Secular opposition to capitalism - from doctrinaire socialism to the kind of soft democratic collectivism we call "liberalism" today - has always derived from one fundamentally incorrect notion, namely that private property and its productive use to earn a profit exploits other people. Karl Marx and Frederick Engles attempted, unsuccessfully, to give scientific grounding to this fallacy of capitalistic exploitation.
Historically, the Christian church had been skeptical of capitalism, not because of what the pursuit of profit did to exploit other people but rather because of how the pursuit of profit frequently corrupted individuals, making them avaricious, envious and materialistic.
The pope's encyclical exploded both misconceptions: "The church acknowledges the legitimate role of profit as an indication that a business is functioning well. When a firm makes a profit, this means that productivity factors have been properly employed and corresponding human needs have been duly satisfied. But profitability is not the only indicator of a firm's condition. It is possible for the financial accounts to be in order and yet for the people, who make up the firm's most valuable asset, to be humiliated and their dignity offended.
Besides being morally inadmissible, this will eventually have negative repercussions on the firm's economic efficiency. In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs and who form a particular group at the service of the whole society."
By a process of elimination, this devastating critique of socialism and unenlightened capitalism alike left democratic individualism and free markets, informed and guided by the spiritual teachings of the church, as the only practical means of organizing human action. At the same time, "Centesimus Annus" also reconciled the church's historical fear that capitalism and free markets breed vice among the faithful with beneficial social outcomes that only human freedom and its expression through private property and free markets can produce.
The papal encyclical expounded upon how, for example, the effort involved in building a business also builds individual virtue: "Important virtues are involved in this process, such as diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships as well as courage in carrying out decisions which are difficult and painful, but necessary both for the overall working of a business and in meeting possible setbacks."
Pope John Paul II concluded that earthly poverty and human despair are not the product of private property, capitalistic exploitation of labor and the pursuit of profit through the operation of free markets but just the opposite. It is when people are excluded from ownership, lack the opportunity to develop job skills and are not free to participate in free enterprise that people suffer and are, as the pope said "if not actually exploited, they are to a great extent marginalized; economic development takes place over their heads, so to speak, when it does not actually reduce the already narrow scope of their old subsistence economies."
The next time pessimism and despair over the future grip us, we should remember that October 1978 when the renaissance of freedom began with the election of a humble Polish pope by the name of Wojtyla.