German Solidarism of Heinrich Pesch
= "Solidarism is the ideology underlying Heinrich Pesch’s outline for an economic system. Its underlying philosophy is personalistic in that it emphasizes man, the human person, not merely “labor” – the factor of production—as both the driving force behind, and the reason for which economic activity takes place". 
By Rupert J. Ederer:
"Heinrich Pesch is probably the greatest economist who has ever lived. The ironic fact that he is little known is a commentary on our times and the state of the economic science rather than on the man. This German Jesuit scholar wrote the longest, most exhaustive economics text that anyone has written, and it deserves to be regarded as a kind of Summa Economica. The five-volume Lehrbuch der Nationalökonomie examines all serious economic thinking up until Pesch’s time, culling out what is deficient, retaining what is worthwhile, and filling in what its author perceived to be lacking. The result is a design for an economic system that is opposed to both classically liberal capitalism and state socialism, based instead on Aristotelian-Thomistic philosophical premises. Pesch called this system of thought solidarism. He designed it in full conformity with the moral natural law. Although it was sometimes characterized (and criticized) as Christian or Catholic economics, it could be described as such only in the same sense as one would use the expression “Christian philosophy.” It is economics in total harmony with the teachings of the Catholic Church about Christianity."
1. By Stephen M. Krason:
"What, broadly, are the basics of solidarism? First, it rejects both individualism and collectivism and seeks to uphold the good of both the individual and society. In short, it embraces the common good as understood by sound ethics. Second, there is a solidarity among all men because of, simply, their common humanity. There is also a more particular solidarity among people in the same nation and within the same occupation or industry or area of the economy. That means that there is or should be solidarity between employers and workers; both need each other to achieve successful economic results. This does not mean that there may not be competing interests on each side—so that, say, labor unions don’t have a purpose—but that these interests can be balanced and reconciled. Class conflict is not inevitable. Its stress on such solidarity distinguishes solidarism from both economic liberalism and Marxism.
Third, the worker cannot be reduced to a mere factor of production, nor can economics be made the be-all-and-end-all, so that everything is reduced to economic calculation. This is what Pesch termed “economism,” a term picked up by both the German economist Wilhelm Roepke and Pope John Paul II. Fourth, the market and its advantages are accepted as givens by solidarism and economic freedom is a good thing. Neither, however, may be unrestrained. While competition is valuable and plays a crucial role in economic life, it cannot be its ordering principle. That can only be human dignity.
Fifth, in line with this, while there are certainly market inclinations and forces (e.g., supply and demand) they cannot be treated as rigid “laws” (a notion that came from the Enlightenment). While market forces may help allocate resources effectively, solidarism rejects the notion that if the economy is just left alone the results will almost automatically work out to the good of everyone (indeed, this is the very thing that Pope Francis recently addressed). While self-interest, like the interests of labor and management, is legitimate, it can also be destructive and so—like what James Madison said about factions—must be regulated and channeled in a way that does not undermine the common good. Like Roepke, solidarism believes that economics cannot be separated from ethics, requires a sound social and cultural context, and there is an appropriate role for state action.
Sixth, the sense of solidarity motivates the solidarist to promote occupational groups or other sorts of arrangements of those taking part in a particular industry—which must be voluntarily agreed to, and not imposed by the state—which would aim at a kind of enlightened self-regulation. The state could thus step back and not engage in the heavy regulation and micromanagement that we have become so accustomed to (with all their attendant problems)—though it would continue to oversee economic activity and intervene where appropriate in its role as the chief guarantor of the common good. Quadragesimo Anno gave an approving nod to a reorganization of industrial economies along such lines.
Seventh, solidarism has no illusions about economic reorganization as some kind of panacea. The proper shaping of the human soul, of course, is a prerequisite. This requires formation of the virtues in the individual, which leads to the realization of such virtues as justice and social charity in the context of society that, in turn, makes possible solidarity. Proper personal formation requires serious religious commitment and sound family life. Even in his time, Pesch lamented the weakening of the family. Solidarism does not say that there must be a substantial restoration of a family-based economy—a position that some distributists would take—nor that industrialization inevitably undercuts the family, but it is aware of the serious strains put on family life by a certain version of “capitalism” (whose economism meant excessively long work hours and paid scant attention to the worker’s family needs).
