John Paul II's 1991 Encyclical Weighed Capitalism After Communism Fell

When a Pope writes a letter to the whole world right after the Berlin Wall falls, you expect a victory lap. Capitalism won, communism lost, pass the champagne. Instead John Paul II sat down with the question that every triumphant free-marketeer should have to answer before dessert: won what, exactly, and on what terms?

His answer, in the encyclical Centesimus Annus of 1991, was a qualified yes. It is one of the most useful documents in modern conservative thought precisely because it refuses both easy cheers. It does not say markets are sacred, and it does not say markets are suspect. It says markets are good servants and poor masters, and then it tells you what the master should look like. Let us read it the way we read a founding text: closely, passage by passage, starting with the man who wrote it.

The Pope who had lived it

Karol Wojtyla was born in 1920 in Wadowice, Poland. He grew up under a free Poland, lived through the Nazi occupation that began in 1939, and worked in a quarry and then a chemical factory while studying for the priesthood in secret. After the war came communist rule. He was ordained in 1946, became Archbishop of Krakow in 1964 and was elected Pope in October 1978, the first non-Italian in four and a half centuries.

That biography matters for reading the text. He did not learn about socialism from a pamphlet. He watched a state take over the economy and the schools and then go after the Church. When he visited Poland in June 1979, enormous crowds gathered to hear him, a demonstration of unarmed loyalty that the regime could not match. Solidarity, the independent trade union, was born in the Gdansk shipyards the next year. Historians still argue about how large his role was in the collapse that followed, but few doubt that he was a major moral force.

Then came 1989. The Berlin Wall opened in November, the eastern bloc regimes fell, and the Soviet Union itself dissolved in December 1991. A year and a half after the wall fell, on May 1, 1991, he issued Centesimus Annus, Latin for "the hundredth year."

Why "the hundredth year"

The encyclical marks the hundredth anniversary of Rerum Novarum, issued by Pope Leo XIII in 1891, which was the Church's first great statement on the condition of workers in an industrial age. Leo XIII defended private property and the right of workers to form associations, and he rejected socialism as a remedy. John Paul II set out to read his predecessor's text against a century that Leo could not have imagined: two world wars, communism, fascism and the welfare state.

So the structure is a Catholic one: look back at the tradition, apply it to a new situation, and call for judgment. The new situation was the sudden absence of the socialist alternative.

The question the Pope asked

In section 42, he put the question that every commentator of that year was answering with a slogan. He asked whether, after the failure of communism, capitalism is the victorious social system and the model for countries trying to rebuild. And he began by saying the answer is not simple.

The text of the answer is worth reading carefully. He says that if by capitalism we mean an economic system that recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly yes. He adds that it might be more accurate to call such a system a business economy or a market economy.

But then comes the second half. If by capitalism one means a system in which economic freedom is not bounded by a strong juridical framework that places it at the service of human freedom in its totality, and sees it as a particular aspect of that freedom whose core is ethical and religious, then the answer, he says, is certainly negative.

Let me translate that for a dinner table. The Pope is saying: yes to private enterprise, no to a free-for-all. The market is a tool inside a legal and moral frame. If the frame goes missing, the tool becomes a tyranny of its own.

What "strong juridical framework" actually means

Conservatives sometimes read the phrase and hear a demand for regulation. That is a mistake in both directions. A juridical framework means the rule of law: clear property rights, enforceable contracts, honest courts, stable money, and punishment for fraud and theft. These are not obstacles to the market. They are its conditions. Anyone who has watched a market operate without them, in a state where contracts are not enforced and officials sell their favors, knows what happens.

John Paul II saw this clearly because he had studied the former Soviet bloc. Countries emerging from communism had markets in name and gangsters in practice, because the legal infrastructure did not exist. A market economy is not what remains when you remove the state. It is what the state makes possible when it does its proper job and stops doing the rest.

So the first lesson of section 42 can be stated in three points.

1. The market, business and private property are good, because they express human freedom and creativity.
2. Their goodness depends on a legal order that is ethical at its core.
3. Where that order is missing, the economy fails the people it is supposed to serve.

This is not a left-wing reading or a right-wing reading. It is the reading that Ordered Liberty Is Not a Contradiction, It Is the Only Kind That Lasts defends on its own grounds, and it fits the account of the law's proper work set out in The Rule of Law Has Eight Marks, and Lawmakers Can Fail at Every One.

Section 48 and the Social Assistance State

Now for the passage that conservatives most like to quote, and that deserves quoting accurately. In section 48, John Paul II turns from the market to the welfare state, which he calls the Social Assistance State, the Vatican's English rendering of the term.

His diagnosis is that the malfunctions and defects of this kind of state arise from an inadequate understanding of the proper tasks of the state. Then he invokes subsidiarity, the principle he found in the social teaching of the Church. A community of a higher order should not interfere in the internal life of a community of a lower order, taking over its functions. Instead the higher community should support the lower and help coordinate its action with the rest of society, always for the sake of the common good.

