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Markets and Profits ...Is Profit the Bottom Line?

Health care delivery continues to be in a state of flux. The effectiveness of a wide range of new networks or partnerships ---from PPOs to mergers ---has the predictability of impressions from a Rohrshach blot! Yet new partnerships and alliances among health care institutions are proliferating at a steady pace.

The revised and updated Ethical and Religious Directives for Catholic Health Care Services (1994) recommends that increased collaboration among Catholic sponsored services be given a priority .Otherwise, new partnerships could actually threaten other Catholic institutions and services. The prospect becomes more real in cases where financial factors alone play the trump card.

For example, a decision in the mid-1990s by St. Louis University had drawn criticism in some circles. The university's board endorsed a proposal to sell its hospital to a for-profit chain. An offer made by two Catholic health care groups was outbid by $100 million.

An executive with the Catholic Health Association raised serious objections to that deal. There exists considerable support for the claim that Catholic values in health care will not remain viable in such for-profit arrangements.

In addition, this issue is being framed within a broader context. There exists an ongoing debate on whether for-profit health care can be ethical in principle. In the long run, investor-owned entities will inevitably raise a key question ---Will the profit margin eventually emerge as primary at the expense of compassionate service and ethical standards? At least such an assumption is a working hypothesis.

Although there are undeniable advantages to market efficiency, access to health care cannot not be reduced to a commodity dictated by the laws of supply and demand. Health care represents a basic social good for men and women. As a consequence, a life-or- death necessity cannot be adequately delivered by a cost-efficiency calculus alone.

As a matter of fact, a reality check would confirm that not-for -profit institutions are being buffeted by market forces. Catholic health care services are not exempt from the pressures of the market, especially when the business ethos begins to dominate the culture of health care institutions.

From an institutional perspective, however, the long-range question is troublesome ---at what point will identity, mission, and values become a "mission impossible?" And, indeed, from a societal perspective, "Your money or your life" should never be a moral option.

Access to health care along with achieving a public consensus on a right to health care, represents but one of several major socio-economic quandaries which are symptomatic of several unresolved dilemmas related to societal values and unmet social needs.

Unbridled (laissez-faire) markets cannot equitably respond to basic social needs. As Lester Thurow, the M.I. T. economist, has observed, values and preferences are "the black hole of capitalism." In the same vein, Joseph Cardinal Bernardin (1928-1996) described unmoderated market forces as "socially insensitive and ethically blind."

Free markets must be integrated into a larger dynamic of a public philosophy to set societal priorities.

In the first social encyclical (Rerum Novarum, 1891), Pope Leo XIII rejected a major premise of 19th century laissez-faire economic theory, namely, the so-called "wage contract" theory .The "wage contract" theory treated human labor as a commodity subject to the laws of supply and demand. Rerum Novarum rejected it as immoral, a violation of the dignity of the worker.

A century later, Pope John Paul II issued Centesimus Annus (On the Hundredth Anniversary of Rerum Novarum, 1991). This centennial encyclical confirmed the foundational moral principles laid down in the inaugural social encyclical by Pope Leo XIII. In the summary of Leo XIII's platform for economic justice. (CA nn. 4-11), two major principles can be highlighted: 1) a rejection of the Jaissez-faire economic theory and the defense of an indispensable role for government intervention on behalf of the common good.

In a twenty-first century context, the old laissez-faire economy might today simply be called a "winner-take-all" or a "survival of the fittest" ideology.

Notwithstanding his analysis of the historic roots of Catholic social teaching, Pope John Paul II also contributed several seminal insights in his own appraisal of the merits and the disadvantages of a free economy or a market economy. (CA , Chapter IV nn 30-43)

Pope John Paul II affirms the free market as "the most efficient instrument for utilizing resources and effectively responding to needs." Yet the Holy Father's endorsement of markets is not unqualified, for there are essential human needs that do not fall within the scope of the market. In speaking of market effectiveness, he writes:

But this is true only for those needs which are 'solvent,’ insofar as they are endowed with purchasing power and for those resources which are 'marketable,' insofar as they are capable of obtaining a satisfactory price. But there are many human needs which find no place on the market. It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied ...(CA n.34)

Human dignity grounds certain basic human goods and creates a moral exigency that the fundamental needs of men and women be met.

Centesimus Annus presents an argument for appropriate controls on the market by society and the government "so as to guarantee that the basic needs of the whole of society are satisfied. (CA n.35)

Another original approach in the centennial encyclical centers on Pope John Paul II's recognition of the legitimate role for profit in a business economy. Similar to his comments on markets, the Holy Father's validation of profit is also conditional. He states:

But profitability is not the only indicator of a firm's condition.... In fact, the purpose of a business firm is not simply to make a profit, but is to be found in the very existence of a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society. (CA n.35)

While profit can be seen as "a regular of the life of a business," there are other human and moral factors which must be viewed as integral to the life of a business.