Eighth, solidarism strongly defends private property, although private ownership—whether on the individual or large-scale corporate business level—can never be separated from the obligation of its social use (i.e., the concern about others and the community in the use of one’s property). The notion of absolute rights bestowed by ownership came from the economic liberalism that became ascendant in the nineteenth century and collided with the traditional classical-Christian understanding. Thus, the solidarist would very likely espouse the view of some Catholic writers in the first half of the twentieth century that large companies take on a kind of semi-public character, so they can be subject to more regulation and restraints for the sake of the common good. One example might be that laws could legitimately stop a company from just moving its plant facilities almost overnight to another part of the country or overseas when the economic effect on a community and employment would be disastrous. Nevertheless, solidarism would reject the suppression of private ownership of the means of production and distribution by something like the sweeping nationalization of a sector of the economy. It doesn’t outright exclude government ownership, but this would have to be the exception (e.g., mail service, local government ownership of utilities). It rejects socialism, but aims for socialization (a term mentioned by Pope John XXIII in Mater et Magistra, and grossly misunderstood). Socialization simply means insuring that all in an economy benefit, and like John Paul II the solidarist understands that this is not necessarily or even likely accomplished by government ownership. It is in line with what in Catholic social thought is now called the universal destination of created goods—that God has given man the bounty of the earth’s resources for all to partake of.
The concern for socialization and the universal destination of created goods perhaps underlies the ninth and tenth points. While the state could step back with a solidaristic-type economic restructuring, its role cannot be minimal. Besides the proper kinds of interventions in the economy it must provide what in the Reagan period first came to be called a “safety net.” While—consistent with the principle of subsidiarity—the family and religious and other civil-society-type groups should be the first to take care of the needy, the state as a matter of justice must help out when this is insufficient. Also, it cannot be indifferent to the situation of wealth distribution; disparities of wealth have to be addressed. This was not originally a Marxist idea as some might think, but goes back to Aristotle who seemed to advocate that an acceptable range of wealth-holding—avoiding a situation of extremes—was necessary to sustain a good and stable political society. This isn’t to say, however, that the solidarist would countenance an aggressive program of redistribution that would penalize achievers and reward the indolent. Finally, the state in promoting the common good must play a role—in association with the private sector and observing subsidiarity—in economic planning. Individuals, families, and businesses plan economically, so certainly it is necessary for nations to do so.
Eleventh, solidarism stresses the need for a just wage. This has direct implications for the state’s social welfare role: a just wage across the economy would mean that there would be less demand for public assistance programs. In line with its belief that nothing happens automatically in economic life, market forces alone cannot be the sole determiner of wage levels. Nor does merely the agreement of the parties make a wage contract just; a dignified life for oneself and his family must be the governing standard. From a public policy standpoint, the solidarist looks positively at such approaches as profit-sharing and family-wage escalators to help accomplish a just wage.
Twelfth, solidarism is concerned about justice in pricing (which, interestingly, is an area that has not been developed much in the social encyclicals). A just price is one that both covers costs and yields the producer or trader a reasonable gain (a profit). While Pesch provides much more analysis about this, some of his key points are that the consumer has no right to the lowest possible price (the workers producing a good, after all, must receive a just wage), the price should reflect the true value of a good or service (while the solidarist believes that the satisfaction of wants, and not just needs, is legitimate, some wants—say, for moral reasons—clearly should not be pursued), and that no one should be allowed to make an exorbitant gain (including profit) at another’s expense. Profit-making, like competition, cannot be the governing principle. An acceptable profit would be one that conforms to the normal level of profit for a company’s country or occupation, although a higher one could be acceptable if it were in line with the value of what one provides.
Thirteenth, any tax levied must be truly necessary, must take into account persons’ level of wealth, may be heavier on, say, investment income than income earned from work, and must be used to fund activities that will promote the common good and not merely the private good of some (e.g., interest groups). The fourteenth and final point is one that certainly collides with prevailing economic thinking: completely free trade must be rejected. This is because of commutative justice: certain countries are unable to derive the same advantage as others in a free trade regimen. Some would be hurt, as when cheap foreign products flood their markets and overwhelm their domestic producers. There is no problem with some measure of protectionism.
