The question is, how do we develop the will and the ways more effectively to reach out in both charity and justice to address the global reality of millions upon millions living, and too often dying, without dignity, opportunity, or hope because of global poverty, hunger, and economic injustice?

The question is, how does our Nation move from strong talk about family values to creative and effective action to support families in responsibly caring for children and overcoming the economic social and moral forces which too often undermine families?

How can our tax code, work place policies, private institutions, and public programs support and not undermine families, especially poor families?

The question is, in a time of limited resources and many competing priorities, how can we work together-business and labor, private and public sectors, religious and community groups-to put the needs of the poor and the vulnerable first, seeking to provide needed opportunity, respect human dignity, and meet basic needs? Let me conclude. This encyclical has drawn much interest because of who John Paul II is, for whom he speaks, and the dramatic changes he addresses. My hope is that this encyclical will contribute to a broad and sustained dialogue across economic, ideological, and political lines. A dialogue on the moral dimensions and human consequences of economic life and global change.

I hope we can find significant common ground and common purpose in recognizing both the strength of market economies and the work yet to be done to realize our national dream of liberty and justice for all, especially for those who have not yet found a decent place in our economic life.

My fear is that the encyclical might well be selectively read and used, and that its profound challenges will get lost in an effort to renew some old arguments. Its balance and complexity should be protected lest it be undermined by headlines and slogans. This would be unfortunate, since there is both affirmation and challenge for all of us in this powerful statement, namely, for entrepreneurs and business people who will find their important contributions recognized and welcomed. They will also find new challenges to shape and measure their efforts by moral categories, human dignity, and common good among others.

This statement brings together working people and their unions, their vocations and roles being reaffirmed and strongly supported, and they are called to work for greater justice and participation with new urgency and creativity.

Conservatives and liberals-for conservatives, there is the affirmation of the market and the responsibility to address needs not met by the market. For liberals, there is the passionate priority for the poor and the warnings about bureaucratic excesses of some responses.

For public officials, your responsibility to safeguard human rights, protect the weak, and pursue the common good are laid out with new urgency, but the dangers of bureaucratization and the call to respect and enhance family life and community institutions, these are clear as well.

The church, its social teachings, have been strongly reaffirmed and advanced, but the challenge remains to move from words to action.

As Pope John Paul II says, "We run the risk of seeing the collapse of communism as a one-sided victory for our economic system. As a result, we can fail to make the necessary corrections in our economic life." Now is not the time for gloating but for serious dialogue and action on how best to use our economic strength and moral principles to shape our national life to better protect the life, liberty, and freedom of all God's children.

I hope today's hearing and these reflections will contribute to this important task. I thank you.

Chairman LAFALCE. I thank you very much for that excellent presentation.

[Bishop Malone's statement may be found in the appendix.]

Chairman LAFALCE. Our next witness will be Mr. Michael Novak. Mr. Novak, we will include the entirety of your remarks in the record.

STATEMENT OF MICHAEL NOVAK, GEORGE FREDERICK JEWETT CHAIR IN RELIGION AND PUBLIC POLICY, THE AMERICAN ENTERPRISE INSTITUTE

Mr. NovAK. Thanks for your invitation.

The Committee on Small Business is especially to be praised for considering this encyclical because in the long history of the Catholic Church no doctrine is so strong or so full on praise for the virtues of business, particularly its insight into the nature of the virtue of enterprise.

Chairman LAFALCE. Could you bring the microphone a bit closer? Mr. NOVAK. Therefore, I think, insofar as it is read and preached, it is going to have a dramatic effect on the morale of business men and women around America, the vast majority of whom are in small businesses. It is a terrible mistake to think that the Fortune 500 or the Forbes 500 represent the primary locus of American business life. They do not. They employ about 14 million persons. About three times that many work in small businesses, at the very least.

