Rediscovering Heinrich Pesch and Solidarism

As I said in my post, A Promise Fulfilled (Part II), one of the influences on my economic thinking was Father Heinrich Pesch, S.J. and the system he called 'Solidarism'. For those who are not familiar with him here is an excellent article that attempts to distill his thirteen volume Lehrbuch into a short summary and gives a glance at what can be and what cannot be done towards implementing it at this point in time.

From Crisis Magazine, 1 January 2014

The passing of the eminent American Catholic economist, Dr. Rupert J. Ederer, at the age of ninety on Thanksgiving Day 2013 calls attention to the great, but equally unsung, economic thinker and system that he devoted most of his career to furthering: Heinrich Pesch, S.J. and solidarism. Pesch, who died in 1926, was thought to have inspired Pope Pius XI’s great social encyclical Quadragesimo Anno five years later. In spite of Pesch’s relative obscurity, Ederer called him an economic “system builder,” on par with Adam Smith, Karl Marx, and John Maynard Keynes—although the system he constructed was based firmly on Catholic teaching and the natural law. The word “solidarism” rings of the principle of solidarity, which has been stressed more recently in Catholic social teaching. In fact, solidarism is also referred to as “the solidarity work system.” There is some indication that Pesch’s solidarism influenced the famed Solidarity trade union movement in Poland that rose to prominence a generation ago and led the way to the collapse of Eastern European communism.

What, broadly, are the basics of solidarism? First, it rejects both individualism and collectivism and seeks to uphold the good of both the individual and society. In short, it embraces the common good as understood by sound ethics. Second, there is a solidarity among all men because of, simply, their common humanity. There is also a more particular solidarity among people in the same nation and within the same occupation or industry or area of the economy. That means that there is or should be solidarity between employers and workers; both need each other to achieve successful economic results. This does not mean that there may not be competing interests on each side—so that, say, labor unions don’t have a purpose—but that these interests can be balanced and reconciled. Class conflict is not inevitable. Its stress on such solidarity distinguishes solidarism from both economic liberalism and Marxism.

Third, the worker cannot be reduced to a mere factor of production, nor can economics be made the be-all-and-end-all, so that everything is reduced to economic calculation. This is what Pesch termed “economism,” a term picked up by both the German economist Wilhelm Roepke and Pope John Paul II. Fourth, the market and its advantages are accepted as givens by solidarism and economic freedom is a good thing. Neither, however, may be unrestrained. While competition is valuable and plays a crucial role in economic life, it cannot be its ordering principle. That can only be human dignity.

Fifth, in line with this, while there are certainly market inclinations and forces (e.g., supply and demand) they cannot be treated as rigid “laws” (a notion that came from the Enlightenment). While market forces may help allocate resources effectively, solidarism rejects the notion that if the economy is just left alone the results will almost automatically work out to the good of everyone (indeed, this is the very thing that Pope Francis recently addressed). While self-interest, like the interests of labor and management, is legitimate, it can also be destructive and so—like what James Madison said about factions—must be regulated and channeled in a way that does not undermine the common good. Like Roepke, solidarism believes that economics cannot be separated from ethics, requires a sound social and cultural context, and there is an appropriate role for state action.

Sixth, the sense of solidarity motivates the solidarist to promote occupational groups or other sorts of arrangements of those taking part in a particular industry—which must be voluntarily agreed to, and not imposed by the state—which would aim at a kind of enlightened self-regulation. The state could thus step back and not engage in the heavy regulation and micromanagement that we have become so accustomed to (with all their attendant problems)—though it would continue to oversee economic activity and intervene where appropriate in its role as the chief guarantor of the common good. Quadragesimo Anno gave an approving nod to a reorganization of industrial economies along such lines.

Seventh, solidarism has no illusions about economic reorganization as some kind of panacea. The proper shaping of the human soul, of course, is a prerequisite. This requires formation of the virtues in the individual, which leads to the realization of such virtues as justice and social charity in the context of society that, in turn, makes possible solidarity. Proper personal formation requires serious religious commitment and sound family life. Even in his time, Pesch lamented the weakening of the family. Solidarism does not say that there must be a substantial restoration of a family-based economy—a position that some distributists would take—nor that industrialization inevitably undercuts the family, but it is aware of the serious strains put on family life by a certain version of “capitalism” (whose economism meant excessively long work hours and paid scant attention to the worker’s family needs).

