Published by Forbes.com on March 4, 2014 [EDITOR’S NOTE: Michael Novak delivered this address at the Catholic University of America on January 14, on the first anniversary of the university’s School of Business and Economics.]
The Catholic University of America is a sacred place to me. I loved reading of the lay initiatives in its beginnings, and the brilliant papers presented at a founding conference during the first year of its existence. I studied here for two terms in 1958 and 1959 – and had the privilege of studying under Monsignor John Tracy Ellis, Robert Trisco, Paulist Father Gene Burke, the legendary Monsignor Joseph Fenton and the well-known Redemptorist, Father Francis J. Connell. And I have come back here to give more than one series of lectures that later became books.
Today, though, is a special day. We are here marking the first anniversary of CUA’s School of Business and Economics, and business is the most strategically central vocation in the whole field of social justice.
Pope Francis, in his Evangelii gaudium, wrote: “Business is a vocation, and a noble vocation, provided that those engaged in it see themselves challenged by a greater meaning in life; this will enable them truly to serve the common good by striving to increase the goods of this world and to make them more accessible to all.”
The business vocation is the main hope of the 1 billion human beings around the world still locked in poverty.
The business vocation is the main support of the multitude of institutions of civil society – the main support of private universities, cancer clinics, soup kitchens, symphonies, hospitals for the poor, sports activities both in neighborhoods and in major cities, service organizations such as Lions Clubs, the Rotary, Kiwanis, the Elks, the support of religious activities without number. Without business corporations, there would be no great power standing between associations of citizens and the Leviathan of the administrative state. Without business, there would be only a very weak private sector indeed.
Today, though, I want to begin with a simpler theme. An evangelical theme.
Think about this for a moment.
What was the vocation that from all eternity the Lord God Creator chose for his only son, born of humankind? The Lord God Creator called the Christ, the Redeemer, to shoulder the vocation of small business: a creative vocation, a vocation of humble service to nearly every human household.
When he was the age of most of you in this room, then, Jesus was helping run a small business. There on a hillside in Nazareth, he found the freedom to be creative, to measure exactly, and to make beautiful wood-pieces. Here he was able to serve others, even to please them by the quality of his work. Here he helped his family earn its own way. Creativity, exactitude, quality, beauty, service to others, independence – this was the substance of his daily life. In preparation for all that was to come.
Like Christ, each of you, too, has been given a calling. “Before Time was, the Lord knew thee by name and called you.” The problem now is to recognize your calling, and do what you have been made to do. But how does a young woman recognize her own calling? How does a twenty-something guy learn what he was made to do?
Listen to your own heart. Ask three questions: What are your abilities, in their full range of upward possibilities and their limitations? Which activities do you most enjoy? What would you love to be doing your whole lifetime? These are three signs of what God made you to do, fitted you to do.
But there is a catch. Many others may want the same things you do. To prove that you are reading correctly what God wants you to do, you must have worked really hard, and prepared yourself even better than they. And you need a Providence who has seen to it that circumstances are in favorable array – so that you are in the right place at the right time, and make the right moves when the chance comes. God helps those who help themselves – and, still, he must open the opportunity to those who do help themselves. We need lots of prayers for his guidance, and his blessings on our behalf.
No one promised that life would be a rose garden
Life is not a rose garden. No one promised that. We must earn our way by the sweat of our brow. We are told that this is a vale of tears – much disappointment, much sorrow in it. So in seeking to answer your own call, you must pray constantly for light and for the best preparation you can undertake. The deeper you dig the foundations in your youth, the higher you can build the future.
But why choose business as a vocation? Business is perhaps the most common vocation of Christians around the world. And it is desperately needed. After the human race was born naked and poor, for millennia there were no industries, settled farms, cities, established businesses in which to seek employment and earn a modest income. Two centuries ago, there were fewer than 1 billion human beings in the entire human population. Nearly all of them were poor, and in France, one of the more developed nations, most were called les misérables.
