Home / Economics / A Distributist Looks at Capitalism and Socialism


In the popular way of thinking and talking there are only two basic ways of organizing an economy, capitalism and socialism.[1]

Despite the fact that few could offer a good definition of either of these systems, most people are convinced that they are the only two possible systems. My purpose here will be to discuss these two well-known systems, to try to define them, to point out their various defects, and to show what the judgment of the Church on each of them is and why. Frequently there is confusion about this last point of the Church’s moral evaluation of both capitalism and socialism. The Church’s condemnation of socialism is well-known, but much less well-known are the reasons for this condemnation and what the popes mean when they condemn socialism. And what of capitalism? Is that too condemned? And if not, does that mean that we ought to regard it as the best or only way of organizing an economy?

So first, what is capitalism? It might surprise many that there is no consensus among economists or economic historians on this. One or two quotations will make this clearer. The economic historian, Robert Heilbroner wrote, “What is capitalism? That is the profound and perplexing problem to which this book is addressed.” And he continues,

But the question of what capitalism “is” presents challenges of another kind. Now the difficulty is not so much to cope with masses of material as to decide on a few quintessential elements. This is a much more recalcitrant question. The variables that affect the capitalist process overwhelm us in their complexity, but it is at least imaginable that they might be coherently ordered. No such conceptual clarity is available when it comes to determining the irreducible elements of the system. No formal procedures, even at the most abstract level, tell us how to specify the essence of a thing.[2]

The famous Catholic econonic historian, Amintore Fanfani, in his Catholicism, Protestantism and Capitalism,[3] begins his attempt to define capitalism with the statement, “Many attempts have been made to reduce this historical phenomenon to certain of its characteristic features. Each student of the question has taken one particular conception, with the result that widely different conclusions have been reached.”[4] He then proceeds for six pages to discuss attempts at a definition and possible meanings. In view of this, we can perhaps pardon the difficulty that most people would experience were they forced to attempt a definition.

But despite this disagreement, I think that an entirely adequate definition is not only possible but has already been made. This is the definition contained in the encyclical of Pope Pius XI, Quadragesimo Anno (1931). Pius characterized it as (§100) “that economic system in which were provided by different people the capital and labor jointly needed for production.”[5] In other words, capitalism is the economic system in which, for the most part, some people provide the capital for financing an enterprise and others provide the labor, that is, they work for wages on enterprises owned by the owners of capital.[6] This does not mean that all workers under capitalism have no share in the ownership of the means of production, simply that for the most part this is true, and thus a capitalist economy is characterized by a division of owners and workers. Now is there anything wrong with this? Or is it just the abuses of capitalism that render it unsatisfactory?

One of the most concise critiques of capitalism was that offered by Hilaire Belloc in the following words.

But wealth obtained indirectly as profit out of other men’s work, or by process of exchange, becomes a thing abstracted from the process of production. As the interest of a man in things diminishes, his interest in abstract wealth—money—increases. The man who makes a table or grows a crop makes the success of the crop or the table a test of excellence.

The intermediary who buys and sells the crop or the table is not concerned with the goodness of table or crop, but with the profit he makes between their purchase and sale. In a productive society the superiority of the things produced is the measure of success: in a Commercial society the amount of wealth accumulated by the dealer is the measure of success.[7]

Let us look carefully at Belloc’s words in order to understand his critique of capitalism. “But wealth obtained indirectly as profit out of other men’s work, or by process of exchange, becomes a thing abstracted from the process of production. As the interest of a man in things diminishes, his interest in abstract wealth—money—increases.” When someone makes his living by creating a product in which he takes pride, whether as an individual craftsman or as part of a team, he is interested in selling his product, yes, and making a sufficient return for his labor. But most often he also takes pride in his work and identifies himself with his trade or profession. He is not simply a seller of some product or other, a product which, if he could, he would exchange for some other if he thought the latter would sell better. He takes pride in the production of a well-made product, apart from what he might sell it for. Nor is this attitude true only of the pre-industrial craftsman. Computer “geeks,” for example, very often take pride in their work and have a certain disdain for those in the computer industry who seem to them more interested in profits than in making a quality product.

When the greater part of the work relationships in a society are of the capitalist sort, then the notes of capitalism that Belloc lists begin to give a certain tone to that society. “In a productive society the superiority of the things produced is the measure of success: in a Commercial society the amount of wealth accumulated by the dealer is the measure of success.” A capitalist society will almost inevitably turn into a commercial society, a society in which mere accumulation of wealth is sought, in which almost any legal method of acquiring wealth is looked upon with approval, and, most banefully, in which striving for wealth is seen as the primary occupation of mankind. The “love of money” which St. Paul excoriates now replaces love of God, love of family and friends, love of learning as society’s chief pursuit. We will see below that John Paul II sees the ideology of capitalism, as that historically developed, as rooted in the same philosophical errors as the ideology of socialism.

