God's economics: What the Pope knows about business

It seems nowadays everybody's got to weigh in with a plan for the economy. Even the Pope. This week, just as G8 leaders were gathering to argue over the best ways to cure the latest economic ills, the Vatican presented its own scheme: Share and be nice.

According to the 144-page document, called Charity in Truth, capitalism should not be like Tennyson's nature, red in tooth and claw. The Pope says good economics depends on the "co-operation of the human family."

The Pope doesn't like "pure" markets driven by greed. He says that the idea markets "must be shielded from influences of a moral character, has led man to abuse the economic process in a thoroughly destructive way."

"Whoa. Wait," I can hear some of you saying. "Morality in markets? That's no way to run an economy. Read your Ayn Rand. Everyone fights for what they can get, and that makes everyone rich."

Others are likely saying, "What does the Pope know about business, anyway? I don't sprinkle holy water, why is he sharing economic advice? Besides, it sounds like he wants to turn the world into a copy of high-tax Sweden."

In fact, the Pope may be ahead of the curve.

The economics of greed is so two years ago. And although there is still a hallowed place for competition in the economic model, there is a growing realization that at many levels homo economicus was bred to cooperate. Rather than being governed by some sort of pure law of the jungle, the most successful economies are ones where people work together.

The dikes of the Netherlands and the paddy agriculture of Southeast Asia were early examples of co-operation for mutual benefit. Only by everyone working together could individual farmers create huge complex drainage and irrigation systems. And that in turn built complex local governments that led to other advantages.

Overcoming that dog-eat-dog, everyone-for-himself mentality is an act of economic progress.

But to see examples where co-operation creates efficiency, you don't have to study history. Just go to your local bus stop or subway station.

It has changed now, but when I first lived in Hong Kong, getting on and off the subway was like a medieval battle - two armies pushing against each other, chest to chest. Or worse, like rugby players in a scrum. Gradually the two mobs would thicken and merge, squirming and elbowing, with the platform people pushing their way past the train people to get on, and the train people pushing their way through the platform people to get off.

It took forever and not everyone would make it. It was a regular occurrence that a few stragglers would cry out helplessly as the doors closed, having been pushed deep into the train by the solid wall of the oncoming mob.

Overcoming that dog-eat-dog, everyone-for-himself mentality is an act of economic progress. In rich places like Canada and Sweden, most people learned long ago that thinking collectively on the subway platform is to everyone's advantage.

Game theory

What works on public transit also works in business.

There is a well-known management tool called game theory. Game theory can get enormously complicated. But in its most straightforward form, game theory tells you that success requires co-operation. It also tells you that knocking the other guy down does not get you further ahead.

Once you hear it, it is easy to understand.

Imagine an office or business operation. Whenever you encounter a co-worker who asks for help, you may choose to help or not. But if you repeatedly refuse to help a person, they stop helping you. Instead, they prefer to help people who help them.

In fact, in game theory this turns out to be the best strategy: Always help everyone, with one exception. If someone repeatedly does you dirty or refuses to help, withdraw your help from that person.

It turns out that successful organizations are run by a core of people who always tend to cooperate first, who boost each other to greater success, while the non-co-operators are ostracized and left to spin by themselves.

That is also why the caricature of the ruthless moustache-twirling business leader is a rare bird in real life. A few, of the Bernie Madoff type, pretend to co-operate while cheating to feather their own nests. But generally those who climb by stepping on fingers and faces must go it alone, and eventually come crashing down. People who succeed as leaders tend to be co-operators who have risen within a network of other co-operators.

The Pope's timing is immaculate. Two years ago when the Vatican began preparing this economic letter, most of the world would have hooted at the suggestion that greed was bad. In those days, unethical markets were the engines of growing wealth. The market advocates pointed at moral versions of capitalism like the high-minded high-tax Nordic countries and sneered.

But now, after the crash of all those greed-driven banks and hedge funds, the Pope has an audience primed to listen. Those Nordics, with their well-funded social programs, remain healthy capitalist economies. Moral. Sharing.

They also repeatedly score highest in all measures of well-being. They have high levels of universal education. Swedes can have babies without penalty, so unlike most rich countries, their population is not dwindling. Nordic businesses, from Ericsson and Nokia to the folks who created those Metro free tabloids that millions around the world read on public transit, are innovative and competitive. Their logging companies continue to make money. Their energy fund continues to dole out money to the public purse.

Maybe the Pope really is saying that the world should be a giant Sweden. And that might not be so bad.

It may be that sharing with the poor does not make us poorer. It just increases the number of rich people. It may be that being ethical, cooperative, and helping others to succeed does not make businesses fail. It just makes the world more efficient and a little bit nicer place to live.

Don Pittis is senior producer of CBC News Business. He has reported on business for Radio Hong Kong, the BBC and the CBC.