Catholic Social Teachings: Dual Role Wage Earner as Consumer
Reality Check
Catholic Social Teachings of Human Dignity, Solidarity, Subsidiarity and the Greater Good, Cardinal Virtues of Justice, Prudence, Fortitude, and Temperance and Economic Theory and the Dual Role of the Family/Consumer as Wage Earner and Consumer
In general, industries become more efficient as they evolve/mature and channel functions may change in relative importance and who performs them and how they are performed. This generally happens in ways that yield industry cost savings and efficiency.
Briefly, historically economics was thought of holistically as a delicate balance of multiple firms offering goods and services and multiple consumers and organizations consuming said goods operating under the principle of Adam Smith’s “invisible hand” whereby channel members- the firms involved in offering goods and services evolved to better and better methods for their consumers and markets all the while keeping each other in check while pursuing what made sense for themselves, their channel partners and their customers and society as a whole. For example, Henry Ford knew that in order to make the automobile accessible to the mass market, he needed to pay his workers sufficient income so as to be able to afford an automobile, likewise his channel partners and their employees. Thinking was not myopic and selfish but rather inclusive, evolutionary and at times even revolutionary. Sadly, that type of thinking did not and does not always prevail and it was precisely this reason that the Catholic Social Teachings were introduced during the time of the Industrial Revolution- arguably because many people and organizations lost sight of the cardinal values of justice, fortitude, prudence and temperance in pursuit of personal wealth and/or dominance. This is where we find ourselves today with regard to Uber’s proposition and behavior and that of many if not most “disruptive technology” business models coming out of Silicon Valley and elsewhere that have trampled industry regulations and norms of behavior in a virtually unrestrained and even rent seeking manner to suit their own agenda to the detriment of many holistic minded organizations and individuals through predatory and dysfunctional business models that aggregate regulation prohibited thereby allowing “the invisible hand” to flourish and society to gain and develop wealth and a balanced economy- the key of which was a growing, healthy middle class.
It is important to know that “Nearly every economist has at some point in the standard coursework been exposed to a brief explanation that the origin of the word "economy" can be traced back to the Greek word oikonomia, which in turn is composed of two words: oikos, which is usually translated as "household"; and nemein, which is best translated as "management and dispensation." Thus, the cursory story usually goes, the term oikonomia referred to "household management", and while this was in some loose way linked to the idea of budgeting, it has little or no relevance to contemporary economics.” This is the crux of the problem.
We live in an increasingly polarized world today and it is in part due to the allowance of exploitation intrinsic in business models at the expense of the worker for the betterment of “earnings” and “shareholders” to the point that economics is now thought of in two terms- macro- at the aggregate national level and micro- at the corporate level and at the loss of the family- however defined earning and spending unit.
Most typically today, the typical worker needs a great deal of debt to be a consumer of the typical necessary bundle of goods that in reality the macro economy demands. Consumer debt is very expensive and largely unregulated with interest rates in the 24% range common for most consumer credit cards. For TNC drivers, many of their costs are covered by credit card too and the wages many force these costs to accrue and build.
Over the past 50 years it has become common to think and present the economy from either a macro or micro-perspective and policy leaders basically ignore micro economics and focus on macro job growth, inflation and/or the stock market.
• Microeconomics studies individuals and business decisions, while macroeconomics analyzes the decisions made by countries and governments.
• Microeconomics focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach.
• Macroeconomics takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature.
• Investors can use microeconomics in their investment decisions, while macroeconomics is an analytical tool mainly used to craft economic and fiscal policy.
The TNC Industry brings to light micro economics in that the supply of drivers impacts the earnings per driver and the earnings per driver impact what each river can spend. Drivers aren’t just workers, they are earners and consumers like all workers.
Henry Ford knew the making of cars was as important as the selling of cars and that the two were inter-twined when transforming society. In reality, that has not changed, we have simply gotten accustomed to new ways of thinking that ignore some channel functions or the needs of some channel partners at the expense of others- and as is the case with ridesharing, the efficiencies brought about by the app connecting passenger and driver are not sufficient to justify the lower price point per ride of many fares which then come at expense of the fare’s driver who supplies the car, fuel, licensing, insurance and his/her time due to the intrinsic “non-revenue earning time” waiting for a passenger ride opportunity or driving to/from a passenger ride opportunity. In addition, unlike manufacturing industries that are scalable due to fixed costs whereby at certain quantities the cost per unit drops substantially, this principle does not necessarily hold true for service industries whereby each ride should cover all fixed and variable costs including a livable wage and a profit for each channel partner to assure an industry’s health and future viability and valued contribution to the “economy”.
The Uber business model is not the only one that is intrinsically predatory- Amazon, Meta, and Alphabet, to name a few all owe their raison d'être to predatory business models, some of which do not even have a path towards profitability for them, let alone their channel partners and all of which have ignored historic industry regulations and industry norms to the detriment of society and many many channel partners. Do we really believe that 80+ year old musicians want to continue to give concerts or is rather that there retirement royalties from record sales and radio play have all but disappeared?
Meta and Alphabet are really “media” organizations that benefit from intrinsically predatory advertising models and the commoditization of personal information/privacy for the purpose of monetized exploitation. Meta, Alphabet, and Amazon starting in 2021 comprise over 50% of all advertising revenues in the United States at the expense of privacy and historic industry regulations and norms against predatory advertising and to the detriment of a healthy media industry, a healthy retail industry, and even damage the profitability of virtually all industries that strive to adhere to a more holistic approach to business and its role in society at large- with very little push back from the impotent U.S. Federal Government and common sense only coming from Europe.