These are just highlights about solidarism. Pesch laid out his whole system in his mammoth thirteen-volume Lehrbuch."
2. Willam Waters and Edward O'Boyle:
"According to Ederer, Pesch reduces the cardinal principles of solidaristic social control to three:
“First of all, the economy must be regulated to accord with the virtues of justice and charity.”
Second, the principle of subsidiarity is applied universally, which means in part, that “………… social organs at successfully higher levels ought to intervene only when individuals and lower organs cannot accomplish a task which the common good nevertheless requires.”
Third, there should exist “ ………… autonomous organizations which revolve around the various functions which people perform in the economy” [Ederer 1988, p. 2].
In its first principle, acting according to charity and justice, solidarism denies the validity of the mainstream assumption that people act exclusively as rational utility maximizers. This extreme utilitarian ethic is seriously defective; people sometimes act out of duty. They behave according to what is right. Therefore, economic behavior is not purely utilitarian; it is, in part at least, deontological.3 For example, journalists have observed that most Japanese prefer Japanese-made products because they are Japanese and represent Japanese jobs. They are tolerant of high retail prices in Japan, higher than some imports. “If living standards in Japan are marginally lower than those in the West, this is more than compensated in Japanese eyes by the strength of the nation …………” [Longworth 1998, p. 37].
In the solidarist tradition, economic institutions (markets, households, financial and public sectors and businesses) are formed according to three kinds of justice, the first, commutative, being a guide to interpersonal relationships governing exchanges among equals. Illustrations of abuses of commutative justice are, it is wrong to cheat, or to seek and use “insider information.” Justice requires widespread information for all marketers. This kind of justice is not absent from mainstream economics being incorporated in the micro model as a criterion of perfect or pure competition. Social economists have no complaint about the orthodox science in this matter of commutative justice. The second kind of justice, recognized by Aristotle as was commutative, says that the whole of society, or community, has obligations in justice to each and any person in severe need. This is distributive justice. An illustration is the need for social security legislation and the like. Social economists have no complaint about deficiencies in distributive justice in socialist models. That a social economy requires both commutative and distributive justice is a reason why some scholars have identified solidarism as the middle way. Finally, there is the medieval contribution to economic justice that each individual has a duty to contribute to the improvement of social welfare. Each of us has a responsibility to improve the common good; an obligation termed contributive justice. There are virtues associated with each of the three kinds of justice: honesty is attributed to the person-to-person relationships that are commutative; fairness the virtue related to the community-to-person relationships governed by distributive justice, and responsibility of each individual is the virtue involved in person-to-community relationships. Much can and needs to be said in economics courses about the place of justice and charity in the economy. But, in fact, little is said in conventional economic courses except on issues related to the individual. It is assumed that most other matters are outside the expertise of economists; the whole subject of correct social interpersonal relationships is relegated to Management, Sociology or Business Ethics courses.4 Social economists, on the other hand, contend that solidarity, the harmonious relationship of persons in the community, and its cousins cooperation, participation and collegiality, are important elements of economic activity, to be treated in the first Principles courses as well as in the highest level of theory courses. Solidarity is a complement to competition, being complementary to competition. Efficiency is not a matter of competition alone but of competition and cooperation interacting. It is a factor in the allocation of resources.
Solidarism’s second principle, subsidiarity, guides decision-making in that decisions should always be made on the lowest possible level. By Becker’s definition, a high unit of society should not undertake to perform functions that can be handled as well by a lower unit; in fact, the higher unit of government or business should offer help (subsiduum) where necessary to enable the lower unit to function at full capacity [Becker 1957, p. 4]. The implication is that decision making should be shared as broadly as possible. The reason for the low level of the units (and for a related requirement of Schumacher’s  that they be small in size) is that the units are comprised of free intellectual beings whose perfection should not be thwarted any more than is necessary. Moreover, the higher the decision making unit the more it must be for the common good, less for the interest of the group.6 The principle of intermediary groups is the third significant part of solidarism. Widespread application of this principle minimizes the need for governmental intervention and the consequent invasion of bureaucratic inefficiency. Not-for-profit intermediaries are a part of the institutional structure of the social economy comprising occupational groups, socially oriented trade unions, industry councils, professional or trade associations and consumer and environmental organizations. Their function is to make decisions concerning the quality of the goods and services produced and the economic welfare of the whole. They are not new to America. An important example is the MPPDA (the Motion Picture Producers and Distributors of America). In the 1930s and 1940s the motion picture industry blossomed to account for 75 percent of America’s entertainment dollar and produced the country’s leading export during the Depression [Gomery 1986]. The studios cooperated through the MPPDA to constrain sex and violence in the films they produced, distributed and exhibited. It appears that without this intermediation the government would have been called upon to perform this function. "
Influence in the US
"Any account of the contributions of German Jesuits and their students to economics over the past 100 years must begin with the German economist Heinrich Pesch and Rerum Novarum wherein Pesch’s work originates.
