Many of you will remember with sadness the news story earlier this year about a family in Wilmington, California, near Los Angeles, where five children and their mother were shot by their father, who then killed himself. The tragic incident was another casualty of the economic downturn. The Lupoe family home was being foreclosed on, and both adults had also lost their jobs the week before. Believing they had no other option, the mother and father, according to the suicide/murder note sent to the police and the news media, decided on this course of action.

This tragic story is not unusual in these times. Many of us have relatives or friends who have lost their jobs, their homes, or their life savings in the past year, even if they escaped the tragic ending of the Lupoe family. We are currently experiencing the worst series of severe losses since the Great Depression of the 1930s.

In this article I will examine briefly what has happened and turn to the social teaching of the Church (STC) for help in understanding the situation and moving forward.

Like so many others, the Lupoes lost their home due to an onslaught of defaults on home mortgages, which made a hole in the dike and led to an awesome flood of bad economic news. Many people in recent years were given home loans even though their poor credit ratings made it unlikely they would be able to keep up with the payments. These loans were called subprime mortgages. One of the most common of these loans is the adjustable-rate mortgage. Bankers and brokers created these enticing loans, which started out with low payment rates, leading homebuyers to believe they could afford them. Then when the rates automatically increased two years later, they discovered they had no way of meeting their obligations.
Part of the responsibility certainly lies with the homebuyers. However, much more fault lies with the bankers and brokers, who were more interested in making money than in clearly explaining the conditions of the loan to prospective buyers, and with the government, which encouraged people to become homeowners and then failed to regulate the financial market. There is certainly enough blame to go around.

All of this was compounded by the practice of packaging mortgage loans and selling them to a largely unregulated new banking industry—referred to as the shadow banking system—which removed the loans from local banks and put them into the hands of anonymous investors sometimes continents away. I’m sure the Lupoes had no idea that their loan would end up being held by someone in New York or London or who knows where. Perhaps it didn’t matter to them, except for the fact that huge profits were being made in this largely unregulated part of the financial industry on their money. At least until lately, pension funds, money managers, foreign governments, and hedge funds were the only real winners in this industry.
When home values dropped, not only were many homeowners left holding loans that exceeded the value of their homes, but huge investment banks like Bear Stearns and Merrill Lynch were as well. As investment banks began to fail, the stock market collapsed. Many people and institutions lost money. Businesses began to fail, and jobs were soon to follow as money became scarce.

This is where the Lupoes were hit a second time. Like so many thousands in the last several months, they found themselves without jobs. Despite the enormous amounts of money given to financial institutions in the first bailout in September 2008 to keep loans flowing, few strings were attached. Instead of lending that money to boost that area of the economy, banks simply dropped it into the giant sinkholes they had become. Without loans, houses and automobiles stopped selling, which led to a whole lot of collateral damage—more jobs were lost, retail businesses got in trouble, home values dropped, and more homes were foreclosed on—a vicious cycle of economic woes that has now become familiar.
Where do we go from here? One area of reflection for Catholics has to be the STC. It has much to offer toward finding our way out of this mess.

First, one of the things that has gone very wrong in recent years has been the widening gap between the very rich and everyone else. That the top 2 percent of Americans should control 90 percent of the wealth and have incomes sometimes 400 times more than that of other workers is scandalous and wrong. This mirrors the 1920s, the age of the robber barons, whose profligacy led to the Great Depression. Although the Church has spoken much about this gap, US policies have allowed it to widen, even encouraged it. We have disregarded the regulatory agencies put in place to protect the most vulnerable in our society from the greediest, tax breaks have benefited principally the wealthy, and the practice of paying CEOs enormous salaries while the salaries of workers have barely budged in the last twenty years are only a few examples of what has gone wrong.

The return of the laissez-faire mantra to public discourse—which claims business should be free of encumbrance from government—overlooks the fact that the STC has been critical of precisely this aspect of capitalism. The capitalist system is a great tool for producing wealth; it is a very bad tool for distributing that wealth fairly. It allows those who possess wealth to make more and prevents those without it from rising much above where they are. It is at root an unjust system. It places capital over labor, that is, money over those who do the work. Only the government can step in to ameliorate this injustice.

Christian Tradition challenges us to see all people as our sisters and brothers and to recognize the Creator’s intention that the goods of the earth be available to all. As the Second Vatican Council put it: “Excessive economic and social disparity between individuals and peoples of the one human race is a source of scandal and militates against social justice, equity, and human dignity” (Pastoral Constitution on the Church in the Modern World [Gaudium et Spes], 29). When some take for themselves an inordinate measure of goods while others live in poverty or great need, the society is unjust. We have reached this reality.

