The first two social encyclicals emphasized that workers had a basic right to organize and the government had the duty to intervene in the economy to establish a more just community. The encyclicals opposed “laisser-faire” capitalism or as they describe it in 19th century terms – “liberalism.” This is a source of the term neo-liberalism. What is ‘liberalism’ and what is this ‘new’ or ‘neo’- liberalism? “Liberal” in the U.S. is usually used to describe the economics of progressives, but liberal in the context of the encyclicals refers to “laisser-faire” capitalism. The term neo-liberalism is not used often in the U.S., and if it is, it refers to the policies of right wing democrats, but the strongest advocates of neo-liberalism are republican business tycoons. They promote the demise of unions, privatization of basic government services and free trade – completely contrary to Catholic Social teaching.
Of course, “laisser-faire” – “liberal” capitalists always demanded freedom to make as much money as possible without restrictions of the government or labor unions. Free trade was important unless it provided competition. A “liberal” free trade example is the Irish potato famine. Grain was shipped from Ireland while people starved, because the free market offered more money in other countries such as the U.S. The progressive movement – e.g. LaFollete of Wisconsin, T. Roosevelt, the New Deal – Franklin Roosevelt saved capitalism with some modifications. The “liberal” capitalists had to tolerate a few restrictions or face full scale revolution and chaos. They were also faced with competing political/military interests from other countries.
The distinction between neo-liberalism and liberalism is that neo-liberalism is under the aegis of world financial institutions. After W.W. II, G.A.T.T. (General world Agreement on Tariffs and Trade) replaced by the W.T.O. (World Trade Organization), the I.M.F. (International Monetary Fund) and the World Bank prepared the way for neo-liberalism. The fall of the Soviet Union meant the end of international political competition for capitalists. Worldwide financial institutions now dictate the rules. Free trade rules allow capitalists to exploit labor in all parts of the world. The I.M.F. and the World Bank insist on the reduction or elimination of government programs as a condition for loans. Resistance includes the “Battle in Seattle” and the Cochabamba, Bolivia Water War. Besides Bolivia, Cuba and Venezuela; Ecuador, Brazil, Argentina, Uruguay, and Paraguay show resistance when possible. Challenges over oil in the Middle East are controlled by the U.S. military.
The attempt to take away most collective bargaining rights in Wisconsin is an attack on “progressives” where the movement started. It is a direct attack on the union movement. Public service workers are the largest and most concentrated sector of the union movement, and therefore they have political power. The first two Encyclicals, Rerum Novarum – 1891 and Quadragesimo Anno – 1931 could be seen as supporting unions and other progressives against “liberalism,” but these Encyclicals focused on European problems. Despite the experience of W.W.1, international trade issues were not considered. The response to neo-liberalism as it revolves around ‘free trade,’ as defined by international financial institutions, remains to be considered in the light of later encyclicals.