As his thinking on economic affairs matured, Pesch established a small study group where two other German Jesuits -- Oswald von Nell-Breuning and Gustav Gundlach -- played key roles. At least two laypersons in this group -- Goetz Briefs and Franz Mueller -- emigrated to the U.S. where Briefs joined the faculty of Georgetown University and Mueller eventually joined the faculty of St. Thomas College in Minnesota. Both played a role in the establishment of the Catholic Economics Association in 1941 which some 25 years later became the Association for Social Economics. Two American Jesuits, Thomas Divine and Bernard Dempsey (neither of whom were formal students of Pesch), are regarded as the founding fathers of the Association. Oddly, these two men -- both trained in economics -- saw things much differently. Divine was closely allied with mainstream economic thought. Dempsey, on the other hand, was powerfully influenced by Pesch’s economic thinking which at that time and for some time afterward was known as “solidarism.” Eventually, Divine’s view became the dominant perspective within the Association [Waters 1990a, pp. 92-93].
Dempsey and Divine were joined by several other American Jesuits including Leo Brown and Joseph Becker both of whom specialized in labor-market problems: Brown in labormanagement relations and Becker in employment security. Both become leading experts in their respective domains and probably are the most influential of the American Jesuits in practical economic affairs. Brown became a major labor mediator and arbitrator; Becker became the most outstanding student of unemployment insurance of his time. There are several other American Jesuits who are noteworthy, including Richard Mulcahy who published The Economics of Heinrich Pesch to bring Pesch’s ideas to those who do not read German, and several American lay persons who were trained and inspired by the Jesuits. "
By Rupert J. Ederer:
"Heinrich Pesch was born in Cologne, Germany, on September 17, 1854. He died in Valkenburg, Holland, on April 1, 1926. During that span of not quite 72 years he combined with his exemplary life as a Jesuit priest many years of extraordinary, productive scholarship. Pesch began his university studies at Bonn. After he entered the Jesuit order in 1876, he went through the intensive regimen required by that order, and that included for him periods in Holland, Austria, Luxembourg, and England. It was during his theological studies in England — absence from Germany being forced by the Bismarckian repression of Jesuits — that Pesch was able to see firsthand the social devastation liberal capitalism wrought among the working classes. The experience is what prompted the young student to dedicate his life to doing what he could to improve the lot of the common working people.
Although the provincial of his order had intended to have him go on studying to become a professor of theology, Pesch successfully pleaded his case for studies in economics. While still a theology student, he began to probe the so-called Soziale Frage — the great social question of the time, namely, how to alleviate the plight of the working classes in the laissez-faire capitalist milieu of the late 19th century. Later he was assigned to co-edit with his brother, the renowned philosopher Tilmann Pesch, the prestigious journal Stimmen aus Maria Laach. He published 71 significant articles in it over a 28-year period. There were also assignments in various parts of Europe, including Vienna and Holland, before he was assigned to be spiritual advisor in the seminary of the Diocese of Mainz — a happy coincidence! There the Jesuit scholar dwelt in the same house in which the great pioneer of Catholic social teaching, Bishop Wilhelm Emmanuel von Ketteler, had lived; it was there that Pesch wrote his important two-volume work Liberalismus, Sozialismus und Christliche Gesellschaftsordnung (Liberalism, Socialism, and Christian Social Order), which he described as an exercise in philosophical sociology. His studies in ethics and moral theology had convinced him of the relevance of morality for economic life. That set him on a course that was contrary to the positivistic orientation that the social sciences, including economics, were taking by that time."
