- Pope Francis followed Warren Buffett in arguing free markets can’t address growing inequality in a letter to the Catholic Church’s bishops on Sunday.
- The pontiff said “magic theories” such as trickle-down economics won’t solve all society’s problems.
- Buffett argued earlier this year that markets reward some skills but not others, exacerbating inequality in the absence of government intervention.
- “It isn’t some diabolical plot, or anything,” the billionaire investor told Yahoo Finance. “It’s because of the market system.”
- Visit Business Insider’s homepage for more stories.
Pope Francis echoed Warren Buffett in blaming unfettered capitalism for rising inequality in a letter to the Catholic Church’s bishops titled “Fratelli Tutti” on Sunday.
“The marketplace, by itself, cannot resolve every problem, however much we are asked to believe this dogma of neoliberal faith,” the pope wrote.
“Neoliberalism simply reproduces itself by resorting to the magic theories of ‘spillover’ or ‘trickle’ — without using the name — as the only solution to societal problems,” he continued, referring to “trickle-down economics”, or the idea that as the rich accumulate wealth, money will automatically flow into the pockets of poor people.
The pope pointed to the pandemic’s fallout, including massive unemployment spikes around the world, as proof that “not everything can be resolved by market freedom.”
Buffett, a billionaire investor and the CEO of Berkshire Hathaway, voiced a similar view in a Yahoo Finance interview earlier this year.
“There’s no question that capitalism, as it gets more advanced, will widen the gap between the people that have market skills, whatever that market demands, and others, unless government does something in between,” he said.
“It isn’t some diabolical plot, or anything,” Buffett continued. “It’s because of the market system.”
The so-called “Sage of Omaha” proposed two ways to tackle the issue: a more generous earned income tax credit to reduce working people’s tax burden, and steeper taxes on the ultra-wealthy.
Buffett, who plans to give more than 99% of his wealth to philanthropy, has repeatedly called on politicians to hike taxes on the super rich. Current laws allow him to pay a lower rate than his secretary.
Buffett has mentioned the pope a few times over the years.
The Berkshire boss bemoaned that criticizing efficient market theory (EMT), or the idea that share prices reflect all available information, amounted to blasphemy in his 2006 letter to shareholders.
“A finance instructor who had the nerve to question EMT had about as much chance of major promotion as Galileo had of being named Pope,” he quipped.
Buffett also referenced the pontiff in a fable underlining the obsessive focus of Berkshire’s managers in his 1986 letter.
“Our prototype for occupational fervor is the Catholic tailor who used his small savings of many years to finance a pilgrimage to the Vatican,” he said.
“When he returned, his parish held a special meeting to get his first-hand account of the Pope,” Buffett continued. “‘Tell us,’ said the eager faithful, ‘Just what sort of fellow is he?'”
“Our hero wasted no words: ‘He’s a 44, medium.'”