In addition, we as Americans have a false understanding of private property. We have come to see it as an absolute right. The STC does not see it this way. Pope Paul VI argued for the right of private property, but not the absolute right. “The right to private property is not absolute and unconditional. No one may appropriate surplus goods solely for his own private use when others lack the bare necessities of life” (On the Development of Peoples [Populorum Progressio], 23). The Pastoral Constitution on the Church in the Modern World gives the principle by which private property is to be understood: “By its nature private property has a social dimension which is based on the law of common destination of earthly goods” (71).

In other words, private property is secondary to the destination of earthly goods for the good of all. This means that eminent domain is a legitimate maneuver when the good of society demands it. It also means taxation is legitimate when it is needed to care for the common good, and in particular a progressive income tax, which demands more from those who have more. “In a system of taxation based on justice and equity it is fundamental that the burdens be proportioned to the capacity of the people contributing (On Christianity and Social Progress [Mater et Magistra], 132).

Nor is our vaunted understanding of capitalism something the STC passes on without comment: “It is unfortunate that on these new conditions of society a system has been constructed which considers profit as the key motive for economic progress, competition as the supreme law of economics, and private ownership of the means of production as an absolute right that has no limits and carries no corresponding social obligation. This unchecked liberalism [the European term for laissez-faire capitalism] leads to dictatorship rightly denounced by Pius XI as producing ‘the international imperialism of money.’ One cannot condemn such abuses too strongly by solemnly recalling once again that the economy is at the service of [human beings].…Capitalism has been the source of excessive suffering, injustices and fratricidal conflicts whose effects still persist” (Populorum Progressio, 26; Acta Apostolicae Sedis [A.A.S.], No. 4, pp. 257–299). While we are well aware of the condemnation of Communism that fills Church documents, this stern assessment of capitalism is one we often overlook, and it may even come as a shock to many people.

Second, according to the STC, government has a legitimate role to play in the economy. For years now we have been bombarded with the view of some that big government is bad, and by “big government” they mean any government that delivers goods and services to the people, at least to the poor. Health care, education, unemployment compensation, and social security were services some thought the private sector should provide, even though ample proof indicated the private sector was not doing so. Health care, for example, left in the hands of private insurers has done a poor and costly job for those who have private insurance and has completely ignored forty-five million Americans.

The mantra that would push government out of the economy is one the STC has never condoned. As Catholics we’ve often been more aware of the Vatican’s opposition to Communism/Marxism over the years than the critical stance it has often registered toward our capitalist system.

The Pope who has become a symbol of all this in the Church and beyond, the good and loving John XXIII, had this to say about the role of government in society: “The State [read Government], whose purpose is the realization of the common good in the temporal order, can by no means disregard the economic activity of its citizens. Indeed, it should be present to promote in a suitable manner the production of a sufficient supply of material goods….Moreover, it should safeguard the rights of all citizens, but especially the weaker, such as workers, women and children” (Mater et Magistra, 20; A.A.S., No. 8, pp. 401–464).

Pope John Paul II added these words: “The State has the duty of watching over the common good and of ensuring that every sector of social life, not excluding the economic one, contributes to achieving that good, while respecting the rightful autonomy of each sector” (The Hundredth Year [Centesimus Annus], 11).

In the STC, government has the responsibility of ensuring the common good. The capitalist system inherently favors the wealthy. Thus many areas of involvement are important. One is surely the regulation of economic activity, which is clear from the present crisis, brought on in large part by weakening, or in some cases abandoning, regulation of the marketplace. Many of the regulatory systems put in place during the Great Depression have been ignored by recent administrations. It is time to fix them; an obvious example in this critical time would be regulating the banking and the shadow-banking system. In the complicated system of packaging debts, it has become clear that those funds were a chimera. In many ways the whole system became a giant Madoff-Ponzi scheme: money was being lent that had no connection to real goods or earnings.

Another responsibility of government is to provide those goods and services that some cannot provide for themselves. The US health-care system has become the most scandalous example of services that some—read forty-five million—cannot afford. This needs to be corrected and not just kicked around like a fumbled football for another forty years. Education also devolves upon government—local, state, and federal—to ensure it is of the highest quality for all. Social Security, which ensures some kind of decent life for the elderly and those with disabilities, needs serious strengthening. These are obviously government responsibilities.