Today, there are just over 7 billion people on earth. Since World War II, enormous strides have been taken in liberating billions of them from dire poverty. But there are still just over 1 billion humans living at primitive levels of income, under $2 per day, $700 per year. Almost all are unemployed or underemployed. Their only real hope of getting out of poverty is the launching of about 200 million small businesses. Without jobs, how can the poor raise their income?
Capitalism is lifting the world out of poverty
But where will all these 200 million small businesses come from?
Until recently, the poorest regions of the world were Asia, Africa, and some parts of Latin America. Since 1980, however, China and India have been transforming their economies from socialist to capitalist, have raised more than a half billion persons out of poverty, and prodded them into a steady upward movement of income and (for them) striking prosperity. Thus, Asia has jumped ahead of Africa in economic advancement, and now Africa is the poorest region in the world. In these areas, large swathes of the planet are not yet favorable to large industries or corporations. In such regions, the only hope of full employment lies in the formation of small businesses. Indeed, in such regions (and in many others) the best annual measure of economic progress is the rate of new business formations.
Even in developed nations, most jobs are found in small business. In Italy, over 80 percent of the working population works in small businesses. In the U.S., the proportion is just about 50 percent, but some 65 percent of new employment is in small businesses.
During the great economic expansion of 1981-1989, the U.S. added to its economy the equivalent of the whole economic activity of West Germany at that time. Sixteen million new jobs were created in the U.S., the vast number of them in small businesses. Startups peaked as new businesses came into being at a rate of 13 percent (as a portion of all businesses) – an all-time high. Much the same happened under Clinton in 1993-2001, but even better – 23 million new jobs were created.
In the creation of small businesses, four factors are necessary. First, ease and low cost of incorporation; second, access to inexpensive credit; third, institutions of instruction and technical help (such as the system of local credit unions in the U.S.), and the steady assistance of the extension services of the A&M universities; and, fourth, throughout the population habits of creativity, enterprise, and skills such as bookkeeping and the organization of work. Economic development is propelled, as John Paul II said, by know-how, technology, and skill (Centesimus Annus 32). Therein, perhaps, lie the greatest entry-points for Americans and others who wish to help poor nations by proffering assistance in economic development from the bottom up.
In this regard, no one knows more about the ways to prod economic development in the poorest regions of the world than your own Professor Andreas Widmer, who has vast experience in this area, and has set in motion institutions to accomplish this work.
But let me add some humble examples of my own. In Rwanda, a layman from Slovakia spent the better part of two years helping villagers in very poor areas organizing projects to develop the local region’s water supplies, and bring in money and volunteers for building new schools.
In Bangladesh, an American company donated cell phones that missionary priests could distribute to remote villages, and by which the rice-growers there could pinpoint the best local markets for selling their rice from week to week. Local villagers would pay small amounts to use the phones, so that the cost of the phones could be returned, and new phones made available for people elsewhere.
In Panama some years ago, Archbishop McGrath received a substantial grant from a family in Switzerland to open a rotating fund from which poor villages could borrow money. In one village such a loan was used to purchase a truck that was used to carry produce, fresh flowers, and other goods down into Panama City, and to return with other goods. Nearly all families in the village benefited by increased trade and higher incomes. The money paid back to the lender was then lent to other villages in need.
In Rio de Janeiro, an enterprising woman in one of the poorest favelas acquired a small stove, on which she kept heated a kettle of porridge, and an oven in which she baked fresh bread. The families in the neighborhood were desperately poor, and this simple provision of nourishing porridge and good bread raised their standard of living significantly. Neighbors paid small sums for these foods, which the enterprising woman used to buy new food supplies for the morrow. A small group of Americans pitched in and bought her much larger ovens, multiplying her work. A church group in America later arranged for a pharmacist from their parish to spend some months in that favela to set up a small pharmacy and to make contacts in the U.S. for fresh supplies. He also helped train bright and reliable women in the neighborhood to keep the pharmacy going.
