether corporations, governments or church hierarchies they are made up of individuals and each, as such, have a personal responsibility along with one as part of the whole. So often we hear corporations are evil, government is wasteful and the church is old fashioned, out of touch if you will, but we would be better served if we were all more personally honest and transparent. In Richard's defense, listening to him in the context of his "Law Talk" podcasts he always admits his personal shortcomings and biases and in all appearances is sincere.
In the parable of "The Good Samaritan" all that is revealed is when many ignored the distressed persons plight, only one we're told saw a need and met that need at some level of personal sacrifice and monetary cost. What we don't see revealed is him imploring, demanding, guilting or through force confiscation expecting anyone else to contribute in seeing to this persons needs.
Intent, someone has said, always will reveal content. I believe in Richard's.
Oct '10
Re: How Is Warren Buffett Like the Pope?
For those who want to read what the Vatican says the Pope said and have Italian (or trust Google translate), you can look here. (It also appears in Portuguese, but not other languages. I'm sure a sufficiently seasoned Vatican-watcher could draw all sorts of conclusions from this.)
(As an example of Don Google's xlation, we have "If the youth of today have no prospects in their lives, even our own time is wrong and 'evil'", with which many a Ricocheteerist would agree, I'm sure.)
Jun '10
Re: How Is Warren Buffett Like the Pope?
No, it would only raise the the rate.
Dec '10
Re: How Is Warren Buffett Like the Pope?
BThompson
That's because it's not true. There are all sorts of unethical ways to maximize profit which are counter to the common good...Corporations also do unethical things to crowd out competition and reduce consumer choice. Aug 23 at 6:12am
I think you are unfairly equating crony capitalism with free-market capitalism. It's like comparing modern French socialism with Soviet Marxism. Same basic principles, very different practices.
Edited on Aug 23, 2011 at 12:16pm