It was therefore disappointing to see Cardinal Oscar Rodriguez write last week: “In this time the free market has produced one sector which is booming: social exclusion.”
Two immediate points can be made. The first is that the last six years (the time to which he was referring) has been a continuation of a 25-year period during which absolute poverty has fallen more rapidly than at any previous time in human history. Poverty has fallen because countries have become more open to trade and adopted systems of governance that are somewhat more supportive of the rule of law, private property, the proper administration of justice and so on. These are the preconditions for markets to develop. Some countries still have much to do of course.
Secondly, those who live at the margins in, for example, Cardinal Rodriguez’s home country of Honduras do not suffer because of free markets but because of the cronyism, corruption and absence of the basic conditions for markets to function. It is no coincidence that Chile is the most economically free country in Central and South America and that it has a tiny percentage of people living in absolute poverty, whereas Honduras is the 112th freest country in the world and has a quarter of its people living in absolute poverty. According to the World Bank’s ease of doing business report, Honduras is the 162nd (out of 189) easiest place in the world to start a business. In South and Central American countries, people are excluded from markets not by markets,
As it happens, the Cardinal was actually talking about rich countries, especially Italy and Spain, when he made his comments. So, what about the West? Have we had free markets run riot over the last few decades? The answer to that is a pretty unequivocal “no”. Whatever measure one uses – regulation, welfare or government spending – markets have become more and more constrained.
I’m for an Acton Institute approach to free markets because it recognizes the need for a virtuous populace. Free markets are usually critiqued from the standpoint of greed run amok. But free markets in concert with a vigorous civil society shoring up virtue are, I believe, the best way to go. Too bad this is so little understood. The less virtue there is, the more need for regulation and a bigger, more tyrannical state. But then, who ensures virtue on the part of government?
As for Cardinal Maradiaga, I wish prelates would refrain from making big pronouncements on matters of prudential judgment.