What Economics Is For
By Marco Rubio | First Things
Almost 130 years ago, Pope Leo XIII published the encyclical Rerum Novarum. In this text, he defended the well-being of workers and made the Catholic Church’s position on work clear: Work and working people have a fundamental dignity that all societies are bound to respect and serve. “No man,” the pope wrote, “may with impunity outrage that human dignity which God Himself treats with great reverence.”
Work, the Church teaches, has profound meaning. It is an essential part of how we fulfill the purposes of our God-given design. Through it, we provide for the necessities of life and shape the world with our actions. The dignity of work, the Church instructs us through documents like Rerum Novarum, is not just the concern of individuals. It is the concern of communities and nations to provide productive labor to their people.
In the American tradition, private business enterprise is the main institution the public has entrusted with providing dignified work. Historically, the goals of business enterprise in America have been oriented to useful production. In our best moments, this institutional alignment created stable mass employment that secured the foundation for a dignified life.
For instance, my immigrant father could come to America in 1956 with little education and find employment to sustain a stable family life. He and my mother owned a home, raised four children, and cared for my grandparents on the annual incomes of a bartender and a maid. We could even afford for my mother to spend most of her time at home when I was young.
Economic stability for working-class families is not a feature of today’s economy, however. Business profits have become increasingly estranged from production and employment. This is mainly driven by large, transnational corporations. Many of these corporations are now using our country’s resources to speculate on financial assets, including their own share prices. Rather than engaging in real production and innovation with workers here at home — the production that delivers widely shared prosperity — they have sought to reduce their domestic labor costs. This strategy is damaging not only the American worker, but also the competitiveness of American industry. We are cutting off the branch on which we sit.
The alarming implications of this trend are detailed in a new report I released this year, “American Investment in the 21st Century.” The report argues that underinvestment in America’s economy is driven by the consensus that the goal of business enterprise is to maximize financial return for shareholders. It is easy to see how this belief would lead to lower physical investment. Returns from financial engineering are easier, quicker, and more certain for shareholders than long-term investment in the capital-and labor-intensive creation of actual goods and services.
Not only the American worker, but American industrial capacity itself has suffered. Over the last forty years, the financial sector’s share of corporate profits increased from about 10 percent to nearly 30 percent. During this same period, business investment decreased by 20 percent, while corporations have tripled the amount of capital returned to shareholders. Studies have revealed that corporate managers are under enormous pressure to prioritize short-term profits over long-term strength and to sacrifice the creation of durable value in the pursuit of quarterly earnings. This shift in how we allocate capital has sapped our productive capacity and damaged our ability to provide dignified work.
When dignified work is lost or unattainable, it corrodes the human spirit. Recent years have seen the destruction of jobs that provided a way of life for families and communities for generations. Despite the claims that a “new economy” would rescue them, the new fabric of American work is not thick enough to sustain them. Entire regions have been hollowed out. Even among those who have succeeded by the terms of the financial economy, there is an inescapable sense that their work is not productive in the way it was for generations prior.
Our failure to prioritize the creation and maintenance of dignified work through investment now presents serious problems. These problems include reduced manufacturing employment, less time for families to have and raise children, population loss in rural America and mid-sized cities, and lower levels of technological development than rival states like China. To revive the dignity of work, we should begin by addressing these problems. I have suggested a few ideas, like taxing stock buybacks and encouraging physical investment, building new hubs for manufacturing and innovation, and further expanding the federal per-child tax credit and enacting a paid family leave policy. There are different ways to get at these issues, but we have to start here.
Compare a politics dedicated to restoring the dignity of work to the contemporary interest in abstract concepts like “democratic socialism.” Separated from the daily lives of most Americans, where the most important decisions are how to raise children and make ends meet, elite-level politics asks people which abstract economic system they affirm. These terms — capitalism, socialism, and their variants — have deep meanings and histories, but today they are more often deployed as surface-level expressions of political identity. This is a reckless way to think about our national inheritance of business enterprise oriented to mass employment.
There is great wisdom in the Church’s guidance. The Church’s tradition cuts across identitarian labels, insisting upon the inviolable right to private property and the dangers of Marxism, but also the essential role of labor unions. The Church emphasizes the moral duty of employers to respect workers not just as means to profit, but as human persons and productive members of their community and nation. The tradition sees past our stale partisan categories and roots our politics in something larger: the inviolable dignity of every human person, the work he or she does, and the family life that work supports.
St. John Paul II taught that “the obligation to earn one’s bread by the sweat of one’s brow also presumes the right to do so. A society in which this right is systematically denied, in which economic policies do not allow workers to reach satisfactory levels of employment, cannot be justified.” Pope Francis has taught that public assistance should be a provisional measure because the “broader objective should always be to allow . . . a dignified life through work.” Pope Benedict XVI has likewise taught that poverty resulting from lack of access to sufficient employment is a “violation of the dignity of human work.”
In the American context, these teachings should guide us to reject an unserious and distracting debate over abstract labels, and simply start to build an economy that can better provide dignified work. We must recover this wisdom and remember what economics is truly for.
Originally published August 26, 2019 at https://www.firstthings.com/web-exclusives/2019/08/what-economics-is-for.