All of the companies mention including Uber and its competitor LYFT are publically help corporations listed on U.S. exchanges adding another dimension to wealth distribution and participation. Amazon, Alphabet and Meta are listed on NASDAQ and UBER is listed on the New York Stock Exchange.
It is commonly known yet not understood or assimilated that the stock market is no longer reflective of corporate performance and as passive income it has generated more wealth for people than wages- which is very problematic and can be explained largely by machine trading and predictive modeling software, coupled with immense 401 K money, mutual and index funds, and few individuals voting a proxy or even knowing where there money is invested. The Gramm–Leach–Bliley Act passed in November 1999, repealing portions of the BHCA and the Glass–Steagall Act, allowing banks, brokerages, and insurance companies to merge, thus making the CitiCorp/Travelers Group merger legal. This furthered the already growing concentration of wealth among “big banks” and the invention of a no time value of money economy where many Americans live on credit cards that charge exorbitant rates of interest yet are discouraged from savings in savings accounts as they pay less very low annual interest rates and are therefore highly encouraged to make passive investments in the stock market that may serve to benefit others more than themselves, including corporations like UBER and LYFT that go public for enormous valuations when they do not have a proven profitable business model nor a path toward one but rather immense cash and political clout.
Since 1980, the structure of the U.S. banking industry has changed considerably, with more than 10,000 mergers involving more than $7 trillion in acquired assets having taken place. There were 19,069 banks and thrifts operating in the United States in 1980 and only 7,011 in 2010, a decline of more than 60 percent and 4715 banks in 2022.
During the industrial revolution, a time of great change where capital and labor were pitted against each other, the Catholic Church in its wisdom presented the Catholic Social Teachings as a framework for developing solutions for this challenge.
“If we can cooperate with all people in building authentic community based on truth, justice and charity, economic growth would no longer be limited to satisfying human needs, but it would also promote human dignity.” Pope John XIII
With the stock market near record highs and the unemployment rate near record lows, the media and the White House would have us believe that the economy is doing well, yet I think all of us in one way or another sense that there is more to it than just these two figures. We know that gig jobs like Uber have little regard for the worker, leverage buyouts can leave companies having debt payments at the expense of growing wages for employees, and that the size and scope and behavior of the 5 largest Tech Companies: Amazon, Alphabet, Apple, Facebook and Microsoft is out of line, and that the tactics, profits and callous disregard for human life exhibited by some pharmaceutical companies is somehow very wrong.
In 1891, the social, political and economic changes of the industrial age yielded deplorable labor conditions and raised new questions about the relationship between labor and capital. Pope Leo XIII wrote Rerum Novarum (of New Things) as the Catholic response to the social crisis in the modern world and to teach man how to live together in harmony. The teachings reject socialism and communism as vehicles for social change and conveys that if you want proper social change it needs to be done looking at the human person, human work, private property and the principle of collaboration. People working together for the common good.
After the stock market crash, the teachings were expanded and reaffirmed the principles applied to labor and capital but added that the state in its relations with the private sector should apply the principle of subsidiarity. Subsidiarity would become a permanent fixture of Catholic Social Teaching.
The whole of the Church’s social doctrine can be seen as an updating or deeper analysis and an expansion of the principles that are presented in Rerum Novarum.
The 4 Principles of Catholic Social Teaching are:
1) The dignity of life- human beings are equal in dignity and created in the image of God.
2) The common good-activities are to be done for the good of all and not just one party.
3) Subsidiarity –The principle of subsidiarity reminds us that larger institutions in society should not overwhelm or interfere with smaller or local institutions, yet larger institutions have essential responsibilities when the more local institutions cannot adequately protect human dignity, meet human needs and advance common good
4) Solidarity-the notion that we all share and participate in what we are doing, not just now but from generation to generation and no one is exploited. It is both a social value and a moral principle. Solidarity requires the appropriate modification of laws, market regulations, and juridical systems.
These principles must all be present and one is not be done at the expense of another.
The 4 Social Values of Catholic Social Teaching are:
1) Truth
2) Freedom
3) Justice
4) Charity
Justice to give to God and neighbor what is their due constitutes the way things need to operate.
The Areas of Application of Catholic Social Teaching include:
1) The Family
2) Work
3) The Political Community
4) The Environment
5) The Promotion of Peace
Through lack of acknowledgment of dignity of man and selfishness, a common definition of the purpose of a corporation since 1997 held by some in power and promulgated to society at large was” to maximize shareholder wealth”.
In August of 2019, The Business Roundtable announced a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies” for the benefit of all stakeholders- customers, employees, suppliers, communities and shareholders”.
“The American dream is alive but fraying” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable.
This stakeholder approach to business is what I was taught in my college courses in the 1980s at the University of Minnesota’s School of Management and is necessary for business to be a noble profession. A greater realization of Catholic Social teaching can provide a framework for goodness now and for generations to come and conditions that favor a more just society.
It is refreshing to see the Minneapolis City Council and the State of Minnesota make a conscious decision to tackle the TNC industry at its crux so as to us recalibrate ourselves and work and pray for a better society for all people.