Then comes the line that makes people wince. By intervening directly and depriving society of its responsibility, the Social Assistance State leads to a loss of human energies and to an inordinate increase of public agencies. These are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and they are accompanied by an enormous increase in spending.

Put plainly, a state that does everything for people stops them from doing things for each other. The family, the parish, the neighborhood, the charity and the local business all wither. And the agencies that replace them are expensive and impersonal, and care more for the procedure than for the person.

He did not stop at criticism. He said that those in need should not be abandoned, and that the state has real duties toward them. And he credited, with warmth, those who give of themselves in voluntary work, as part of the answer. The Pope's picture is a society of many layers of responsibility, not a state and a crowd of individuals. We covered that picture in Pius XI Put Subsidiarity in Writing in 1931, and Washington Should Read It and Subsidiarity, the 1931 Catholic principle every federalist should know, and it is the same idea Burke called the little platoons, in The Little Platoons Passage From 1790 and What It Asks of Us Now.

Where the Pope was not a libertarian

A fair reading also has to say what the encyclical does not endorse, or this becomes a pamphlet.

John Paul II warned in the same document against consumerism, the habit of treating people as consumers and goods as the measure of life. He insisted that some human goods are not for sale and cannot be handled by market mechanisms. He defended workers' right to just wages and to form unions. He called for solidarity with the poor, within and between nations. And he warned that an economy that treats man only as a producer or consumer leaves out his dignity.

Those emphases are why the text has been read in many ways. Some on the right take section 42's yes and ignore its conditions. Some on the left take the conditions and skip the yes. The honest reading keeps both. This is also the territory in which Wilhelm Röpke Defended Markets and Warned They Need Something Beyond Them argued, from a Protestant economist's side, that markets live off moral capital they do not make.

How Michael Novak and others read it

The American Catholic thinker Michael Novak, a philosopher and theologian who wrote widely on democratic capitalism, welcomed the encyclical as the Church's endorsement of the free economy as a moral enterprise. His book The Catholic Ethic and the Spirit of Capitalism appeared in 1993, and he argued that the creativity and enterprise the Pope praised were exactly the virtues of a free economy rightly understood. In his reading, the Pope had given the free economy a moral grounding.

Others, including many Catholic scholars on the left of the spectrum, stressed instead the passages on the universal destination of goods, on workers and on the limits of the market. They argued that Novak's reading was selective.

The sensible conclusion is that each side has a real text to point to, and neither has the whole of it. Conservatives who want to use Centesimus Annus should use it honestly. Its message for them is not "the market is holy." It is "the market is good, inside a law that is just and a culture that is moral, and the state must not smother the associations that teach people to care for each other."

The strongest objection, answered

State it fairly.

A Pope cannot endorse capitalism. The Church's teaching has long warned about the concentration of wealth, the exploitation of workers and the idolatry of money. Reading Centesimus Annus as a blessing for market economies ignores the poor, and the phrase "strong juridical framework" is a polite way of saying heavy regulation.

The answer comes in three steps.

1. The text does not say what the objection says. Section 42 gives a conditional yes to a market economy and a flat no to a system without ethical limits. It does not endorse unregulated markets, and it does not endorse a state-run economy either. Neither side gets to cut the quote in half.
2. A juridical framework is law, not planning. The Pope uses the phrase for the rule of law and for the legal order that keeps markets honest. That is different from a system in which officials direct production. His own experience with the planned economy is why he insisted on that difference.
3. The poor were the test he applied. John Paul II had seen what central planning did to the poor of Poland. His argument is that the best path out of poverty is access to work, property and markets, together with a culture of solidarity, and that a state that crowds out charity and family does not help them.

The objection is right that Catholic teaching limits markets. It is wrong that the limit is a mandate for planning.

The case in brief

1. Pope John Paul II, who lived under Nazi and communist rule in Poland, issued Centesimus Annus on May 1, 1991, for the hundredth anniversary of Leo XIII's Rerum Novarum.
2. In section 42 he answered that capitalism, understood as a market economy resting on private property, enterprise and human creativity, is the right model, but that an economy without a strong juridical framework serving human freedom is not.
3. In section 48 he criticized the Social Assistance State for violating subsidiarity, draining human energies, multiplying bureaucracies and driving up spending.
4. The encyclical also warns against consumerism and defends wages, unions and solidarity, so it endorses neither a free-for-all nor central planning.
5. Novak read it as a theology of democratic capitalism and others stressed its limits, and the honest reading keeps both.

What you can do: read sections 42 and 48 of Centesimus Annus, which the Vatican publishes free online, and then support one local charity, church or neighborhood group that does a job a government office would do worse.