It is true that in a capitalist society not all individuals consider mere accumulation of money or things as the purpose of life. But a capitalist society tends to disregard other motives as unworthy of mention. Education, for example, is justified in terms of how much it will increase one’s salary, and the institutionalized pressure for ever greater sales, ever improving performance over the previous quarter, pushes many into making mere gain their goal. Capitalism hardly acknowledges the existence of any other motive or reason for being except accumulation of wealth.

Does the Catholic Church condemn capitalism? If we are speaking of the mere economic arrangements by which one man employs another man to work for him, then the answer is no, provided of course that a just wage is paid. Pius XI, immediately after he offers his definition, proceeds to say, “Leo XIII’s whole endeavor was to adjust this economic system to the norms of right order. It is clear then that the system as such is not to be condemned.” (§101) But the point to note here is that Leo XIII sought “to adjust this economic system to the norms of right order.” Capitalism is not automatically a just system. Indeed, the popes have been explicit about rejecting what John Paul II in Laborem Excercens called “rigid” capitalism (§14), and earlier Pius XI had taught that “the proper ordering of economic affairs cannot be left to the free play of rugged competition” (Quadragesimo Anno, §88), that is, to mere capitalist market forces. Equally important, they have rejected the philosophy that fostered capitalism and usually accompanies it, classical liberalism. For example, Paul VI, in his 1971 apostolic letter Octogesima Adveniens, wrote that “we are witnessing a renewal of the liberal ideology [which] asserts itself both in the name of economic efficiency, and for the defense of the individual against the increasingly overwhelming hold of organizations, and as a reaction against the totalitarian tendencies of political powers.” But, continues the Pope, “at the very root of philosophical liberalism is an erroneous affirmation of the autonomy of the individual…” Likewise in Sollicitudo Rei Socialis John Paul II notes that “the Church’s social doctrine adopts a critical attitude towards both liberal capitalism and Marxist collectivism” (§21).

The Church does not condemn capitalism as such (though neither does she endorse or recommend it), but her social doctrine does condemn the capitalistic liberal ideology and any kind of capitalism which refuses to permit “the market [to] be appropriately controlled by the forces of society and by the State, so as to guarantee that the basic needs of the whole of society are satisfied” (Centesimus Annus, §35). So if we keep in mind exactly what capitalism is, then we can affirm that the Church has never disapproved of it, though the Church has continually spoken against the actual operations of the capitalist system.

Therefore if a Catholic wants to support capitalism he is free to do so. But he is not free to favor the kind of capitalism which operates with few or no external restraints. Space prevents a detailed discussion here, but the corpus of papal social teaching gives a sufficient notion of the types of legal and other restraints which a capitalist economy must have in order that it be adjusted “to the norms of right order.”

What of socialism then? We will see that due to the historical fact that the economic proposals made by socialists have been continually changing since at least the time of Leo XIII it is not possible to define socialism with the same precision that one can define capitalism. Socialism in fact is less an economic system than a philosophical approach to life, as we will see below. What does the Church say about socialism, then, and why? In the same encyclical in which he gave a qualified acceptance of capitalism, Pius XI was unequivocal in condeming socialism. “No one can be at the same time a sincere Catholic and a true socialist” (no. 120). That might seem clear enough, but unless the explanation which the pope adds is also read and understood the meaning will not be clear. Pope Pius explained here that by the time of Quadragesimo Anno socialism had “for the most part split into two opposing and hostile camps.” (§111) One of these camps was the communists, who had taken power in Russia only about ten years before Pope Pius wrote. They taught “merciless class warfare and the complete abolition of private ownership” and pursued their aims using “methods…even the most violent.” They were hostile to “Holy Church and even God Himself.” Obviously no Catholic could approve such a program or join such a movement. But what of the other kind of socialists?

The other section, which has retained the name of `socialism,’ is much less radical in its views. Not only does it condemn recourse to physical force: it even mitigates and moderates to some extent class warfare and the abolition of private property. (§113)

Could therefore a Catholic adhere to this kind of socialism? Pius’ ultimate answer is no, but in getting to that answer he states several important qualifications. First, he notes that the purely economic program of the moderate socialists was moving in the right direction. Not in the direction of free-market capitalism, however, but in the direction of Catholic social teaching. Thus Pius XI wrote, “it cannot be denied that its [i.e. moderate socialism’s] programs often strikingly approach the just demands of Christian social reformers” (§113). Then he goes on to say that if the moderate socialists continue to lessen their class antagonism and their opposition to all private ownership of the means of production

it may well come about that gradually the tenets of mitigated socialism will no longer be different from the program of those who seek to reform human society according to Christian principles.