The point of giving assistance to women and men of enterprise in poor regions may be solidarity with those in need. But the point of new businesses is to create new wealth in these poor environments. Increased local economic activity helps each new business grow. A business enterprise is not a lonesome cowboy. It is part of a social organism necessarily networking with many other players. Business enterprises are necessarily social; they need investors, workers, customers, suppliers, marketplaces. In this way markets are one of the most fundamental of all social institutions, even more universal than political bodies.
Markets of necessity must be law-abiding, and dependent on at least minimal levels of moral trustworthiness. Even nomads need markets. The ancient and medieval thinkers recognized the centrality of city-states and other political bodies. Aristotle gave prominence to the economic activities of households, but had much less to say about markets as an international network, with its own practical principles analogous to, but not the same as, those of politics. A full discussion of economics, including much more than markets alone, awaited more recent centuries.
Further, we must keep reminding ourselves that the point of assisting entrepreneurs to open new businesses is to generate a culture of entrepreneurship and new wealth. The point is to stimulate scores of thousands of women and men. In some countries, women take better to entrepreneurship than men. For economic growth it is necessary to stimulate scores of thousands of women and men to look around their countries to assess economic needs. What small manufactures, businesses, and services need to be created to improve the lives of their fellow citizens? Then they must begin creating such businesses. Are there enough pharmacies spread throughout the population? Are there medical clinics? Are there hospitals? All these can be developed as thriving businesses, since their need is universal. One can imagine building, even in poor countries, a chain of pharmacies, such as a modest version of Walgreen’s, or of LifePoint Hospitals. Similarly, a business model for improving education is often far more successful than state-run systems.
Everybody in the poorest regions needs tables and chairs, lamps, dinner plates, cutlery, bath towels, a whole range of goods that improve home living. Most of these can be supplied by small, local manufacturers. Trucking companies are needed. Specialized workers in nearly all fields need to be trained. There is a whole world of economic activity to be built. It is the role of entrepreneurs to bring to these vast possibilities down-to-earth imagination and practical experience in producing success. There are fortunes to be made in the poor regions of the world, whose worth can be used for ever more investment, donations to cultural institutions, and help for many different branches of civil society, including local groups.
Think what a great vocation it would be to place oneself in solidarity with the poor of the world by setting up networks of assistance to small business formations in this or that poor country or region, in order to help lift its peoples from unemployment and its resulting poverty. Such poor persons need small amounts of start-up money, technical and practical support, instruction in many bookkeeping or other business skills, and links to the wider world. What a great work a new generation of young Americans could produce, speeding up the move of the last billion human beings to break free from poverty.
In the real world, to get a vast movement of economic development underway, financial incentives are an important practical incentive. A few may work for purely charitable reasons. But for great number of economic activists, financial rewards better ignite the fire of motivation. An almost universal economic activism adds so much to the common good of poor societies, that it seems just and fitting to reward those who take the necessary risks and commit themselves to working extra-long hours. It is no wrong thing for people everywhere to work for the financial betterment of their own households, neighborhoods, and countries.
Breaking the chains of poverty in the United States
Lyndon Johnson’s War on Poverty is now 50 years old, and the 80-some different government programs which constitute it have spent more than $20 trillion (adjusted for inflation) since the 1960s. Today, however, the percentage of the poor (about 16 percent) remains almost the same as in Johnson’s day, and the raw number of the poor (more than 50 million people) is even greater because of the growth of our population. Of course, the ranks of the poor in America are increased every year by the million or more legal immigrants who come here (not to mention the illegals).
