Since at least the 1982 publication of his book, The Spirit of Democratic Capitalism, Michael Novak has been the leading voice in the effort to reconcile Catholicism and capitalism, an effort which bore spectacular fruit with the 1991 papal encyclical, Centisimus Annus.   The tension between the two -isms, though partially a function of the fact that Capitalism is associated with Protestantism, was for the most part a fairly natural result of capitalism's dependence on individualism and self-interest, as opposed to Catholicism's hierarchical and authoritarian structure and Christianity's requirement of selflessness and charity.

The three essays in this collection, originally delivered as the Pfizer Lectures at the American Enterprise Institute, address the future of the corporation, intellectual property rights, and corporate governance.  They are unified by the way in which Novak treats business and the corporation as institutions which have important moral roles to play in society.  First he discusses the fact that corporations are voluntary associations, which allow individuals to work together in ways that make them more powerful and effective than they could ever be on their own and which serve important social ends :

    From the point of view of civil society, the business enterprise is an important social good for four
    reasons.  First, it creates jobs.  Second, it provides desirable goods and services.  Third, through its
    profits, it creates wealth that did not exist before.  And fourth, it is a private social instrument,
    independent of the state, for the moral and material support of other activities of civil society.

In fact, he argues, the effectiveness of corporations in providing goods and services, in creating wealth, jobs, and opportunities, and in providing a counterweight to the power of central government, makes them second in importance only to religious organizations in terms of the role they have played in creating and guaranteeing democracy.

In this section he makes the really intriguing point that some of the earliest capitalist corporations were born out of the Catholic monasteries of the Middle Ages.  He quotes the great modern Tory historian Paul Johnson to the effect that :

    A great and increasing part of the arable land of Europe passed into the hands of highly disciplined
    men committed to a doctrine of hard work.  They were literate.  They knew how to keep
    accounts.  Above all, perhaps, they worked to a daily timetable and an accurate annual
    calendar--something quite alien to the farmers and landowners they replaced.  Thus their cultivation
    of the land was organized, systematic, persistent.  And, as owners, they escaped the accidents of
    deaths, minorities, administration by hapless widows, enforced sales, or transfer of ownership by
    crime, treason and folly.  They brought continuity of exploitation.  They produced surpluses and
    invested them in the form of drainage, clearances, livestock and seed...they determined the whole
    future of Europe; they were the foundation of world primacy.

This is ingenious both for the insight that the great innovation that these first corporate entities offered was continuity, of a type that was not available to individuals or even to families, and for the way in which it implicates the Church in the creation of capitalism.  Novak's writing is characterized by this unique combination of perceptive analysis on general issues combined with more subtle demonstrations that capitalism and Christianity are and have been compatible.

The second section, on intellectual property, is so compelling that it actually made me rethink my position on Napster.  Most of us have been tape recording albums, videotaping shows, "borrowing" computer programs, and now burning cd's, for so long that we've become inured to the idea that the underlying products are ours to exploit and that this will have little or no effect on the artists who create this product.  Novak draws upon Abraham Lincoln's 1850 Lecture on Discoveries and Inventions in order to make the case that protection for patents and copyrights is one of the central innovations of the American system, one that deserves to be defended.  He points out, for instance, that the right of inventors and authors to receive royalties is the only "right" mentioned in the body of the Constitution.  It can hardly be a coincidence that the country which affords such creative activity the greatest protection has been the most creative nation.  Novak discusses the ways in which these protections, which reward those who are willing to share their ideas and to take risks to develop them into products, have served to benefit not merely the innovators themselves but the society at large, and concludes :

    Patent regimes recognize the right of inventors and authors to the fruit of their own labors as a right
    in common law.  They do so because this right serves the common good by stimulating useful
    inventions and creative works from which a grateful public benefits.  Far from protecting private
    interests at the expense of the common good, patent protection advances the common good by
    means of private interest.  The common good is the end, private interest is the means.

Here again, we see that although it is often blithely assumed that capitalism serves only individual interests, it is in fact the most effective way for society in general to achieve progress.

In the final section, Novak discusses the various threats to the corporation presented by the various efforts to change how they are governed.  He cites Michael Oakeshott's differentiation between the "civic association" and the "enterprise association" :

    The civic association aims at something larger than any particular end, interest, or good: the
    protection of a body of general rules and a whole way of life; in other words, the larger framework
    within which, and only within which, the pursuit of particular ends becomes possible, peaceable,
    and fruitful.  Given such a framework, individuals are free to choose myriad activities.  The state is
    a civic association, he thought, or at least should be; so is the church; and so are many kinds of
    clubs, charitable organizations, and associations for self-improvement.

    ... By contrast, Oakeshott noted, the enterprise association is built to attain quite particular
    purposes... Enterprise associations are focused, purposive, instrumental, and executive: they fix a
    purpose and execute it.

The problem that corporations (enterprise associations) now face is that politicians and political activists are trying to blur these lines and turn them into civic institutions, with responsibilities for meeting all kinds of political and social purposes.  This diffusion of aims, unwise as it may be, is perhaps appropriate for government organizations : if affirmative action and the like are going to be implemented somewhere, better that it be in government which is already moribund.  But one need only look at the havoc such social experiments have wreaked on the military [as Stephanie Guttman has done in her excellent book : The Kinder, Gentler Military: Can America's Gender-Neutral Fighting Force Still Win Wars? (2000)(Stephanie Gutmann)   (Grade: B+)] in order to see the disastrous effects of making an organization with a single purpose (being prepared to fight and win) try to satisfy a multitude of political purposes (gender neutrality, acceptance of homosexuals, etc.).  Such fiddling by the political class has rendered our once mighty fighting forces politically correct, but much less formidable.

Corporate America now finds itself prey to these same pressures.  Already overregulated on the environmental, labor, and other fronts, business finds itself under attack for not being sufficiently socially conscious.  They are being asked to ignore the bottom line, to eschew profits, and to instead focus on their role in local communities.  It is supposed that society would be better off if corporations were governed so as to "benefit" their employees and their neighbors, and governed in the way that government thinks fashionable at the moment, rather than being run with mere efficiency and profits in mind.  One would have thought that the long and disastrous European experiment with Socialism and the spectacular failure of Japan's once vaunted economic planning would have put this argument to rest, but, alas, such is not the case.  There will apparently always be a class of activists, politicians, and bureaucrats who believe that they, if given the opportunity, could run the economy.  But having seen how inefficiently they run our governments, we should resist them at all costs.

In this book, Michael Novak is really trying to steel business people, to whom the initial lectures were addressed, for this fight.  He seeks to warn them that they must not give up the freedom from government interference which has made American industry so uniquely creative and efficient.  This is important not just to the bottom line of their corporate ledgers, but because :

    Corporate leaders often lose sight of the fact that the most important secondary effect of what they
    do--not what they aim at, perhaps, but what their actions lead to--is to raise the poor out of poverty
    and to offer unparalleled opportunities for the development of human talents.  Their further great
    effect is to animate civil society, that huge, bustling arena of the world's grand experiment in
    self-government.  These two signal achievements, raising up the poor and energizing civil society,
    provide powerful moral claims for business corporations.  Corporate leaders should take care that
    new schemes for corporate governance do not jeopardize these achievements nor distort their one
    main purpose: to create new wealth for the whole society.

Leaders of corporate America, and informed citizens, must be conscious of these legitimate moral claims and must use them to resist the temptation on the part of the political class to warp corporations to their own social purposes.  They have the moral high ground and should not yield it.

(Reviewed:17-Mar-01)

Grade: (B+) Orrin C. Judd

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