For it is rightly contended that certain forms of property must be reserved to the State, since they carry with them an opportunity of domination too great to be left to private individuals without injury to the community ar large.

Just demands and desires of this kind contain nothing opposed to Christian truth, nor are they in any sense peculiar to socialism. Those therefore who look for nothing else, have no reason for becoming socialists. (§114)

In other words, it is not primarily because of any opposition to the moderate socialist economic agenda that the pope made his famous declaration that no Catholic could be a true socialist. It was for reasons that might be termed philosophical: “the reason being that it conceives human society in a way utterly alien to Christian truth.”

In fact it is because according to socialism society itself must be organized only

with a view to the production of wealth. Indeed, the possession of the greatest possible amount of temporal goods is esteemed so highly that man’s higher goods, not excepting liberty, must, they claim, be subordinated and even sacrificed to the exigencies of efficient production. (§119)

This, in a word, is why “No one can be at the same time a sincere Catholic and a true socialist.” It is not because of the economic doctrines of the moderate socialists. It is because socialists have elevated the material side of man over the spiritual side and made the production of goods the organizing principle of society. Socialism is condemned because it never abandoned its roots in a materialistic philosophy, ultimately grounded in atheism. And as long as it remains really socialism it will always have that cast to its principles. Incidentally, this is why European socialist parties have so often jettisoned their distinctive economic programs, but do not abandon their hostility to the Church, to protection of unborn life, to Christian marriage, and so on. The atheism and anti-Chrisitian ideology that lies behind all true socialism remains, even when socialist politicians have embraced many of the exploitive economic practices of capitalism.

John Paul II returns to this theme of the errors of socialism in his 1991 encyclical Centesimus Annus, and elaborates on the previous teaching of Pius XI. John Paul states that

the fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. (§13).

And what is at the root of these socialist errors? John Paul answers that “we must reply that its first cause is atheism.” For our purposes here the important thing to note about the teaching of both Pius XI and John Paul II is that neither focuses on socialist economic practices. Indeed, Pius XI explicitly approves some of their practices, and both pontiffs identify an essentially philosophical error as the real reason why no Catholic can be a socialist. However, John Paul’s analysis of this gets even more interesting. For he has this to say of the atheism that is characteristic of socialism.

The atheism of which we are speaking is also closely connected with the rationalism of the Enlightenment, which views human and social reality in a mechanistic way. Thus there is a denial of the supreme insight concerning man’s true greatness, his transcendence in respect to earthly realities…and, above all, the need for salvation… (ibid.)

Who is being condemned here? It is hard to see how he could not have intended to include in his condemnation here the original formulators of modern economic science and capitalistic doctrine, such as the Physiocrats in France and Adam Smith in Scotland, in other words, the classical liberalism that has long been the ideology of capitalism.

So it seems that John Paul is indirectly suggesting here that, just as no Catholic can be a socialist, no Catholic can be a capitalist, insofar as that means one who embraces the full logic of the capitalist system. It is ironic that this teaching is contained in an encyclical which so many have wrongly seen as constituting an endorsement of capitalism.

Genuine socialism stands condemned by the Church, but as we saw, not for economic but for other reasons. Capitalism in the sense in which the popes use the term is not condemned, but is subject to so many strictures that any just capitalism would differ widely from capitalism as it operates nearly everywhere today. Moreover we should remember that John Paul II in section 35 of Centesimus Annus explicitly noted and sanctioned economic systems other than capitalism. He wrote, “We have seen that it is unacceptable to say that the defeat of so-called ‘Real Socialism’ leaves capitalism as the only model of economic organization.” Distributism offers another way, an economic system which will place fewer obstacles for fallen humanity to put first things first, to put material goods in their own proper place and value other things more. Capitalism as it has always operated has produced a commercial society that distracts men from what is important and fosters the greed and love of money that St. Paul called the “root of all evils.” Genuine socialism likewise turns men away from what is important toward this-worldly manner of existence that in the end is as materialistic as the commercial capitalism that it critiques. Distributism is the best and easiest method of avoiding the errors of each. Distributism by itself will not, of course, banish greed from the hearts of men, but it does not provide artificial incentives to greed and the amassing of goods beyond the reasonable needs of one’s self and family. Distributism points fallen human nature toward its true good, and although individuals are always free to sin, a just social order will aid and support us in our struggle for virtue. Even a capitalism that operates justly creates barriers to virtue, for by separating ownership from work it tends to foster our desire to acquire wealth without limit rather than to obtain a reasonable living by producing long-lasting quality products. Capitalism institutionalizes the pursuit of riches apart from one’s reasonable needs and divorces the production of goods from the needs of society. The criterion of a product becomes whether people can be persuaded to buy it, regardless of their needs, whereas under distributism the criterion of a product is whether it serves the genuine needs of society. Anyone who looks at human life as more than a mad scramble for more and more things will naturally turn his attention to a system whose tendency is to place material goods at the true service of mankind. This distributism does, and this capitalism, even when it is subjected to the requirements of justice, will do only with great difficulty.