Edward J. O’Boyle:
"Von Nell-Breuning’s “functional order in the concrete” foretells the title and the central theme of Dempsey’s The Functional Economy: The Bases of Economic Organization by which Dempsey meant the principles which are foundational to a functional or organic economic system [Roets, pg. 550]. The Functional Economy, which in fact is a collection of articles previously published, is a major contribution to CSE because it applies the principles of conventional economics such as marginal utility and substitution along with the principles of Catholic social teaching such as subsidiarity and commutative justice to everyday economic affairs. The subjects covered in some of the chapters are especially illustrative: the worker as person; basis of just wages; just price in a functional economy; subsidiarity -- a basis for functional adjustment.
Further, and most importantly, Dempsey understands the importance of the question on vocational order raised in von Nell-Breuning’s commentary on Quadragesimo Anno but set aside. Dempsey’s answer, however, does not take the form of concrete examples. Rather he asserts that the question relates to the nature of economic institutions and he articulates three principles -- consistency, feasibility, and economic rationality -- which provide instructions as to the functions and structures of economic institutions reconstructed along the lines suggested in the encyclical.
Consistency, according to Dempsey, means “a harmony between the structuring given to man’s economic activity and the conclusions of an adequate philosophy of human nature and human action” and feasibility is defined operationally and administratively as “what is socially and politically possible” [Dempsey 1958, pp. 327-329]. Economic rationality to Dempsey means the impact of the reconstruction suggested by the so-called vocational order principally on production and distribution.
Will the social planner’s scheme help to produce more and better goods, in a better way, with better distribution? How much more? How much better? [Dempsey 1958, pg. 331].
Dempsey died at age 57. We can only speculate as to what his contributions might have been had he lived another 20 years. Even so, the last chapter of The Functional Economy provides some hints in the form of Dempsey’s statement that the central problem facing American business leadership is how to “maintain democratic government and personal freedom in an economy where the high standard of living is bound up with the efficiency of very large aggregates of capital goods” [Dempsey, pg. 460]. The rest of the last chapter intimates that Dempsey likely would have studied the ways in which it is possible to reconstruct economic institutions to facilitate the everyday practice of the three principles of justice: commutative justice, distributive justice, and contributive justice."
Edward J. O’Boyle:
"Ederer fled Germany in the 1930s but, unlike them, earned his doctorate in economics in the United States. He attributes his all-consuming interest in Pesch to Dempsey and Mueller [Gurries, p. 2; Ederer, p. 80]. In the dedication of his Heinrich Pesch on Solidarist Economics Ederer said of Franz Mueller that “he ranks foremost among persons who made Pesch and Solidarist Economics known in the United States.
Ederer is included among the nine Jesuits for two primary reasons. First, he earned his doctorate in economics under the influence of the Jesuits at Saint Louis University, principally Dempsey. Second, without collaborators to ease the burden, Ederer translated into English the entire 3800 pages of Pesch’s Lehrbuch with bibliographies, fine print, and footnotes in an effort which he described as “a boulder of a job.” This translation work was a 20-year labor of love [Ederer, p. 79]. Until Edwin Mellen Press published Ederer’s translation of Pesch’s magnum opus in 2002-2003, anyone fluent only in English had to rely principally on Mulcahy’s The Economics of Heinrich Pesch.
In 2000-2006 Edwin Mellen Press published in five volumes Ederer’s translation of Pesch’s Liberalismus, Socialismus, und Christliche Gesellschaftordnung (Liberalism, Socialism, and Christian Social Order). IHS Press in 2004 published Ederer’s rendering of Pesch’s Ethik und Volkswritshaft (Ethics and the National Economy). In 1981 University Press of America published Ederer’s translation of Ketteler’s major works as The Social Teachings of Wilhelm Emmanuel Von Ketteler.
At this writing, Ederer’s Economics as if God Mattered, published originally by Fidelity Books, is under revision. Though not a translation, this book strictly speaking is less an original work than a review of the Church’s social encyclicals and teachings as seen through the eyes of a social commentator who has devoted his professional lifetime to understanding and communicating Peschian economics.