Later on in the development of the encyclical's text, Pope John Paul II again returned to this concept of markets and human needs. As efficient and vital as market forces can be in promoting economic well-being, markets have limits. Markets cannot automatically satisfy certain "collective and qualitative needs." Centesimus Annus clearly asserts:

There are certain human needs which escape its logic [the market's]. There are goods which by their very nature cannot or must not be bought or sold. Certainly the mechanisms of the market offer secure advantages ...Nevertheless, these mechanisms carry the risk of an 'idolatry' of the market, an idolatry which ignores the existence of goods which by their very nature are not and cannot be mere commodities. (CA n. 40)

In this regard, the state and society as a whole have a correlative duty to defend "those collective goods which I, among others, constitute the essential framework for the legitimate pursuit of personal goals on the part of each individual." (CA n. 40)

When at last the Holy Father addresses the question about the triumph of capitalism with the collapse of the Marxist system in Eastern Europe, he carefully nuances his response. His answer is negative ---"if by capitalism is meant a system in which economic freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality I and which sees it as a particular aspect of that freedom, the core of which is ethical and religious ..." (CA n. 42)

The encyclical, however, renders an affirmative judgment about "a business economy, market economy or simply free economy" when the economic system "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." (ibid.) The tradition of Catholic social teaching upholds the moral dimension of the economic order along with the effectiveness of the market economy.

Undoubtedly the Marxist ideology has failed. Yet, on the one hand, marginalization and exploitation still dehumanize the underdeveloped nations of the Third World. And, on the other hand, the developed nations are marked by human alienation ---a species of moral poverty .The demise of Communism has set the stage for a realistic solution to these grave problems. That fall has become an opportunity and a risk. The Holy Father warns against the dominance of "a radical capitalistic ideology...which refuses even to consider these problems, in the a priori belief that any attempt to solve them is doomed to failure, and which blindly entrusts their solution to the free development of market forces." (EJ n. 42)

Earlier in the encyclical On Social Concern (Sollicitudo Rei Socialis, 1987), Pope John Paul II had penned a forceful critique of the "structures of sin" that impoverish and assault the human dignity of untold numbers of peoples on a global scale. These oppressing "structures of sin" stem from actions and attitudes opposed to the will of God and the good of neighbor. Two of these sources are identified as an "all-consuming desire for profit and the thirst for power" ---"at any price." (SRS nn.36-37)

The Holy Father lays bare the kind of idolatry latent within economic and political decisions severed from moral criteria ---an idolatry of "money, ideology, class, technology."

The Catechism of the Catholic Church formulates a succinct summary of the substance of church social teaching on the moral parameters of markets: "Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended." (CCC n. 2425)

The opening chapter of Economic Justice for All, the 1986 pastoral letter on the economy issued by the National Conference of Catholic Bishops, comments on economic freedom and limits on markets:

The U.S. value system emphasizes economic freedom. It also recognizes that the market is limited by fundamental human rights. Some things are never to be bought or sold. This conviction has prompted positive steps to modify the operation of the market when it harms vulnerable members of society. (EJ n.8)

The pastoral letter weaves this theme into the very fabric of the moral analysis, especially in treating selected economic questions ---employment, poverty, and the international economy.

In introducing the analysis of selected economic issues, Economic Justice for All emphasized the importance of the broader problematic of the economic system and its values and the moral task of bringing the Catholic vision of economic justice to bear on these vital and pressing questions. The questions are probing:

...does our economic system place more emphasis on maximizing profit than on meeting human needs and fostering human dignity? Does the economy distribute its benefits equitably or does it concentrate power and resources in the hands of a few? Does it promote excessive materialism and individualism? Does it adequately protect the environment and the nation's natural resources? Does it direct too many scarce resources to military purposes? (EJ n. 132)

The bishops as pastoral leaders and teachers hoped to initiate a "continuing exploration of these systemic questions in a more comprehensive way than this document permits."

In the sphere of international economy and the developing nations, Economic Justice for All makes two noteworthy comments about the moral implications of the maximization of profits to the detriment of the common good. The pastoral letter names the reconciling of "the transnational corporations' profit orientation with the common good ..." (EJ n. 256). Section D of the pastoral also remarks that "the Christian ethic is incompatible with a primary or exclusive focus on maximization of profit." (EJ n. 280)

Even on the political horizon, popular thinking about free markets is ambiguous. In Why Americans Hate Politics (1991) E. J. Dionne coined a phrase to name this inconsistency ---"the politics of false alternatives." The phenomenon that he described more than a decade ago still appears to hold true today.

According to Dionne, political liberals tend to favor government intervention in economic affairs but generally promote a laissez-faire outlook on cultural issues and private behavior. By contrast, political conservatives tend to favor government intervention in cultural affairs, family values, and personal morality, but resist regulation in business and the economy.

Whether from the left or from the right side of the political spectrum, laissez-faire mentalities fall drastically short of being an adequate moral framework to guide culture, economics, or politics.

Perhaps J. Philip Wogaman, a well known Christian ethicist, expressed that deficiency as well as anyone might ---"The free market is potentially a good servant, although it is certainly a bad master."

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Last modified: April, 2008