End Notes

[1]. This article incorporates some passages from earlier articles of mine.

[2]. The Nature and Logic of Capitalism (New York : W.W. Norton, c. 1985) p. 14.

[3]. New York : Sheed & Ward, 1939.

[4]. Ibid., p. 5.

[5]. Paulist translation, as published in Seven Great Encyclicals and elsewhere. The original Latin speaks of the economic system “qua generatim ad commune rei oeconomicae exercitium ab aliis res, ab aliis opera praestaretur.” Acta Apostolicae Sedis, vol. 23, no. 6, June 1931, pp. 209-210.

[6]. A few economists have given a similar definition. E.g, “Here, then, is the essential dividing line: under capitalism the worker does not work on his own; he works for his employer, the capitalist. The worker is propertyless and has to offer his labour for sale in the market.  The capitalist, by virtue of his owning capital, is in a position to buy labour.” A. K. Dasgupta, Phases of Capitalism and Economic Theory (Delhi : Oxford University Press, 1983) p. 125.

[7]. An Essay on the Nature of Contemporary England (New York : Sheed & Ward, 1937) p. 67.


About the author: Thomas Storck


Thomas Storck is the author of Foundations of a Catholic Political Order, The Catholic Milieu, and Christendom and the West. His work has appeared in various publications including Homiletic and Pastoral Review and the book, Beyond Capitalism and Socialism. Mr. Storck is a former contributing editor of New Oxford Review and Caelum et Terra and serves on the editorial board of The Chesterton Review.An archive of Mr. Storck's writings can be found at www.thomasstorck.org.


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  1. Tom:

    Congratulations on a marvellously lucid and eloquent analysis, and may it be read and taken to heart wherever people of good will are open to alternatives to the mess in which our ideological masters and their media allies have so comprehensively landed us.

  2. In the literature on economic democracy (= labor-managed market economy in the economics literature), the distinguishing feature of the current economic system (“capitalism”) is not the private ownership of capital but the legality of the renting, hiring, or employing of human beings, i.e., the employment contract. Something like the “employment system” would be a better name.
    Also to evaluate this system, it is best not to be taken in by a “fundamental myth” that there is such a thing as the “ownership” of a firm-as-going-concern. Of course, land, buildings, and capital goods are all rentable, so when workers, an entrepreneur, or some other party rents the capital and undertakes a production process or business enterprise, then the owners of the capital are not undertaking the enterprise, i.e., are not the “residual claimants” as economists say–but they still have their ownership. Thus the determination of “who is the firm” is a function of who rents whom or what, i.e., the direction of the input contracts. There is no “ownership of the firm” (the fundamental myth); it is only a question of who rents what or whom.
    Of course, the conventional corporation has owners and it can own capital assets (“means of production”) but it is only an asset-owning bin and not the enterprise when the capital is rented out. For instance, a real estate corporation may own the premises for a shop but it does not “own the shop” since it leases out the space and facilities to the so-called “shop owner” who is in fact only the residual claimant in that enterprise (the one who pays the costs and receives the revenues). When an asset-holding corporation does rent in the people to use the assets in production, then it plays the role of the firm or enterprise by virtue of those rental contracts, not by virtue of the “ownership of the means of production” which it had in both cases.
    The characteristic feature of the current system is not that capital is rentable but that people are also rentable. The system where other people could be owned has been abolished, and that includes the contract to sell oneself voluntarily. But the voluntary contract to rent oneself out remains, and that is the basis for the current system no matter what one calls it.

