“The biggest weakness of the paper”

The president of the Munich-based Ifo Institute for Economic Research, Clemens Fuest, is "disappointed" by the economic aspects of the Pope’s new encyclical "Fratelli tuttti". In an interview, he explains what he finds lacking in the Pope’s letter.

CBA: In his new encyclical, the Pope describes his utopia of a better world. What do you think of this utopia as a whole??

Prof. Clemens Fuest (President of the Munich-based Ifo Institute for Economic Research): Overall, I am disappointed. It is right that the Pope calls for more solidarity with the weak in the world. But there are no groundbreaking ideas on how to achieve this. At the same time, the text is full of anti-market ideology and misconceptions about globalization and the role of private property.

CBA: After all, Francis is not an economist, but a churchman, and he calls, among other things, for people to turn to charity to solve current problems. Is this naive?

Fuest: This is not naive, but it is insufficient. A society based on charity alone does not work. No one wants to be dependent on the selfless giving or even the mercy of others. There is no society in which prosperity and culture thrive primarily on this basis. That doesn’t mean we shouldn’t try to be and do more for others.

CBA: Pope criticizes market liberalism, which he calls "neoliberalism". Does he see this too one-sided and negative?

Fuest: Railing against markets and alleged neoliberalism is paper’s biggest weakness. Neoliberalism is described as the belief that markets solve all problems. No one in the world who has anything to say or is in their right mind claims that markets solve all problems. Nor is there any society in the world where market forces spread unchecked. Problems like poverty and environmental pollution usually result from a combination of dictatorial regimes and corruption. Market forces are not the central problem here. That in countries with great grievances economic power is also abused and people enrich themselves with terrible methods is true, but is not caused by market economy, capitalism or neoliberalism.

CBA: Francis believes the free-market liberal notion that the sum of realizing individual interests produces the best outcome for all is disproven. Is he right?

Fuest: He is wrong. No one has ever claimed that the realization of individual interests produces good results regardless of the prevailing framework and institutional rules of the game. Adam Smith, the spiritual father of market liberalism, often pointed out the importance of framework conditions such as limiting monopoly power. At the same time, the mobilization of individual interest for the common good, which the market economy provides, is the central prerequisite for overcoming poverty and need. This has been proven many times.

CBA: The pope puts the common good thinking above everything, so that every human being can live in dignity. He calls the right to private property a "secondary natural right", which is derived from the primary "principle of the universal determination of goods". Can this help and make the world more just?

Fuest: The call for people with a lot of wealth, such as entrepreneurs, to have the common good in mind is legitimate. However, many entrepreneurs also take the common good into account. However, subordinating the entire private sphere to the common good is dangerous. The question arises as to who defines what the common good is. The strength of liberal societies lies precisely in the fact that there is a private sphere in which the community remains outside. Without private property there is no freedom.

CBA: Apparently, however, the pope does not think a free market economy can make for a more just world. Is he too pessimistic?

Fuest: I think his statements on this are dangerous because it can lead people to support dictators with socialist promises of salvation, like Hugo Chavez for example. He had promised to overcome capitalism in Venezuela and to provide for a just society. In fact, he has turned the country into a poorhouse, where a few state functionaries enrich themselves and violence and misery prevail widely. It has become a country from which millions of people flee. His successor Maduro continues this work.

The fact that the Pope does not denounce this Chavez-Maduro socialism, but takes up arms against the market economy, is almost a scandal. Francis instead rages against a system that doesn’t exist at all. There is no country in the world where there is an unregulated market economy without government influence. At the same time, it is clear that there is no country in which prosperity, nature conservation and humanity can flourish without a market economy.

CBA: For all the criticism, what should businesses and the economy take away from this papal letter??

Fuest: It’s not so much about companies and the economy, but about each of us individually. We should all ask ourselves how we treat weaker people and people in difficulties and what we do for them.

CBA: Suppose the pope had asked you for suggestions for improvement beforehand – what would you have said to him?

Fuest: I would definitely have advised him against pillorying the market economy like that. The worldwide spread of the market economy and global trade has lifted hundreds of millions of people out of poverty and misery in recent decades. That doesn’t mean there isn’t a need for reform, but it’s a path we need to continue down. The assertion in the encyclical that globalization has not benefited the weak and has only led them into dependency is a simple untruth. Prejudices are presented here, the actual development of the world is ignored. Such mistakes are regrettable because they take away some of the credibility of the whole text.

The interview was conducted by Gottfried Bohl.

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