Pope Francis as MBA Professor

Pope Francis recently went to Genoa to talk to employees of a troubled steel plant, answering four pre-selected questions. John Allen Jr., editor of CRUX, covered it (here). Catholic World News also had brief coverage (here). Allen claimed the pope “delivered a reflection on business activity worthy of a graduate- level MBA program.” He was not being ironic. Allen’s fulsome praise omitted a link to the pope’s comments, but Catholic World News provided one (here).

Allen said the pope made four basic points. He ignored some important points, but I’ll follow his order, and then backtrack to discuss points he ignored or suppressed. The first point is that “undo” internal competition is self-defeating. Neither he nor the pope defined what constitutes “undo” competition, but it appears that only minimal competition between employees is permissible. Pope Francis said:

“The emphasis on competition within the company, besides being an anthropological and Christian error, is also an economic mistake as it neglects the fact that the business is first of all cooperation, mutual assistance, and reciprocity. When a business scientifically creates a system of individual incentives that put workers in competition with each other, perhaps an advantage can be gained in the short term, but it soon ends up undermining that fabric of trust that is the soul of any organization. And so, when a crisis arises, the company unravels and implodes, because there is no longer any rope to hold it together. It must be said strongly that this competitive culture among workers within a business is a mistake.”

I don’t know what an “anthropological error” means, and would have liked some explanation of why competition is “unchristian.” After all, we’re used to seeing athletes thank God, or Jesus, for their competitive victories. Christian faith is often claimed to play a role in their competitive success, even in some Catholic publications. (CRUX went wild during the Olympics whenever a pious Christian won a medal, insinuating that’s why we beat those godless Commies.) I can’t think of any successful business of any size that does not “put workers in competition with each other.” I know of no management gurus in MBA programs that advocate the elimination of incentives that lead to internal competition.

What Did Jesus Say?

Jesus told his apostles to serve, and not compete with each other. But that is a very narrow context, and they weren’t running a business.

His parable of the talents in Matthew 25:14-30 is more to the point. (Luke 19:11-27 has a similar parable.) A businessman/estate owner going on a trip gave varying sums (talents = a large sum) to each of his 3 slaves, “according to his ability” (v. 15) – ranging from 5 talents to 1 talent. As we will see allocation according to ability is something that Pope Francis condemns. The slaves made various investment decisions. When the businessman returned, he learned that the slave given 5 talents earned 5 more by trading. His master said “well done” and rewarded him. The slave given 2 talents earned another 2 talents. His master said “well done” and rewarded him. But the slave given 1 talent simply buried it for safekeeping. His master called him wicked and lazy, saying ‘you ought to have invested my money with the bankers, and on my return I would have received what was my own with interest” (v. 28). For this, the master said ‘take the talent from him and give it to the one with ten talents. For to all those who have, more will be given… As for this worthless slave [who buried the money], throw him into the outer darkness, where there will be weeping and gnashing of teeth” (vv. 28-30). Jesus obviously believed in internal competition. He was also a severe judge. He was also somewhat capricious, since the second slave earned as good a return as the first, yet didn’t receive any of the special dividend.

Pope Francis Rejects Merit

The second point is related. Not only does Pope Francis reject internal competition, he rejects rewards based on merit:

“Another ‘value’ that is actually a disvalue is the so-called ‘meritocracy’. Meritocracy is very appealing because it uses a beautiful word: ‘merit’; but since it is exploited and used ideologically, it is distorted and perverted. Meritocracy, beyond the good faith of the many who invoke it, is becoming a way of ethically legitimizing inequality. The new capitalism, through meritocracy, gives a moral appearance to inequality.”

That is, according to Pope Francis, personnel decisions regarding compensation, promotion, etc. should not be based on merit or any form of competition. These lead to inequality, which the pope views as sinful. Neither the pope nor John Allen provides guidelines for such personnel decisions, though they are obviously central to the operation of a business. Perhaps random choices reflect God’s will.

Such decisions are not restricted to businesses. Promotion from priest to bishop is clearly not done randomly. For one thing, bishops are much less likely to abuse children than priests. Perhaps the pope views demerits differently than merits.

Another possibility is management by corruption. During much of the history of the papacy, it was not possible to become pope without spreading bribes. This was often true of appointments to bishop as well. Corruption certainly avoids the “evils” of relying on merit, though it does rely on competition of sorts. Rewarding ass-kissing is similar, and widespread in today’s Church; it is highly competitive.

Entrepreneurs and Speculators

The third point involves the difference between entrepreneurs and speculators. The pope spoke at length about the distinction:

“there is no good economy without a good entrepreneur. There is no good business without good entrepreneurs, without your ability to create, to create jobs, to create products.... It is important to recognize the virtues of workers. Their need - workers - is the need to work well so that the job is done well. Sometimes it is thought that a worker works well just because he is paid: this is a serious disrespect towards workers and labour as it denies the dignity of work, which begins precisely in working well for dignity, for honour.”