  3. After reading “the servile state” my idea was that Belloc wanted to alarm the people of his time about the consecuences of the industrial capitalism, that, like the Fabians was expecting, was finally somehow converging with socialism into a materialistic and semislave society. This alarm is in my opinion as right today as it was in his time. But he told about 2 posibilities about the property: negate it (socialism) or allow it, and then in the second 2 other options: in the hands of a few (capitalism) or widely distributed (distributism). I think that socialism, negating property and even God, is much more far from the distributist goal than capitalism. A distributist society, unfortunately quite an Utopia in our times, could only come from the transformation of a capitalism one. I don´t believe in the idea of distributism in “equal distance” from capitalism and socialism.

  4. Alfonso,

    Yes, I agree, it is a mistake to think of distributism as “equal distance” from capitalism and socialism, or even as “between” them. It is another way altogether. We should stop thinking about political and social positions as if they are always on some linear spectrum.

    Mr. Ellerman,

    If I understand you correctly, I agree with you. The reason why capitalists are able to slant economic outcomes in their favor is because they are legal owners of the firm. They can pay the workers the agreed wage and keep whatever is left. If workers set up the firm and obtained the capital they needed, then they would control the outcomes and the capitalists would simply receive the agreed-upon interest payment.


    Thanks for the good words and it’s a pleasure to hear from you. I often think of my trip to Australia in 2008 and how much I enjoyed meeting you and all the others.

  5. Almost. The point is the conceptual point that there is no property right “ownership of the firm” in a ‘capitalist’ economy in the sense of a property right that requires the holder of that right to be the residual claimant in a production process. The owners of capital goods can rent people to work in the enterprise, or people working in an enterprise can rent capital (which we may take as land, structures, machines, or finance for the sake of the argument). Thus with the abolition of the person-rental contract, no existing private property right (such as the mythical “ownership of the firm”) is violated. What is changed is that there is no more the contractual liberty to rent other people–just as now there is no contractual liberty to buy other people, to engage in a coverture marriage (wife giving up independent legal personality), to sell one’s citizen rights, and so forth. All these contracts pretend to alien inalienable rights–which means essentially that the contracts put a person in the legal position of a non-person or sub-person and are thus inherently invalid (even though at one time all were accepted in positive law). For more details on inalienable rights, one might consult: http://www.ellerman.org/Davids-Stuff/Econ&Pol-Econ/InalienableRight_LitmusTest_Reprint.pdf

  6. I wondered if, after Pope Benedict’s invitation for Laity to promote the study of the Catholic Social Justice teachings…how hard will it be to create a “Catholic Social Justice in a Box”? Not for academics but for “regular joes” with a good heart and noble spirit? I read these articles and they are great, but most of my friends at the Church Men’s group will not tolerate much if this. Suggestions?

  7. Yes, I think you’re on to something there. There’s a lot of simplistic thinking that supports free-market economics, and often it can be caught in neat little slogans, which are at best half truths. Can we express Catholic social teaching in a similar simple way? I’m not sure, but obviously we need to try. Since you’re involved in a group of “regular joes,” any suggestions from you? In particular, at what level do you think they can be reached? How simplified should it be made? I’m serious that I’d like your suggestions.

  8. Thanks for a great article, continuing to burst the self deception bubble of “either/or” thinking in economics!!!

  9. ” The man who makes a table or grows a crop makes the success of the crop or table the test of excellence.” This seems an unduly limited definition of creativity. Selling or financing the system that allows the crop or table to benefit creators and buyers may be as creative an activity as creating them. Why is a table a “success” if no one wants to buy it or if no investor will support its production? This way leads to narcissistic insistence on every man being able to define for himself what a “successful” product is.
    Does the just and prudent man not have a duty to produce within an economically rational system, to prove his product in the marketplace, whether that product is a table or a new form of mortgage securitization? Capitalism would appear to be the only system in which that duty of husbanding of resources and disciplining of effort would be allowed and rewarded.

  10. Mr. Speirs,

    You wrote, “Does the just and prudent man not have a duty to produce within an economically rational system, to prove his product in the marketplace, whether that product is a table or a new form of mortgage securitization?”

    Obviously the goods produced by our economic system should correspond to genuine human needs. Under distributism no one would be forced to buy something he didn’t want. With capitalism, however, people manage to sell all kinds of useless things by creating a false sense of needs, etc., via advertising. Capitalism would seem to be among the worst systems for rewarding truly good work. Do you think that the creators of the arcane financial instruments of the last 10 years were responding to genuine social needs or were motivated chiefly by their desire to grow rich and hide from the public (and the regulators) what they were up to? Or the creators of the mounds of cheap junk that clutter up our stores and end up eventually our land fills?