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The principle of subsidiarity, a core principle of Catholic social teaching, states that human affairs should be handled by the lowest and least centralized level of authority possible.
“The teaching of the Church has elaborated the principle of subsidiarity, according to which a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good” (CCC 1883).
Another way of saying it is that social institutions should be as small as possible but as big as necessary in order to protect the common good. For instance, national defense is an example of a duty of the federal government, for it is not something that could be feasibly handled at a lower level. A federal welfare state, on the other hand, which attempts to provide for all human needs at a macrocosmic level, is an example of a violation of the principle of subsidiarity:
Malfunctions and defects in the Social Assistance State are the result of an inadequate understanding of the tasks proper to the State. Here again the principle of subsidiarity must be respected: a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good (Centesimus Annus, 48).
As Archbishop Joseph Naumann and Bishop Robert Finn remind us in their joint pastoral letter, the principle of subsidiarity is vital to maintaining "the transcendent dignity of the human person,” as it protects the right of those in need to be agents of their own care. Disrespect for this principle leads to a distancing between authoritative entities and the people they serve, thereby creating the potential for an abuse of power and societal dysfunction. Bl. John Paul II explains:
By intervening directly and depriving society of its responsibility, the social assistance state leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and which are accompanied by an enormous increase in spending. In fact, it would appear that needs are best understood and satisfied by people who are closest to them and who act as neighbors to those in need (Centesimus Annus, 48).
The application of the principle of subsidiarity in practice is a matter of prudential judgment which depends on the concrete particulars of each situation. It is possible for people of good will to disagree about whether or not a given action is consonant with this principle, and Catholics have the duty to work to discern the truth of each situation according to the teaching of the Church.