Pope Francis is Right: Free Markets Serve the Common Good

On Thursday, Pope Francis delivered remarks to a joint session of Congress and urged for unity in his message. While left-leaning pundits have been quick to highlight comments from Pope Francis for remarks that seemingly demonize capitalism, there were clear signs in Thursday’s address that this is not the most accurate way to think about Pope Francis’ views on the topic.

In his address, Pope Francis said:

“Business is a noble vocation, directed to producing wealth and improving the world. It can be a fruitful source of prosperity for the area in which it operates, especially if it sees the creation of jobs as an essential part of its service to the common good.”

This statement reflects a fundamental understanding of immense benefits that result from the core tenant of free-market capitalism: voluntary mutually beneficial exchange. At its most fundamental level, capitalism is not a zero-sum game; both parties must benefit for transactions to take place, leaving both parties better off than they were before.

Scaled up, that core tenant of voluntary, mutually beneficial exchange has been mankind’s most successful anti-poverty program and has led to the highest global standard of living in all of human history. Arthur Brooks, President of the American Enterprise Institute, notes that between 1970 and 2010, 80 percent of the world’s worst poverty was eradicated. There are 200 million fewer hungry people around the world than there were just 25 years ago. Finally, the percentage of people around the world living in abject poverty (on less than $1 per day) has fallen to only 5 percent; the lowest it has ever been. These powerful indicators have a common thread: the rise and prevalence of global capitalism.

But capitalism doesn’t just result in better standards of living for businesspeople; the wealth created through capitalism is also used for various philanthropic and charitable causes. In 2014, charitable giving in the United States rose to its highest level in history. According to estimates from Giving USA, charitable giving in the U.S. for 2014 reached $358.38 billion and was about 2.1 percent of total Gross Domestic Product (GDP). Private charitable organizations, including religious institutions such as the Catholic Church, have benefited greatly from the wealth created by capitalism and have used that wealth to further efforts to help those with the least among us. However, even under capitalist economic systems, excessive taxation can hamper economic growth and charitable giving.

Furthermore, new research from the ALEC Center for State Fiscal Reform finds a direct link between lower state taxes and increased charitable giving. The new report, The State Factor: The Effect of State Taxes on Charitable Giving, examines both levels and rates of growth of state charitable giving over time and how taxes affect those levels and rates of growth. With private charitable giving, including religious giving, usually maintaining a better track record of helping the poor, these findings are an important consideration for anyone interested in helping others.

So, while left-leaning commentators may still misinterpret the pontiff’s comments about capitalism , the wealth global capitalism has created and the philanthropy it has enabled are important features of progress Pope Francis has certainly acknowledged for the blessings they are.

In Depth: Cronyism

Cronyism in tax policy stifles innovation, hinders competition and introduces a deep temptation for corruption. The 2014 ALEC Center for State Fiscal Reform study, The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth, found that in the most recent year in which states published their respective tax expenditure…

+ Cronyism In Depth