Inflation and Catholic Social Teaching
Inflation is an insidious problem! It harms, in a perverse reverse order, those least able to deal with it: from the poorest up. By eroding purchasing power, families at the bottom quintiles of income distribution have the least resources to deal with inflation’s resulting higher prices.
WHAT IS INFLATION?
Inflation is the rate of rising prices for goods and services over a given period. It is typically expressed as an increase in the cost of living.
Again, while inflation hurts us all, it is especially hard for the poor whose incomes fail to keep up with rising prices.
WHAT CAUSES INFLATION?
Inflation has three possible causes:
- Production costs increases: When raw materials costs and/or wages rise but the demand for goods is unchanged consumers will have to pay more for the item.
- Consumer demand increases: When demand for a good or service increases the available supply will decrease causing consumers to pay more for the item.
- Government actions:
- Expansionary fiscal policy (when government increases discretionary income for businesses and consumers by tax cuts or increased spending on infrastructure projects).
- Expansionary monetary policy (when central banks lower interest rates allowing banks to lend more leading to more spending and demand for available goods and services.)
THE ROOT CAUSES OF CURRENT INFLATION
Our current inflation problem is a result of Government actions where government has simultaneously expanded both fiscal and monetary policy.
During COVID-19 many businesses closed, and interest rates went to, essentially, 0%. Then came stimulus checks, rent waivers, debt forgiveness (and other measures) as well as huge infrastructure spending.
WHAT DOES CATHOLIC SOCIAL TEACHING HAVE TO SAY?
A key aspect of CST’s understanding of society that applies to the current inflation problem is:
PREFERENTIAL OPTION FOR THE POOR
We pointed out how inflation hits hardest on those in the lower income quintiles yet “those oppressed by poverty are the object of a preferential love on the part of the Church”. (Catechism of the Catholic Church, 2448)
The “defenseless and the poor have a claim to special consideration” because they have fewer “resources of their own to fall back on”. (Pope Leo XIII, as quoted in Centesimus Annus, 10)
“[I]t is for this reason that wage-earners…should be specially cared for and protected by the government.” (Pope Leo XIII, 37)
In fact, “considerations of justice and equity can at times demand that those in power pay more attention to the weaker members of society, since these are at a disadvantage when it comes to defending their own rights and asserting their legitimate interests.” (Pope St. John XXIII, 56)
This principle demands the government focus on inflation as it harms the least among us most.
Read more about the Preferential Option for the Poor
CATHOLIC SOCIAL TEACHING AND CURRENT INFLATION
So, what must the government “do”? It must “ensure a stable currency”! (Centesimus Annus, 48)
The State must not lose sight of the long-term effects of its economic policies. It must create “favorable conditions…which will lead to abundant opportunities for employment and sources of wealth”. (Pope St. John Paul II, 15)
And the Church insists public authorities must “arbitrate between various particular interests” to attain [the common good].” (Catechism of the Catholic Church, 1908) which “is concerned with the interests of all” (Pope Leo XIII, 51) and “every single citizen has the right to share in it.” (Pope St. John XXIII, 56)
Also, the common good applies to future generations! (Pope Francis, 159)
Read more about The Common Good
Catholic social teaching is built on three foundational principles - Human Dignity, Solidarity and Subsidiarity. Human Dignity, embodied in a correct understanding of the human person, is the greatest. The others flow from it. Good governments and good economic systems find ways of fostering the three principles.
This means a correct understanding of the human person and of each person’s unique value. All Catholic social teaching flows from this: the inherent dignity of every person that comes from being made in God’s image.
Solidarity is not “a feeling of vague compassion or shallow distress at the misfortunes of others. It is a firm and persevering determination to commit oneself to the common good”. (Pope St. John Paul II, 38) Love of God and love of neighbor are, in fact, linked and form one, single commandment.
Subsidiarity “is a fundamental principle of social philosophy, fixed and unchangeable, that one should not withdraw from individuals and commit to the community what they can accomplish by their own enterprise and industry. So, too, it is an injustice and at the same time a grave evil and a disturbance of right order to transfer to the larger and higher collectivity functions which can be performed and provided for by the lesser and subordinate bodies”. (Pope Pius XI)