St. Thomas on the Stock Exchange

by Don Boland © 1998

In my article "Money as Capital", which appears elsewhere, I deal with the problem of usury. As St. Thomas, following Aristotle, explains, usury has to do with the demand for the payment for the use of money when it is "lent" to another. From this we get the word "usury". This, when understood strictly, as we have shown in the other article, is an attempt to obtain something for nothing and hence an improper and indeed "unnatural" use of money. However, money does have its proper, and indeed "natural" moral use, as is obvious. As Aristotle notes, money was "invented" by human reason to facilitate the exchange of wealth. It is something purely rational, therefore, if we are speaking from a physical point of view, purely conventional in value; but it is nonetheless "natural" insofar as human reason hardly deliberates in devising it, so obvious a benefit does it confer on us in the social exchange of goods (simply by splitting the exchange).

However, besides this natural use there are two unnatural uses of money to which Aristotle and St. Thomas give some detailed attention. One, already referred to, is the use which is called usury; the other is without a commonly accepted name (and without a clear concept in modern times) which some translators of Aristotle call "chrematistic" and which St. Thomas called "negotiatio". The nearest English equivalent I can think of is "dealing". All of these terms, of course, have quite innocuous general meanings in each of the languages concerned. We must try, therefore, to identify the "unnaturalness" in the concept of the use of money we are trying to discuss.

All of the uses of money are lumped together in the language of Economics as ways of "investing" money. But for some the more appropriate name for "dealing" of the sort that we are trying to identify is something akin to gambling, whether it be on the Stock Exchange or in the market generally.

It is important, indeed, to see what "investment" as the lending of money and "investment" as akin to gambling have in common - together, incidentally, they are thought by many to constitute the "essence" of capitalism as we have it. But it is also important to see the difference between these two forms of "financial investment". The best way of exposing this I feel is in the representation of barter say as CC (simple exchange of commodities), of civilised exchange as CMC (exchange of things with money as the natural medium of exchange). These are the natural forms of exchange of Aristotle. One unnatural (or better, as we will see, non-natural) form is what I have called, for want of a better name, "dealing" and it may be represented as MCM, where commodities are bought and sold for the sake of "making money" (not for the sake of satisfying one's need for goods); the other strictly unnatural form is usury which may be represented as MM, where a profit is sought from the use (lending) of money only.

Now in II-II, 77 & 78 St. Thomas, following Aristotle, identifies MM as essentially and incurably unnatural. But with regard to "dealing" (gambling on the changes of values of commodities - or rights to things, such as shares, debentures etc) or MCM, St. Thomas qualifies Aristotle's branding of this as unnatural and allows for a legitimate use of it. He says that in the abstract it has the "species of evil" because it bespeaks no natural limit, but in the concrete it is possible for someone to provide a rational limit as where one engages in it for profit indeed but limited to the needs of himself or his family, or of the needs of the poor or even the State. The unnaturalness or malice of the activity then comes from one's seeking of profit (or money) without limit (avarice). It has no natural controlling mechanism as CC and CMC where one obtains what one needs, though even here one can use this natural thing badly (e.g. buying more shoes than one can reasonably use).

"Gambling on the Stock Exchange" as I see it is simply the most sophisticated form of MCM. Even dealing in currencies, which are all monies, is to be classified as MCM not MM for the monies so used are not of one's own country and have as it were the status in one's country of "commodities" or rights to same.

Though it is true that people are very much more liable in this case (MCM) to being caught up in the profit-making frenzy, St. Thomas' view, then, is that the activity as such is not absolutely to be condemned like usury and an honest person can engage in it (if necessary or appropriate for him) in order to make a living (or help out those in need). That of course takes a fair bit of restraint, which becomes almost impossible where such activity is promoted not only by its practitioners but also by politicians and their advisers (the economists) as the highest "art" of business and finance. Sociologically considered, therefore, it can still be a true blight on our social life.

What appears to follow from the analysis by St.Thomas is that MCM is morally neutral or indifferent. Yet St.Thomas seems to be saying something more about MCM than that it is, like any indifferent act, not immoral by reason of its nature but from its purpose and circumstances. Going for a walk, for instance, does not have the "species of evil" in the abstract, but MCM does. There is something peculiar about desiring to engage in exchange merely for the sake of "making" money. I think the difference is that money is "invented" by man for a particular purpose, namely, the acquisition of natural wealth (which is something finite), and there is some sort of distortion there if we even consider it as an object of (unlimited) desire apart from this particular purpose. This distortion (or drawing away from its rationally contrived purpose), however, can be corrected, by reason, by such a purpose being restored in a particular individual's use of the process, i.e. by imposing on his use of it a limit determined according to natural or rational need (the natural limit on all use of wealth). Hence, the appearance of evil which attaches to the process in the abstract disappears in the concrete.

Ordinarily, i.e. in a natural exchange (i.e. CMC - e.g. the shoemaker selling shoes in order to buy food etc), we are engaged in a process which considered in its completeness is an exchange of things which are different but of (roughly) the same price or value (according to some common or social standard of evaluation). In MCM (i.e. buying in order to sell), however, we seek to exchange "prices" (embodied in money) rather than things, that is to buy something and sell the same thing at a higher price ("at a profit"), even after deducting the costs associated with the transaction (such as transport etc).

