In Centesimus Annus, John Paul II developed similar insights, but made specific reference to self-interest. In practical terms, the pope noted, violent suppressing self-interest results in its replacement with burdensome state bureaucracy that slowly drains creativity out of society. To this hard-to-deny historical observation, John Paul added the following insight from Christian anthropology. “Man,” he wrote, “tends towards good, but he is also capable of evil. He can transcend his immediate interest and still remain bound to it. The social order will be all the more stable, the more it takes this fact into account and does not place in opposition personal interest and the interests of society as a whole, but rather seeks ways to bring them into fruitful harmony.”[vii]
The market economy is one way of realizing this harmony, albeit often indirectly. If, for instance, a business fails to produce new or better products at lower prices, it risks disappearing altogether, along with the jobs and capital it creates. Entrepreneurs and businesses consequently have to identify the needs and wants of consumers and then work out how to meet such needs and wants in a faster, less expensive manner. A certain alignment is thus established between a business’s pursuit of its self-interest and other people’s economic wellbeing, without anyone actually intentionally choosing such harmonization as their primary goal. Consumers receive a product at a progressively lower cost while businesses make a profit. This enables commercial enterprises to pay back loans, employ more people, engage in research and development, expand their size, and produce new and better products at often progressively-lower costs which in a competitive environment lowers prices.
None of this means that the pursuit of self-interest in the marketplace is cost-free. Sometimes a business is so successful that its competitors go out of business altogether. A certain degree of disruption (what Joseph Schumpeter famously called “creative destruction) is constant in a market economy. As a result, some people do lose their jobs. Some businesses do go bankrupt. And some people do have to retrain and start all over again.
Some defenders of markets are reluctant to acknowledge that embracing free enterprise, free markets, and liberty does mean trade-offs. Stability, for example, is sacrificed for mobility. Allowing people to pursue their economic self-interest does bring with it with many risks. The resulting wealth does create numerous resources that help literally billions of people to meet their needs, satisfy their wants, and potentially flourish precisely as humans should. Yet, as we will see, the same pursuit brings with it enormous spiritual and moral challenges – challenges that some free marketers deny at the risk of putting in peril the market economy itself.
Self-interest and the Common Good
For all the turmoil caused by markets, the creativity and competition flowing from people’s pursuit of their self-interest in the marketplace contributes in many tangible ways to the common good. People, for example, often move to industries where they receive better pay. Others find themselves working in more personally satisfying occupations, which provide more scope for human flourishing. Much-needed competition is introduced to parts of the economy where some businesses hitherto enjoyed a monopoly. Indeed it is hard to find a better description of free competition’s beneficial effects than in the Compendium of the Social Doctrine of the Church:
Observe here how the Compendium frames these issues as a matter of justice rather than efficiency. In other words, truly competitive markets – as opposed to crony capitalist arrangements – helps deliver to consumers, businesses, and entrepreneurs many of the things they are owed as a matter of right, albeit in often indirect and unintended ways.