So, in any case, I am delighted to appear before this particular committee. I am also very happy to appear before Bishop Malone and members of the Bishops' Conference, because they gave considerable leadership in raising the economic question some years ago. In addition to that, they did it in a most impressive way by a very open method in which over a period of 3 years they listened to and invited comment, objection, argument, and they embodied a great deal of that in their final document, so that it was a very rich document, and I think a much larger document in its final draft than it was in its beginning. It was a truly quite revolutionary way for the world of bishops to begin.

Chairman LAFALCE. It was also somewhat shorter.

Mr. Novak. But it really set a new mark for the way the church, as a community, should proceed, and I think a great deal of credit should be put on the record in that regard.

I would like to make a few summary comments about this encyclical because I think too many people are reading in the light of past argument. It is, in fact, a remarkably original piece of work. The Pope himself is a philosopher and has taught social philosophy for a very long time. If you follow his works from the very beginning right through to his encyclical, you'll see a thread of consistency running through it. His great work is called "The Acting Person," a work in phenomenology, a kind of philosophical method in which you stand back to look, blocking other theories out of your mind in order to address the concrete phenomenon.

What from the very beginning struck Karol Wojtyla, then a philosophy professor, not yet a bishop, about the human being was the capacity of the human being to originate action, to start things that have never been started before; to imagine things, to dream things, and then to execute them, and to introduce new things into history.

When he became Pope, in Laborem Exercens, he introduced the theme of creation theology. He noted, as opposed to the Marxist interpretation of work, that work is not just about creating things. It is not just materialistic activity.

In work the creative subjectivity of the person is also engaged. A person puts a part of himself or herself into the work. As a Polish bishop, Wojtyla had observed with Father Tischner, a Polish priest who writes on these matters, how depressing it was for workers to go through the smoke, and steam, and heat of a steel mill and watch the product of their work rust in the yard outside because it was of such inferior quality that nobody wanted it. It was as though they themselves were rusting.

Chairman LAFALCE. After the Pope's encyclical Laborem Exercens, I was moved to do a paper on the theology of work.

Mr. NOVAK. We have a magazine that might be interested in publishing that.

But in any case, this notion that at the heart of human activity lies creativity-each woman, each man, is made in the image of God, that is, to be a creator-has been a persistent theme in the Pope's work. He gradually came to apply that to economic systems. It is as if he were asking himself, looking around at the real existing systems in the world, there is socialism, there is capitalism, there are the Third World economies, precapitalist, usually State directed; which one of these should the church recommend and which one of these best releases the creative capacities of individual women and men working together, because almost all business activity is by its nature cooperative activity.

Now, this line of thought-this will be my second comment-is remarkably similar to the fundamental American idea. Centesimus Annus, I would argue, is the best presentation of the way Americans think about their system that has ever been written by any church authority of any church and, indeed, by a great many philosophers besides. The Pope argues throughout that there is more in play than economics alone. There is also required a strong political framework, limited Government, protecting the fundamental rights of human beings. This is what was achieved in our constitution.

The heart of the economic order is not markets, and it is not private property. Those are important, but they do not make capitalism. There were private property and markets as long ago as Jerusalem in the Bible, and that was not a capitalist civilization.

In paragraph 32, the Pope states a tremendously important truth. Besides the Earth, man's principal resource is man himself. His intelligence made in the image of God enables him to discover the Earth's productive potential and the many different ways in which human needs can be satisfied. It is his disciplined work, in close collaboration with others, that makes possible the creation of evermore extensive working communities which can be relied upon to transform man's natural and human environments.

The whole text is a beautiful one. It emphasizes again the theme of the creative capacity of the human person. That insight has great economic ramifications, as the Pope remarks at the end of that section, where he is talking about the modern business economy.

At the end he makes an important historical point that Catholic theory has not made before. At one time, the decisive factor of production was the land. Later it was capital, understood as the total complex of the instruments of production. Today, a decisive faction is increasingly man himself, that is, his knowledge, especially his scientific knowledge, his capacity for interrelated and compact organization, as well as his ability to perceive the needs of others and to satisfy them. Therefore, you need the market.

