Laudato Si: Papal Economics and the Social Mortgage

One of the enduring lessons from the most recent Papal Encyclical, Laudato Si (Praise Be to You), is the simple notion that the “natural environment is a collective good.” Although simple, this profound concept has broad ramifications and is key to understanding how an encyclical about the environment is related to economic justice.

The Natural Environment as a Public Good

An economist understands that a collective good (sometimes called a “public good”) is a special class of goods that cannot realistically be withheld from one individual without withholding it from everyone and for which the marginal cost of an additional person consuming it, once they have been produced, is zero. We can say this about air, water, land: the natural environment– humanity’s habitat.

An environmentalist understands this, and so does a theologian. Laudato Si reminds us that “[w]hether believers or not, we are agreed today that the earth is essentially a shared inheritance.” To understand the implications of understanding the natural environment as a public good, Laudato Si points us to two core concepts in Catholic Social Teaching: private property and the universal destination of goods.

The Christian View of Private Property

In Genesis 1:26-29, we learn that God entrusted the earth to mankind.  Stewardship is man’s unique calling, and this calling requires his labor and his love.  By man’s labor, the earth is productive.  By man’s love, there is fruit and communion.  Man’s calling requires the provision of private property so as to enable the reaping of the fruit of his labor and sharing of that fruit in communion with others.  This symbiotic, sharing relationship is how theologians understand man’s place in both the material and spiritual realms.  So central is the notion of private property that God commanded that man “shall not steal.”  Man shall not rob another man of his opportunity to fulfill his calling.

In his encyclical letter Centesimus Annus (Hundredth Year), Pope Saint John Paul II explained that “In this way, [man] makes part of the earth his own, precisely the part which he has acquired through work; this is the origin of individual property.”

However, the Catechism of the Catholic Church reminds us that “the right to private property, acquired or received in a just way, does not do away with the original gift of the earth to the whole of mankind” (CCC 2403).

The Universal Destination of Goods

A second core principle of Catholic Social Teaching is the notion of the “universal destination of goods.”  Vatican II’s Pastoral Constitution Gaudium et Spes (Joy and Hope) teaches that “God destined the earth and all it contains for all men and all peoples so that all created things would be shared fairly by all mankind under the guidance of justice tempered by charity.”  This means that each person must have access to the level of well-being necessary for his full development (physical and spiritual).

Laudato Si instructs us that “the rich and poor have equal dignity, for ‘the Lord is the maker of them all’ (Proverbs 22:2).  In Laudato Si, Pope Francis calls upon the wisdom of the bishops in Paraguay who have championed the notion that man’s inherent dignity has very practical consequences.  Clean water, air and adequate housing are not enough.  We must also strive for those other essential resources: “education, credit, insurance and markets.”  All of these things are part of a truly integral human development.

The Social Function of Private Property & the Social Mortgage

Drawing upon Pope Saint John Paul II’s 1981 encyclical letter Laborem Exercens (On Human Work), Laudato Si reminds us that the “principle of the subordination of private property to the universal destination of goods, and thus the right of everyone to their use, is a golden rule of social conduct and the ‘first principle of the whole ethical and social order’.”

In 1987, Pope Saint John Paul II went further in Sollicitudo Rei Socialis (The Social Concerns of the Church) to demand that “a type of development which did not respect and promote human rights—personal and social, economic and political, including the rights of nations and of peoples—would not be really worthy of man.”  In this encyclical, we are reminded that private property is not exclusively private in nature and that it has a “social function.”

This “social function” encompasses the notion that a property owner is a social being, joined together with other in a network of communities (family, neighborhood, workplace, place of worship, etc.).  As Catholics, this concept is understood as of the “Body of Christ.”  However, although a social being, private property owners are individuals and as such are accountable for the way that the goods produced by means of that property are held for the holder’s own use or released for the use of others.

The accountability to the social function of property is referred to in Laudato Si as the “social mortgage.”  Just as an economist understands how a conventional mortgage obligates a homeowner to repay a lender who made ownership possible, a theologian understands how property owners (individuals, corporations, governments or government instrumentalities) have a debt to God.  This “social mortgage” obligates us to give back to the community so that those with no private property holdings have access to basic resources and services that helped make possible the personal development of that property owner.

In Sollicitudo Rei Socialis, Pope Saint John Paul II, balances this question by differentiating the analysis in examining both the notion of ownership and the use of the goods of the world.  He instructs that the goods produced through the ownership of private property are the means by which human material need is met and for that reason alone private property is subordinate the universal destination of good of the world.

Social Mortgage Payments and Economic Controversy

One of the most challenging questions is what type/amount of “social mortgage” payment/transfer is sufficient to satisfy the demand of the social function of property?   Transfer/payment types can be classified as either being of a private or public.

Private payment/transfer:  These “social mortgage” payments include arrangements where business owners share in goods produced by the venture with those who do not have private property of their own.  This is either done through wages and/or profit sharing of other sorts.  Other examples include business arrangements where employee (non-equity participants) can work to earn equity in business ventures such as employee stock ownership entities (ESOPs). Alternatively, private payments (philanthropy) made to community service organizations for the provision of social benefits to less endowed members of a community.

Public payment/transfer:  These “social mortgage” payments include such mechanisms as taxation, regulation, use of eminent domain, and public mandates.  Public mandates include such mechanisms as health insurance and minimum wage rules.

Ultimately, the debate becomes one of how our societies are structured to distribute, use, and care for the resources that have been entrusted to us.  Societies are designed around economic systems that endeavor to organize our world—broadly either as market economies or command economies.  In an individualist capitalistic, market economy, the challenge is that everyone is left to fend for himself.  This can be a very motivating dynamic but can also lead to great disparities.  From an economist’s perspective, this type of system fails when there is broad unmet need in the midst of surplus production or underutilized production capacity.  In socialistic or communistic command economies, goods are produced by some and are shared with everyone on the basis of need.  These systems are problematic when there is unmet need due to an insufficient incentive to produce.

Laudato Si contends that neither type of economic system is sufficient to the dignity of man.  In both economic systems, the challenge is one of production.  In their extremes, a pure market economy results in too much production that is not shared, and a command economy results in too little production.  Either way, there is unmet need.

In the end, Laudato Si reminds us that the “natural environment is a collective good, the patrimony of all humanity and the responsibility of everyone.”  Pope Francis teaches us that “If we make something our own, it is only to administer it for the good of all.”

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