Eighth, solidarism strongly defends private property, although private ownership—whether on the individual or large-scale corporate business level—can never be separated from the obligation of its social use (i.e., the concern about others and the community in the use of one’s property). The notion of absolute rights bestowed by ownership came from the economic liberalism that became ascendant in the nineteenth century and collided with the traditional classical-Christian understanding. Thus, the solidarist would very likely espouse the view of some Catholic writers in the first half of the twentieth century that large companies take on a kind of semi-public character, so they can be subject to more regulation and restraints for the sake of the common good. One example might be that laws could legitimately stop a company from just moving its plant facilities almost overnight to another part of the country or overseas when the economic effect on a community and employment would be disastrous. Nevertheless, solidarism would reject the suppression of private ownership of the means of production and distribution by something like the sweeping nationalization of a sector of the economy. It doesn’t outright exclude government ownership, but this would have to be the exception (e.g., mail service, local government ownership of utilities). It rejects socialism, but aims for socialization (a term mentioned by Pope John XXIII in Mater et Magistra, and grossly misunderstood). Socialization simply means insuring that all in an economy benefit, and like John Paul II the solidarist understands that this is not necessarily or even likely accomplished by government ownership. It is in line with what in Catholic social thought is now called the universal destination of created goods—that God has given man the bounty of the earth’s resources for all to partake of.

The concern for socialization and the universal destination of created goods perhaps underlies the ninth and tenth points. While the state could step back with a solidaristic-type economic restructuring, its role cannot be minimal. Besides the proper kinds of interventions in the economy it must provide what in the Reagan period first came to be called a “safety net.” While—consistent with the principle of subsidiarity—the family and religious and other civil-society-type groups should be the first to take care of the needy, the state as a matter of justice must help out when this is insufficient. Also, it cannot be indifferent to the situation of wealth distribution; disparities of wealth have to be addressed. This was not originally a Marxist idea as some might think, but goes back to Aristotle who seemed to advocate that an acceptable range of wealth-holding—avoiding a situation of extremes—was necessary to sustain a good and stable political society. This isn’t to say, however, that the solidarist would countenance an aggressive program of redistribution that would penalize achievers and reward the indolent. Finally, the state in promoting the common good must play a role—in association with the private sector and observing subsidiarity—in economic planning. Individuals, families, and businesses plan economically, so certainly it is necessary for nations to do so.

Eleventh, solidarism stresses the need for a just wage. This has direct implications for the state’s social welfare role: a just wage across the economy would mean that there would be less demand for public assistance programs. In line with its belief that nothing happens automatically in economic life, market forces alone cannot be the sole determiner of wage levels. Nor does merely the agreement of the parties make a wage contract just; a dignified life for oneself and his family must be the governing standard. From a public policy standpoint, the solidarist looks positively at such approaches as profit-sharing and family-wage escalators to help accomplish a just wage.

Twelfth, solidarism is concerned about justice in pricing (which, interestingly, is an area that has not been developed much in the social encyclicals). A just price is one that both covers costs and yields the producer or trader a reasonable gain (a profit). While Pesch provides much more analysis about this, some of his key points are that the consumer has no right to the lowest possible price (the workers producing a good, after all, must receive a just wage), the price should reflect the true value of a good or service (while the solidarist believes that the satisfaction of wants, and not just needs, is legitimate, some wants—say, for moral reasons—clearly should not be pursued), and that no one should be allowed to make an exorbitant gain (including profit) at another’s expense. Profit-making, like competition, cannot be the governing principle. An acceptable profit would be one that conforms to the normal level of profit for a company’s country or occupation, although a higher one could be acceptable if it were in line with the value of what one provides.

Thirteenth, any tax levied must be truly necessary, must take into account persons’ level of wealth, may be heavier on, say, investment income than income earned from work, and must be used to fund activities that will promote the common good and not merely the private good of some (e.g., interest groups). The fourteenth and final point is one that certainly collides with prevailing economic thinking: completely free trade must be rejected. This is because of commutative justice: certain countries are unable to derive the same advantage as others in a free trade regimen. Some would be hurt, as when cheap foreign products flood their markets and overwhelm their domestic producers. There is no problem with some measure of protectionism.

These are just highlights about solidarism. Pesch laid out his whole system in his mammoth thirteen-volume Lehrbuch (whose translation into English, like most of his works, we owe to Ederer). It is obvious—not surprisingly—that it sounds like the social teaching of the popes. One of my very capable students years ago commented after our class had finished Pesch’s Ethics and the National Economy (his short distillation of his thought) that she thought she was reading another social encyclical.

To be sure, Pesch’s thought could not just be picked up across the board and applied to our contemporary economy. He died almost ninety years ago, and it would need analysis and updating to address the many changes that have occurred since then. Popes such as John Paul II did not mention economic restructuring, although the participatory norm he stressed certainly was part of it. Maybe John Paul thought that with the moral and cultural decline since 1926 we have to think about more basic things. What is needed is for Catholic economic scholars and other social scientists to rediscover Pesch and consider how solidarist ideas could apply today.

It also offers Catholics of a politically conservative bent economic analysis—at the systemic level—that genuinely respects private property and a rightful role for the market but avoids a view of “capitalism” that is at odds with Catholic social teaching. While needing updating, it is a theory addressing the economics of modern—as opposed to, say, medieval—times, but is rooted in the classical-Christian tradition instead of the mindset of the Enlightenment. Perhaps it’s time to rediscover and think about Pesch and solidarism, especially at a time when Pope Francis asks us to think about whether at least significant aspects of our current thinking about economics is correct amid widespread, serious economic inequalities and conditions of poverty in the world.