Philosophy of Society

Philosophy of Economics (Economic Theory)

Common Good, Subsidiarity, Solidarity

The analysis of the phenomenon of economics demands not only an examination of its fundamental concepts but also an exploration of the ultimate goals it aims to achieve. A clearly defined objective enables the assessment of the quality of economic activity and the relevance of economic decisions. The sole aim to which the economy is directed is the common good; that is, the economy is tasked with creating optimal conditions for all individuals, within which they can experience happiness. If the economy promotes well-being for all, it is deemed virtuous; if it fails, then alternative methods of governance must be sought. For instance, although the Marxist economic system aimed to distribute goods fairly and render everyone happy, this objective has never been realized in any country dominated by Marxist planned economies. Such economic models have led these countries to extreme poverty, high levels of corruption, political instability, low legal consciousness, poor education levels, and demographic crises. This indicates that the primary goal of economics—the common good—has not been achieved under planned economies, thereby rendering this economic type flawed. Conversely, the economic models employed by Western nations have led them to prosperity. The fact that populations migrate from countries that have experienced Marxist economies to those that have avoided them demonstrates that migrants in the West find greater opportunities for realizing the ideal of the common good.

By the common good, we must understand the existence of economic conditions under which all individuals have the opportunity to pursue their aspirations for happiness. The ability to work and independently choose one’s vocation, access to education, adequate healthcare, democratic institutions, social protection systems, stable insurance, security, and opportunities for savings—these are all elements of the common good that the economy is meant to achieve.

For the common good to be realized, adherence to fundamental principles of economic activity is essential, the foremost of which is subsidiarity. According to this principle, all economic decisions should be made at the lowest level of economic agents. Higher-level entities must not interfere in decisions and actions that can be made and executed independently. For example, each enterprise can autonomously determine what products and in what quantities it will produce, while each citizen can independently decide which profession to pursue. The state should not dictate to enterprises what and how to produce, nor should it prescribe to citizens what fields of study to undertake. However, the responsibility of higher-level economic agents is to assist lower-level agents in realizing their decisions through every possible means. The state must facilitate entrepreneurs in executing their plans by ensuring freedom of enterprise, providing credit, and instituting sound tax policies, yet must never interfere in the operations of a business. Similarly, the state should enable every citizen to obtain the desired education and pursue the profession they have chosen. A glaring example of the violation of the principle of subsidiarity was the Soviet Union, where the state exerted complete control over the activities of all enterprises, leaving no room for freedom for those directly managing them. When individuals do not make decisions independently, they do not bear responsibility for those decisions. This was detrimental to the Soviet economy.

The concept of subsidiarity was first introduced by the Catholic bishop of Mainz, Wilhelm Immanuel von Ketteler (1811-1877), who was the first in European economics to raise questions of social ethics, focusing the government’s attention on the issues faced by workers and the impoverished. In 1891, Pope Leo XIII elevated the category of subsidiarity to one of the fundamental principles of social doctrine in his encyclical "Rerum novarum." The Pope opposed subsidiarity to the extremes of individualism and collectivism, proclaiming it the most acceptable form of economic relations. Alongside Pope Leo XIII’s encyclical, the principle of subsidiarity has been incorporated into several key documents:

• In 1787, the United States Constitution was adopted, and in 1791, the U.S. ratified ten amendments known collectively as the "Bill of Rights." The Tenth Amendment introduces the principle of subsidiarity as the foundation of relations between the federal government and the states: "Powers not delegated by this Constitution to the United States, nor prohibited by it to the States, are reserved to the States respectively, or to the People."
• In 1985, the "European Charter of Local Self-Government" was adopted in the European Union, wherein the principle of subsidiarity prohibits higher-level authorities from interfering in the activities of lower-tier governing bodies. In 1986, this principle was reaffirmed in the "Single European Act," which delineated the powers of EU governing bodies and national governments concerning environmental protection. All subsequent EU documents are based on the principle of subsidiarity. It is determined that any action taken by EU governing bodies must be governed by two principles: the EU may intervene in a country only when justified, and such intervention must not exceed what is necessary.

Civilized economic activity is impossible without the solidarity of all economic agents. Since all are working toward a singular goal—the common good—every economic actor must unite their efforts and assist one another. The principle of solidarity transforms the economy into a pathway toward shared happiness, rather than merely a means to wealth.