Third, John Paul II spoke of the priority of labor over capital. In the present crisis, as in most downturns, workers are the ones who are suffering first and most. They are the ones losing their jobs and their homes while many CEOs have fled the scene with gold in their parachutes. Some saw labor an unnecessary expenditure in the recent debate over bailing out the auto industry, whereas the Church gives the working class the distinction of being the most treasured element of the economic system. All economies must be, according to John Paul II, at the service of the worker. “The Church considers it her task always to call attention to the dignity and rights of those who work, to condemn situations in which that dignity and those rights are violated.…Human work is a key, probably the essential key, to the whole social question” (On Human Work [Laborem Exercens], 1, 3).

Capital and technology are merely tools to assist us in our work. The labor of men and women is always a primary efficient cause, while capital, the whole collection of investment and means of production, remains always a mere instrument at the service of labor. Yet we have created an economic system in which labor is often treated as a kind of merchandise the industrial worker sells to the employer, who is the controller of the capital.
In John Paul II’s understanding, the workers and only the workers ought to be treated as the true makers and creators: “Work is a good thing for human beings—a good thing for their humanity—because through work they not only transform nature, adapting it to their own needs, but they also achieve fulfillment as human beings and indeed in a sense become more human” (Laborem Exercens, 9; from The Priority of Labor, Gregory Baum).
In this same document he outlines a number of issues that have to be faced. Workers might be brought into the ownership, planning, and management of the corporation. Ownership by capital is not an exclusive right reserved for the wealthy. Workers also have the human rights that belong to all for a decent life for them and their families. But the principal change mechanism in John Paul’s mind was the right of workers to organize in unions. In this passage he uses—perhaps nostalgically—the word solidarity, the name of the labor union that helped bring down Communism in his beloved Poland. Workers everywhere have the right to be in solidarity with one another, “the right of association, that is, to form associations for the purpose of defending the vital interests of those employed in the various professions. These associations are called labor or trade unions.…
“Modern unions,” he continues, “grew up from the struggle of the workers…to protect their just rights vis-à-vis the entrepreneurs and the owners of the means of production. Their task is to defend the existential interests of workers in all sectors in which their rights are concerned….Organizations of this type are an indispensable element of social life, especially in modern industrialized societies” (Laborem Exercens, 20).

Finally, Pope Benedict XVI has weighed in on the present economic crisis by introducing into the discussion the idea of greed. It’s a word that has been used much lately in public discourse and, I’m sure, in Sunday homilies. It might be a good way to bring these reflections to a close. The financial world, Pope Benedict says, has been overtaken by greed for unheard-of profits in recent years. In his Christmas message of 2008, the Pope called on the Light of Christ to shine forth “wherever selfishness of individuals and groups prevails over the common good…wherever an increasingly uncertain future is regarded with apprehension, even in affluent nations.” We are a people living in apprehension because of the greed of bankers and financiers. Benedict continued, “If people look only to their own interests, our world will certainly fall apart.” It is, he says, a time to reach out to those in need.
With so many people suffering, we are presented with a rich opportunity to reach out to those in need. Stories of neighbors helping neighbors abound these days. NBC Nightly News has been running a series of such stories, sent in by viewers across the country—mothers reaching out to mothers and their children when a home or a job has been lost, workers pitching in financially to save coworkers’ jobs that would otherwise have been lost. Good old-fashioned neighborliness, it seems, is breaking out all over.

It is also a time perhaps, as we observe the greed of those financiers who brought about this crisis, not to forget “the beam in our own eye,” namely, our own greed that has contributed to this greatly inflated bubble our economy has become. For a long time now, the STC has pointed to the consumerism that marks our capitalist societies. Credit-card debt attests to this reality. Yet in the aftermath of September 11, we were encouraged to go out and shop, and in the summer of this economic downturn, we were told the same thing, as if buying more and consuming more would bring us out of these national catastrophes. We knew better. The problems are far bigger than consumption can cure.

We need to rectify a capitalism that has ballooned into something of an ogre for many; we need government to reassert its rightful place in regulating business and banking and in providing the services—like health care—people need; we need to restore labor and working men and women to their rightful place at the heart of our economy. We need also to look at the greed in our own hearts and establish deeper and better values than simply consuming more. Many Americans are taking stock these days. This is a good thing.

Father Richard Schiblin is retired and living with the Redemptorist community in Berkeley, California. His ministries have included serving as a retreat director and a pastor and setting up a Redemptorist justice and peace desk in Rome.