COMMENTARY: The distinction may offer a way to understand the role of finance in developing an economy aimed at integral human development.

The answers that Pope Francis gave to workers at a steel plant in Genoa, Italy, last month suggested an important distinction in the Holy Father’s economic thinking, one that addresses the increasing importance of the financial sector in the contemporary economy.

In meeting the workers of the Ilva steel factory May 27, Pope Francis had asked for the questions in advance, so that he might better prepare his answers.

He touched on a range of topics, especially emphasizing that employment is not only a means of income, but an essential means of contributing to the common good. He also spoke against competition in the workplace, criticizing “meritocracy” as a way of thinking that blames the poor as “undeserving.”

Yet it was his comments on entrepreneurs and speculators that were most notable, in terms of understanding his broader economic thinking.

One of the questioners asked for a “word of support” for entrepreneurs. In reply, the Holy Father drew a distinction between “entrepreneurs” and “speculators,” praising the “typical virtues” of the former.

“Creativity, love for one’s own business, passion and pride for one’s own work done with the hands and the intelligence and that of his workers,” the Holy Father began, is important. “There is no good economy without a good entrepreneur, without the ability to create work. In his words, one can feel the esteem he has for the city, for its economy, for the quality of the people, his workers and for the environment, the sea.”

Pope Francis then drew a strong contrast with speculators:

“One of the illnesses of the economy is the progressive transformation of entrepreneurs into speculators. Entrepreneurs must never be confused with speculators; they are two different types. The speculator is a figure similar to what Jesus in the Gospel calls [a] ‘mercenary,’ in opposition to the Good Shepherd. They see companies and workers only as means to profit: They use companies and workers to make profit; they do not love them. They don’t consider laying off, shutting down and relocating the company a problem, because speculators use and exploit — eat people and means for their own profit. When good entrepreneurs inhabit the economy, then businesses are friendly to the people. When the economy is in the hands of speculators, everything is ruined. It becomes a faceless, abstract economy.”

What can be taken from these comments?

Much attention was given to the positive words for entrepreneurs and the essential role of business in creating work. The larger part of Pope Francis’ teaching on the economy is fiercely critical of the market, so some commentators even went so far as to suggest that the Holy Father let his “inner capitalist” out in Genoa. Something else is likely going on.

The distinction between “entrepreneurs” and “speculators” illustrates where the Holy Father sees the market working well, creating work and participation, and where it works badly, resulting in a lack of work and exclusion.

The entrepreneur is the one who sees the needs of others and organizes resources and people to meet them. Here, Pope Francis echoes the treatment of business activity that we find in St. John Paul’s 1991 encyclical, Centesimus Annus (32):

“Mention has just been made of the fact that people work with each other, sharing in a ‘community of work,’ which embraces ever widening circles. A person who produces something other than for his own use generally does so in order that others may use it after they have paid a just price, mutually agreed upon through free bargaining. It is precisely the ability to foresee both the needs of others and the combinations of productive factors most adapted to satisfying those needs that constitutes another important source of wealth in modern society. Besides, many goods cannot be adequately produced through the work of an isolated individual; they require the cooperation of many people in working towards a common goal. Organizing such a productive effort, planning its duration in time, making sure that it corresponds in a positive way to the demands which it must satisfy, and taking the necessary risks — all this, too, is a source of wealth in today’s society. In this way, the role of disciplined and creative human work and, as an essential part of that work, initiative and entrepreneurial ability becomes increasingly evident and decisive” (32).

This positive evaluation of entrepreneurial activity, which is the means by which greater numbers of people are employed and able to exchange goods, is contrasted with the negative evaluation given to “speculators.” Pope Francis does not define “speculation,” and some critics have suggested that speculation is just entrepreneurship by another — pejorative — name.

The Holy Father is drawing a distinction, it seems, between economic activity that is aimed at providing new goods and services and activity that is only aimed at making a financial gain. Those are distinguishable, even if much business activity is a combination of the two.

He praises the entrepreneur who builds up a business that provides employment and desired goods; he condemns the speculator who buys a company only to break it up, strip it of its assets, and sell it off, resulting in financial gain but a loss of jobs.

Such distinctions can be difficult to assess in less clear-cut situations — for example, the steel plant owner who cuts jobs in an effort to remain competitive. Entrepreneurship or speculation?

The kind of speculative activity condemned by Pope Francis has been long condemned by others, notably in Hollywood films, from It’s a Wonderful Life (1946) to Wall Street (1987).

It does seem that the Holy Father’s distinction might be more applicable to the financial sector of the economy, where speculative activity is more common.

In the world of finance, instruments are often bought and sold based on “speculation” about their future exchange value, rather than with an eye to investing in the production of goods and services. Indeed, sometimes it is difficult to see the link between the financial instrument in question and actual activity in the real economy.

Such was the case with the complex financial instruments — mortgage-backed securities and credit-default swaps — at the heart of the financial crisis of 2007-2008.

The traditional understanding of the role of finance in the economy is that financiers are essential to bring together savers and borrowers; entrepreneurs who have ideas with those who have the funds to invest in them; and those who are willing to take risks with instruments that can mitigate those risks.

In short, the world of finance is at the service of the production of goods and services in the real economy.

Speculation, on the other hand, is financial activity that is aimed at making a financial gain alone, for its own sake, independent of the underlying reality in which the financial instruments are supposedly tied.

Such criticism is hardly unique to the Holy Father.

After the financial crisis of ’07-’08, it was heard in the great chambers of finance itself. Given the increasing size of the financial sector in the contemporary economy, deficiencies in that sector have the capacity to compromise the entire economy.

It is likely this phenomenon is what Pope Francis had in mind in his first major document, Evangelii Gaudium (The Joy of the Gospel), published in 2013:

“One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Exodus 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose” (55).

The broader “human purpose” would be an entrepreneurial economy that expands employment in the service of meeting the needs of consumers.

A financial system that is instead turned in on itself, seeking profit from exchanges that are increasingly distant from the real economy, elevates money over people and becomes a form of idolatry, to use the Holy Father’s strong language.

Herein is an echo of Pope Benedict XVI’s 2009 encyclical, Caritas in Veritate (Charity in Truth), written in the course of the financial crisis:

“Economic development is exposed as a destructive sham if it relies on the ‘wonders’ of finance in order to sustain unnatural and consumerist growth. In the face of such Promethean presumption, we must fortify our love for a freedom that is not merely arbitrary, but is rendered truly human by acknowledgment of the good that underlies it. To this end, man needs to look inside himself in order to recognize the fundamental norms of the natural moral law, which God has written on our hearts” (68).

Benedict warns against financial instruments that are divorced from the “natural” economy and even the natural law.

It is not only an ethical critique of fraud and market manipulation, but suggests that the financial sector as a whole ought to correspond to what is “truly human” in the world of work, investment, entrepreneurship and exchange.

The Genoa address has been interpreted in different ways and itself does not provide comprehensive keys for its interpretation.

But the distinction between entrepreneurship and speculation may offer a way to understand the role of finance in developing an economy aimed at integral human development.

Father Raymond J. De Souza

is editor in chief of

Convivium magazine.