This seems to be a familiar take on entrepreneurs – they create new products, and new jobs. Pope Francis is also quite concerned with the quality of jobs. But despite the initial familiarity, it turns out that his concept of entrepreneurs and speculators is quite unusual and idiosyncratic:

“The entrepreneur must not be confused with the speculator: the speculator is a figure similar to what Jesus in the Gospel calls a “mercenary”, as opposed to the Good Shepherd. The speculator does not love his company, he does not love his workers, but sees business and workers only as a means to make a profit. He uses the company and the workers to make a profit. Firing, closing down, moving the company is not a problem to him, because the speculator uses, exploits, “eats” people and means for to reach profit targets. When the economy is inhabited by good entrepreneurs, businesses are friendly to people and even to the poor. When it falls into the hands of speculators, everything is ruined…. Behind the speculator’s decisions there are no people, and therefore we do not see the people who are to be dismissed and cut out. When the economy loses contact with the faces of concrete people, it itself becomes a faceless economy and therefore a ruthless economy. We must fear the speculators, not the entrepreneurs; no, do not fear businessmen because there are so many good ones! No. Fear speculators.”

The terms “entrepreneur” and “speculator” bear little relation to the usual use of these terms. Speculators are bad, and the pope tries to characterize them: “The speculator does not love his company, he does not love his workers, but sees business and workers only as a means to make a profit. He uses the company and the workers to make a profit.” This definition has nothing to do with the type of business. It is simply a function of whether or not the manager in question loves his employees and places their welfare high above the profitability of the firm. Conversely, entrepreneurs are good - not only to their employees, but their “businesses are friendly to people and even to the poor.” Presumably entrepreneurs manage this while being relatively unconcerned about profit. To Pope Francis, entrepreneurs are like charities.

Pope Francis says little about risk and reward, central to both entrepreneurs and speculators. He only says that reward should be spread as widely as possible - even to the poor. If a business suffers an adverse event, only wicked speculators fire employees. Good entrepreneurs somehow manage adverse events without firing employees or otherwise reducing expenditures. Perhaps the pope believes that God provides them with cash flow.

Business and Democracy

Point 4, according to Allen: “Successful businesses are essential to democracy.” Neither John Allen nor Pope Francis attempts to explain why successful businesses are more important to democracies than monarchies or other forms of government. But Pope Francis is less concerned with successful businesses than he is with work:

“the entire social pact is built around work. This is the core of the problem. Because when you do not work, or you work badly, you work little or you work too much, it is democracy that enters into crisis, and the entire social pact. This is also the meaning of Article 1 of the Italian Constitution, which is very beautiful: “Italy is a democratic republic founded on labour”. On this basis we can say that taking work away from people or exploiting people with work that is unworthy, or poorly-paid or whatever, is unconstitutional. If it were not founded on labour, the Italian Republic would not be a democracy, because the place of work is occupied and has always been occupied by privileges, castes, and revenues…. It must be clear that the real goal to reach is not that of “income for all” but rather, “work for all”. Because without work, without work for all, there will be no dignity for all.”

There is nothing here about alternative forms of government. Whatever the form of government, the pope wants it to be intrusive - he thinks that dull and poorly paid jobs should be illegal. He claims that democracies are founded on labor - “If it were not founded on labour, the Italian Republic would not be a democracy.” Does he consider the United States to be a democracy? It wasn’t founded on labor. In fact, its Constitution was written with slave labor in mind, though it was later amended.

The pope is also rewriting Church history. During nearly all of its existence, the Catholic Church opposed democracy, favoring divinely appointed Catholic rulers. In fact, it declared “Americanism” – its prior term for democracy – to be a damnable heresy after the French Revolution proved both costly and embarrassing to the Church.

More on Business and Entrepreneurs

Pope Francis has more to say about the nature of business and the good entrepreneur:

"The true manager - I will try to make the profile of a good manager - the real manager knows his workers, because he works alongside them, he works with them. Let's not forget that the entrepreneur must be first of all a worker. If he does not have this experience of dignity, he will not be a good manager. He shares the workers’ efforts and shares the joys of work, of solving problems together, of creating something together. If and when he has to lay off someone, this is always a painful decision and he would not do it if possible.”

Pope Francis says managers work elbow-to-elbow with workers, sharing the “joyful” work. This is only true of some of the smallest enterprises. He appears to have the pre-industrial world in mind, where an owner/artisan works with other artisans, or a farmer works with his farm hands, etc. It is not true of the large businesses the pope talks about, in which jobs are highly differentiated and the manager of the company virtually never works alongside the vast majority his employees. It is certainly not true of the steel mill he was addressing.

 

Summary

In short, Pope Francis’s advice on running a business is to avoid managing by merit and shun competitive incentives for employees. This is incredibly bad advice. The pope seems to have little understanding of modern business, whose jobs are differentiated and whose managers do not work alongside their employees. While his emphasis on meaningful, “joyful,” well-paid work sounds nice, managers who focus on that rather than the competitive marketplace – something Pope Francis never alludes to – are doomed to failure. But even though the pope’s advice is laughable, the religious press showered it with praise. Out of charity, the mainstream press ignored it.