If the nation simply gave every person in America enough money to get out of the statistical ranks of the poor, it would cost a lot less than the $20 trillion we have already paid. Our current programs are not only not achieving their goals, but also spending money far in excess of the amount needed to eliminate poverty. That could be done much more cheaply simply by giving money directly to bring everybody above the poverty line. Worse than that, our current programs are also doing a great deal of harm, encouraging millions of citizens to fall into something worse than poverty, notably, habits of dependency and irresponsibility for their own well-being.
In addition, government programs for the poor have contributed to an immense tide of births out of wedlock and the non-formation of families. The fastest growing segment of the poor in America consists in unmarried women and the children they have borne out of wedlock, often by more than one man. Whatever you think of the morality of such behavior, the social costs for the children are both measurable and immense.
From the point of view of the business community, the main attack on poverty must come from the creation of some 16 million new jobs. Why? Because today 11 million Americans are unemployed, and another 5 million or so have dropped out of the labor force all together. Moreover, a few million more find fewer hours of work than they need.
Therefore, in America too, we need to create at least 5 million new small businesses to bring all Americans who want to work into full-time employment.
Poor people cannot get out of poverty if they do not have full-time work at a wage that, with at least two workers combined, carries them together above the poverty line.
During the last six years, the formation of new small businesses has drastically slowed. This, despite the fact that a vast pool of capital waiting to be invested. A few million young people want to start businesses, but have found economic conditions for starting a business much too unfavorable. The very activity even seems looked down upon.
Meanwhile, many people oriented toward state programs do not grasp the fact that in order to have more employees, we must have many more employers. We must encourage the “high spirits” of entrepreneurs who will, despite the risks, plunge into the founding of new businesses.
There is really no other way to move people out of poverty than business opportunity. A sound politics would give great practical priority to that task.
The important thing is to call to the attention of those who enter business the great social role they are playing in building up a free society, conscious of it or not. They are not working only for themselves. They are raising the material and moral condition of the whole society. It is important for Christians, especially, to take responsibility for the whole of the world’s population, and to make their own personal contribution to raising the level of all.
A practical conclusion: All of you, each of you – Go out and start new businesses. You will greatly benefit the common good. And it is wise for a society to promote handsome rewards for those who do benefit the common good so fundamentally and so richly. The point of such rewards is not selfish. It is, rather, to draw millions of others into launching the full 300 million new small businesses, that the 1 billion remaining poor persons on earth need, if they are to have any chance at all of escaping from poverty.
If you want more of something, reward it. If you want less, punish it. That’s only good common sense.
Building up the strengths of civil society
If it is the main task of the vocation of business to break the chains of poverty, its second great contribution is to build up the strengths of civil society. By “civil society” we mean all those institutions outside the state whose members address a full range of social problems at every level of human activity from the neighborhood to the national and international. New businesses achieve this crucial goal from a point of view independent of the state, and in immediate touch with the multiple purposes of a pluralistic society. The business community is the main source of financial contributions to these vital social institutions.
Indeed, when we say “social justice” we must be clear that “social” refers first to natural associations such as the family and to voluntary associations of individuals for the full range of human social purposes, and only secondarily to the state.
A free society desperately needs large business corporations as a bulwark against the state. Otherwise citizens would stand naked and alone against that vast power and propaganda monopoly. To escape total dependence on the state, to have financial resources for the institutions of civil society, a free society needs a powerful check on the self-aggrandizements of the state. It needs not only independent funds but a source of well-tested public leadership and civic imagination that is much larger and more generous in its point of view than that of the state. All these energies of civil society prevent the state from becoming omnivorous in its appetites and narrowly secular in its point of view.
Without an enterprising, risk-taking, imaginative, creative community of businesses large and small – but especially small – it is impossible to look forward to new job creation. Impossible to imagine the survival of a free society. It is even harder to imagine a society that has dramatically broken the chains of poverty for every woman and man in its midst.
In short, to end as we began, new businesses are at the strategic center of the work for social justice in our time.
Michael Novak, a philosopher, theologian, and author, is the 1994 recipient of the Templeton Prize for Progress in Religion.