Ederer’s contributions to solidarist economics are enormous. Without his 20 years of labor, Pesch’s Lehrbuch likely would never be available to the English-speaking world. The academic world, however, has little regard today for the likes of Ederer as scholars because what they produce does not fit the academy’s rigid test of originality. Even so, all of us who are instructed by the critical insights of solidarist economics stand a little taller today because we stand on Ederer’s shoulders. "
Solidarism in the context of Catholic Social Economics
Edward J. O'Boyle:
"Schumpeter challenged Briefs to design an economic system that would replace socialism as the only alternative to the capitalist system which he regarded as in permanent decline [Waters 1961, pp. 136-137]. Personalist economics emerged on its own as the offspring of solidarist economics principally at the hands of William Waters who was greatly influenced by the teachings of Aristotle and Schumpeter, and Danner whose work draws heavily on John Paul II and Mounier.
The schematic also provides a timeline which connects the three stages of human communication -- the oral/aural stage, the script stage, the electronic stage -- to the evolution of economics since the Enlightenment. In the oral/aural stage, human communication was strictly face to face thereby drawing humans closer together and requiring economic agents to interact face to face, underscoring their human sociality. Teachers and their students were actively engaged in a way which emphasized thinking and speaking as critical to learning. In the script stage, especially after the invention of the printing press, interaction between economic agents could occur at great distances over an extended period of time without their ever meeting face to face, accentuating their human individuality. Under the influence of 16th century professor, Peter Ramus, learning became a process in which teachers lectured and students were expected to listen, take notes, and follow in the textbook (see Ong). Virtually everyone who teaches economics employs Ramist pedagogy in the classroom, thereby reflecting and reinforcing the individualism which dominates the neoclassical economics way of thinking. The Ramist pedagogy extends naturally enough to the university library – the official depository for books rolling off the printing press assembly line -- where the cardinal rule of silence still is observed and enforced.
Homo economicus was a good fit in the typographical culture of the 17th-18th centuries in which inward-directedness, listening and reading, and self-reliance are esteemed while outward-directedness, thinking and speaking, and co-existence are not. The library replaced the forum or as Simon Blackburn put it, citing Schopenhauer, reading is “a mere surrogate for thinking” [Blackburn, p. 5].
In the electronic stage which began with the telegraph economic agents interact over long distances in a short period of time, making them more other-reliant in day-to-day economic affairs without suppressing their human individuality. The economic agent in the electronic stage is an individual being and a social being, no longer just an individual but a person. Ong asserts that personalism emerged in the electronic stage which enhanced human awareness of self and of others.
Catholic social economics that owes much to the nine Jesuits identified herein for its origins and development is barely visible in academic circles today. Perhaps this reflects the vocations crisis in the Jesuit order, the laicization (some would say secularization) of the American Jesuit colleges and universities, the logical positivist bias in conventional economic science, what one might call the marginalization of labor economics (Briefs’ and Becker’s specialization) within the discipline, or some other reason(s).
Whatever the reason(s) for the decline in Catholic social economic thought and the role of the Jesuits within that scholarly tradition, today there are no American universities including Jesuit institutions which offer a doctorate in economics with a concentration in CSE. At the present time, virtually none of the nine persons included in our company of Jesuit economists would be identified by the typical economics student and, for all intents and purposes, their life work is entirely hidden from view in today’s mainstream classroom. Worse yet, none of the professional work of the nine would be recognized much less respected by the typical economics faculty even at Catholic institutions. The legacy of Pesch, Gundlach, von Nell Breuning, Divine, Dempsey, Brown, Becker, Mulcahy, Solterer, Briefs (Goetz and son Henry), Mueller, Ederer, Waters, Danner, Worland, Gruenberg, and the others is being buried by an economics profession which accepts only mainstream thought as having any authenticity. In that sense, they share the same fate as their professional colleagues in economic history and history of economic thought.
A colleague on the economics faculty at a major American Catholic university several years ago recounted to the author his efforts urging the economics department to afford wider acceptance of intellectual perspectives outside the mainstream. His suggestions were roundly rejected by the faculty."
- Heinrich Pesch on Solidarist Economics, Excerpts from the Lehrbuch der Nationalokonomie. By Rupert Ederer. 
- The Economic Person. By Peter Danner.