This might look like getting something for nothing; but the original buyer (dealer) has not necessarily obtained the article at a value less than its true worth nor has the ultimate buyer (at the higher price) necessarily paid more than the true value of the article. This comes about from the very nature of the just price. For it is a practical measure, expressed more as a range than as an exact figure. Moreover, it is not something static but continuously changing under normal circumstances, reflecting the continuous change of the economic situation in every society. The astute person can take advantage of these "accidental" differences in the price of the same things and "make" money without having brought any new thing into existence (i.e. trade without production).

There is therefore no essential injustice in such "dealing" even though, as St. Thomas notes, it is not easy to control one's appetite for (easy) money and those who engage in it are liable to fall into all sorts of immorality such as are associated with greed or avarice, e.g. deceit about the goods and the subjection of other talents or even natural "virtues" to the end of money-making. Hence, he says that clerics, i.e. those specially dedicated to religious things, should avoid it.

What is wrong with it, then, is the pursuit of money for its own sake, as it were, unrestrained by the limits imposed on us in the satisfaction of our natural and rational needs. We need a means therefore of drawing a distinction between the restrained (if difficult, with our modern capitalist money-driven economy, to imagine) use of MCM and the use of MCM without restraint. Let us, then, symbolise this latter as MC'M (I have to thank my colleague John Ziegler for this refinement of symbolism).

Influenced by modern economic theory, however, we more or less identify the unrestrained mode of "dealing" with the process itself, as we know it. The inevitable effect of this is the roller-coaster economy that we have (an economy driven by the desire generally to "make" money). But the theoretical, if you like, distinction is still there. It is the lack of restraint that causes the "boom" and "bust" phenomenon. Societies and their governments have, of course, a responsibility in this matter, and we as a society cannot blame the individuals only who get caught up in the frenzy - some of whom we punish after the horse has bolted, as if we would have been more moral if we had been in their shoes.

It is true that a 'run' on a share will inflate its price well beyond its rational social level, so that shares in that condition take on an anti-economic (and anti-social) character. But that is a side-effect of the infinitude attaching to the process. Shares are a "commodity" peculiarly suited to this process. But anything can be so used, e.g. land and houses. To the "natural" (i.e. rationally directed) demand for the shares (or other "commodity") which sets the "natural" price is added the speculative demand, thus pushing up the price (necessarily a temporary and erratic phenomenon). But it is not the "commodity" being bought and sold which is changed from good to bad, or which becomes anti-economic but the transaction as so directed (or rather undirected), namely, a transaction where commodities are used as means of 'changing money for more money. This process is not good, in the precise sense explained above. It also tends inevitably to get out of hand and become a blight on society.

We could think of the process as the production of counterfeit wealth in the economy. But it is not the commodity nor its natural price which is the counterfeit wealth in the system; it is precisely the addition to the price or value of the commodity engendered which is the counterfeit "wealth". The symbol "C" by itself does not show up the important distinctions between the commodity as a thing (or right to a thing), be it land, goods or shares, and as a priced thing (the proper economic notion of an item of wealth) and further between the social or economic element of the price and the anti-social or anti-economic element. In the unrestrained use of MCM, the character of C does change by the addition of an unnatural price rise. It does well to signify this, then, by changing the symbol to C'.

There will inevitably be losers who are left with the commodities (be they shares or goods or even land) directly proportional to the "winners" who got out "in time" with a "profit". But this applies only when the "infinite" desire for wealth (money) has taken hold of the economy or some part of it and so many are drawn into the exchange process (the "market") by the money-making possibilities of the "boom" that the price (socially determined) is affected. This is a familiar feature of our modern capitalist economies and one that is rightly condemned.

There is still room, nonetheless, as I read St.Thomas, for MCM to operate without adverse social consequences, provided it is measured to someone's (rational and hence limited) needs, and not merely the (unlimited and hence irrational) desires of men for wealth. This we find very difficult to conceive in modern economic theory (which is premised on the unlimited nature of our desire for wealth). What St. Thomas envisages, as stated above, is that MCM is able to take place because of the natural range and fluctuation of values and prices even in a healthy economy. One can therefore, if one is astute, take advantage of these (accidental) differentials and trade at a profit, without having produced any new article of wealth within society. Obviously, such an activity is a secondary one; not everybody can indulge in it. And one would have to look to the general state of the social economy as well as one's own private needs or philanthropic purposes prior to engaging in such a process of dealing.

But the possibility of a rational use is there. If in our times its irrational use has become a social blight which we all should endeavour to eradicate, we cannot automatically condemn those who become involved in it, without knowing their motives and the ends to which they have put their "profits".

The Stock Exchange, originally set up to facilitate the formation of joint stock companies by the selling of shares in them to the public, has now become a centre and focus for the buying and selling of such shares (and other related rights) "at a profit", i.e. MCM. In principle, MCM as practised in this context is no different from elsewhere, but there is a greater danger here of the process deteriorating into a general frenzy of MC'M. We are also obviously at the mercy of these "economic" epidemics from time to time whilstever we fail to understand their nature and cause.

D.G. Boland

Don Boland is a lecturer at the Centre for Thomistic Studies, in Sydney, Australia.

This article posted May 1999. It was published in Universitas, Vol 2 (1998), No. 1.
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