This is a vision of something new in the economy. It is not Marxist, and it is not the traditional land-based economy. I do not think you will find it articulated before this text in anything like this clarity.

In the middle of the Civil War, with all that was on his mind, Abraham Lincoln insisted on extending the Homestead Act and the Land Grant College Act. In every new territory, an institution of intellect would be opened up on the very basis that the Pope sees here, that the cause of the wealth of a Nation is human capital, man himself, his scientific knowledge. If you open up the free territories on this principle, they will be free, and they will be prosper

ous.

Lincoln said that one of the great moments in the history of liberty-the fourth most important-was the Patent and Copyright Act of Article One, Section 8, of the U.S. Constitution, because it recognized in law intellectual property. The most important form of property is not land, not the means of production; it is the idea, the creative idea.

On this basis was legalized the whole enterprise of technological advance, the whole possibility of technological transfer to other nations. This revolutionized the world, as Lincoln perfectly well saw.

I believe the Pope is now standing on that same ground. He sees the importance of human capital. If you read the encyclical carefully with that in mind, you will see how at the end he turns his attention to culture. It is not enough to worry about the market, and private property, and economic organization alone. Nor is it enough to worry about the legal framework, the Constitution, the limited government, the protection of rights, even the welfare systems that will be necessary for the helpful and the vulnerable. One

must also be concerned about what happens to the culture as a whole, because there are transmitted the skills—simple arithmetic, manual skills, habits of cooperation, habits of invention-on which an economy depends.

Why are we so worried about education today? It is our culture that is going bad. Our culture is not doing its job. It is failing both the economy and the political system. As one can see from this encyclical, the great economic debate, and the great political debate of the bloody 20th Century have been resolved, at least in the Pope's mind. Democracy, for all its faults, protects human rights better than any other form of government. That argument is over. It was not so clear before World War I and World War II. But democracy has triumphed.

Second, it was not so clear whether socialism or the traditional economy were preferable to a new capitalism. However, the new capitalism proved to be the superior economic system for meeting human needs and achieving the common good. That is now clear. But what is not at all clear is how we will live in a free society. Granted political liberty, granted economic liberty, what will we do with what we have?

Here, I think Bishop Malone is quite right. We have a lot to examine in ourselves about how we are doing it, and this is what the Pope is calling us to.

I have always thought the seal of the United States represented us very well. The framers went through seven drafts of this seal so we know they thought about it a great deal. You can find it on the back of the dollar bill. Under it, if we may introduce Latin again, they put a little motto-they had a different motto for the first six drafts and in the last draft they inserted the present motto: "Novus ordo seclorum," the new order of the ages. They knew they were developing something new, and unlike Great Britain, or France, or anyplace else, they wanted that originality noted. Federalist 37, firms "The novelty of the undertaking immediately strikes us."

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Above the motto they drew a picture of what that ordo is, and I would interpret it in this way. It is in the form of a pyramid. They wanted some identification with the ancient people of Israel who went out from Egypt seeking the Promised Land and wandered in the desert. So, they imagined most Americans coming to this virtually empty continent seeking a new city on the hill, a promised land.

But the pyramid also gave him a way of suggesting the novus ordo itself, the structure of the order. At the bottom, imagine limited government. The framework is crucial. Unless you have the juridical framework, the rest will not work.

Even in Eastern Europe today, they are discovering that until they get laws of private property, laws of contract, and other sorts of laws, they cannot have a free market. It will not work. Nothing can be done.

Chairman LAFALCE. How about in Mexico?

Mr. NOVAK. Mexico is the same. In Mexico, it is exceedingly difficult to get secure claim of private property. People have confiscated on others' land immemorially. It is not secure. You could go through the laws of Mexico, which do not work, and you can see why there is this great problem, but until you get the law straight,