Private equity firms typically play their cards close to the vest and resist public scrutiny, but with the presidential candidacy of Mitt Romney, Bain Capital has become a matter of public discussion. Romney and his allies argue that his work at Bain “created jobs,” and that he is therefore well suited for the job of president, who, by popular assumption, is charged with creating jobs in the nation. President Barack Obama and his allies have responded that, in fact, Bain’s actions often led to the selling-off of companies and the destruction of jobs. How should we think about this—and what would Catholic social thought have to say? The issues here go far beyond campaign rhetoric to the basic morality of our economy.

From a social-science perspective, Howard Anderson, a lecturer at MIT’s Sloan School of Management, accurately responded to the Romney camp’s assertions that private equity creates jobs. “No,” Anderson replied in an interview in May, “you guys build wealth.”

Sometimes you build jobs. Sometimes you eliminate jobs. What private equity is—and what Bain and the other guys do—it’s the best of capitalism and it’s the worst of capitalism.... Capitalism doesn’t try to do the right thing. Capitalism can be very destructive.

That is, both Romney and Obama are right about Romney’s background at Bain: he both created and destroyed jobs. Jobs were not the issue; the aim throughout was to increase the wealth of Bain investors.

Defenders of modern capitalism describe this as the American free-enterprise system working as it should. Yet what Bain and other private-equity firms do has been widely criticized going all the way back to Thorstein Veblen, who complained a century ago that the “businessman” had taken over control from the factory owner. Where the factory owner set out to make a profit by making good products that consumers wanted, the businessman simply wanted to make a profit—whether by making good products or by any other means, including selling off the assets of the business and shutting it down. A hundred years later, Bain and other private equity firms are Veblen’s “businessmen” par excellence.

What Catholic social thought has to say about this debate may surprise most Americans. Pope John Paul II taught in Centesimus annus (1991):

Ownership of the means of production, whether in industry or agriculture, is just and legitimate if it serves useful work. It becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others, in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation, or the breaking of solidarity among working people.

This is a sentence that, to my knowledge, no neoconservative Catholic has ever publicly quoted or commented on. For many Americans, acknowledging business owners’ moral obligations and recognizing that such ownership entails not only rights but also the duty to serve work is a shocking economic heresy. Where in the world could such a position come from? The answer: from the three-thousand-year history of Judeo-Christian teaching on economic life.

According to the Hebrew Scriptures’ gleaning laws, the owner of a field of wheat was not allowed to harvest the corners, but was under legal obligation to leave that grain to be harvested by the widow, the orphan, and the resident alien. Similarly, the sabbatical (releasing debt slaves every seven years) and the jubilee year (returning alienated land to the families who originally owned it every forty-nine years) reflect a particular view of economic life—namely, that God’s intention was for each family to be able to provide for itself. The ownership laws of the nation were to be designed in service to this most fundamental commitment.

The obligation of the prosperous to assist the poor has stood as a fundamental limitation on the rights of property owners throughout Christian history. But something very important occurred in the modern era. During more than eight millennia of subsistence farming, the basic need was for each family to have access to farmland and to retain enough of the food grown on it to provide sustenance until the next harvest. But the Industrial Revolution radically transformed that reality. Suddenly, people needed to earn a wage in order to survive. In advanced industrialized countries today, fewer than 3 percent of the population are farmers.

In 1891, Pope Leo XIII recognized this dramatic shift and insisted that, even in an industrialized economy, the fundamental goal of the self-supporting family must be sustained as part of God’s continuing intention for the well-being of humanity. This led Leo to his famous teaching on the just wage: mutual agreement on wages does not guarantee justice when workers are desperate to find work in order to support themselves and their families.

John Paul II maintained the same view, insisting that economic structures—including the rights of owners—must serve the fundamental Christian principle that everyone should have access to the means necessary to support oneself and one’s family. John Paul first addressed this issue in his encyclical Laborem exercens (1981), asserting the “priority of labor over capital.” Yet because he employed two different definitions of capital in that document—on the one hand, the machines that workers use, and, on the other, the persons who own those machines—his intentions were open to diverse interpretation on the left and right politically. In Centesimus annus he clarified his original meaning, insisting that all business owners—including stockholders—have a fundamental moral obligation to play their part in an economic system that ensures sufficient work for everyone.

The implication for us in election year 2012 is that a company like Bain should buy up firms when doing so will likely lead to more or better jobs—and should not when it won’t. This is heresy to the most avid proponents of American capitalism. And if truth be told, this teaching is the part of Catholic social thought least easily integrated into our economy today. Yet modern popes have consistently argued that the market system is moral only when it is accompanied by a proper juridical framework forbidding the worst abuses, by guaranteed assistance to help meet the needs of the poor and unemployed, and by the moral conviction of individuals and organizations to forgo greater profits when they undermine the well-being of working people. 

The popes have never insisted that a firm would have to choose bankruptcy when, say, a recession prevents it from paying a just wage or keeping every worker on the payroll. But Bain and all business owners should abandon the simplistic view that every legal form of self-interest in corporate investment is morally acceptable. If Americans understood the church’s long-established teaching on this issue, some prominent Catholics among them—like Representative Paul Ryan—might have to stop praising Catholic social thought and return to Ayn Rand.