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". [1]

Description

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."

(https://www.newoxfordreview.org/documents/heinrich-pesch-the-economics-of-solidarism/)

Characteristics

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."

(https://www.crisismagazine.com/2014/rediscovering-heinrich-pesch-and-solidarism)

History

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.2

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. "

(https://socialeconomics.org/wp-content/uploads/2019/06/OBoyle-ASE-history-essay.pdf)

Authors

Heinrich Pesch

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."

(https://www.newoxfordreview.org/documents/heinrich-pesch-the-economics-of-solidarism/)

Bernard Dempsey

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."

(https://socialeconomics.org/wp-content/uploads/2019/06/OBoyle-ASE-history-essay.pdf)

Rupert Ederer

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. "

(https://socialeconomics.org/wp-content/uploads/2019/06/OBoyle-ASE-history-essay.pdf)

More information

• Book: Heinrich Pesch on Solidarist Economics, Excerpts from the Lehrbuch der Nationalokonomie. By Rupert Ederer.