Universitas, Number 11, April 2005

Economic Philosophy

Don Boland

Economy: from Greek words oikos, meaning "neighborhood" and nomos, meaning "law" or "order".

The end of economic activity is not the accumulation of wealth, or increase in productivity or economic growth for its own sake, but the satisfaction of the material needs of (the families in) society. It is only when this has been attended to that the real work can begin, i.e. the cultivation of a truly human and spiritual life by each and every member of society. The accumulation of true wealth or capital, which knows no natural limit, is cultural and spiritual, not economic and material.

Nevertheless, the two elementary aspects of social life, Labour and Capital, are distinct from the strictly domestic aspects of the family. Hence, these social relationships which they signify, i.e. the industrial and the proprietary, are more properly studied in the context of the social economy, not forgetting their necessary connection to family, social and, ultimately, personal ethics.

On the one hand, we need to avoid identifying this socio-economic study with that of personal, family and even strictly political matters. We are not here studying, in "Political Economy", problems of personal finances, of family or even of government budgets. These are all lesser "economies" within society. We are studying how the whole society which is divided into families, which in turn form groups of families or neighborhoods developing specialized trades and occupations and finally larger associations of producers and traders, "manages" its economy.

Governments are directly concerned with public service and public property, not with the social institution of the exchange of the products of private industry and private property, called the market,. The operation of exchange of goods and services within society belongs primarily to individuals, not to governments, for trade should be free so far as possible. Governments do have an indirect or subsidiary role. But they should not attempt, e.g. by fiscal policy (taxation) and monetary policy (control of the supply of money), to take over the management of the social economy. By doing so they usurp the functions of the members of society (a futile task in any event, doing more harm than good).

On the other hand, we have to understand clearly that the subject matter of Economics is not some self-operating natural order in any naturalistic sense. Thus its most perfect study is not simply scientific, let alone in accordance with the mistaken social and political philosophies of classical political economy or Marxian analysis, or, as in the contemporary science of Economics, according to a purely mathematico- empirical method.

Its most proper subject matter or object is the social ordering or distribution of external goods and services to the various parts of the community according as, through production and exchange, they contribute to the whole process. This in turn is still subject to moral and social laws and adapted to the circumstances of each society by political (economic) prudence.

It is part of social or political philosophy and, hence, subject to moral laws in the same way. Though economic considerations are not the same as moral ones and economic judgments decline from the notion of prudence to that of art, an immoral production or unjust exchange can never be considered to be truly economic.

Economic Philosophy, being part of socio-political philosophy and being, therefore, essentially a practical study, may be looked at according to three levels of consideration as set out below.

The proper subject matter is the social order within the members of a particular society reflected in their external goods and material needs. The end or common good of this order is the material happiness of the members of society, i.e. their common wealth or material well being. This includes all the material things that serve as instruments towards the satisfaction of their natural needs, and also those services or labour directed to the same ends. Generally speaking, the subject matter may be described as all those things whose value can properly be measured in money.

Allowance has to be made for the fact that not all human needs are material and a certain amount of labour and investment of capital is involved in, for instance, intellectual and spiritual pursuits (the value of whose "products" cannot properly be measured in monetary terms). The social economy, though only indirectly concerned with these priceless goods, manages to find ways of distributing equitably the burdens of the occupations concerned with them without any pretence of sale of their "products".

The first level of consideration of this socio-economic order will be the most remote and, hence, "theoretical" . It might be termed Economic Philosophy or General Economics, being concerned with the more abstract principles and general laws of the subject. Analogously to other practical studies it will be concerned with the nature of the socio-economic order in the abstract, with theoretical analysis of the notions of economic value and price, with the natural and rational end of economic activity and with economic laws in general.

Even at this level it is possible to mistake the true ends and principles. This modern Economics does in introducing infinity into our desires for material goods (through confusion of wealth with money) thereby basing all its thinking about socio-economic affairs on a false principle of scarcity, rather than that of sufficiency. An economic act is not one driven by the need to choose between means that are scarce relative to unlimited wants; but is directed to a choice of means that are adequate or sufficient to our limited material needs.

From the viewpoint of the individual it is easy to be persuaded that we are insufficient to the task of providing for ourselves, but that insufficiency is more than amply overcome through association, provided we observe justice in our social relationships. The promotion of the principle of scarcity veils the fact of social injustice whereby some are able to have more than enough whilst the many have less than sufficient, the benefits of association being greatly diminished in the process. The explanation for the inevitable insufficiency of people generally in terms of material welfare, now on a global scale, despite the enormous increased capacity from technological advances, is thus conveniently explained by an inexorable law of economics, rather than by human injustice and political misgovernment.

The second level of consideration will be of the proximate principles and laws of economic life and activity, which we might call Economic Practice or Special Economics. This involves a closer examination of the workings of social systems of labour and investment, production, exchange and distribution of goods or wealth.

A particularly serious social and economic problem at this level concerns the functioning of money and the market, i.e. to what extent and how commercial dealings and speculation can or ought to be controlled. Related to this is the problem of interest on money or usury, which bedevils the modern world of finance as much as it did the ancient and mediaeval worlds, though it requires different considerations to be taken into account.

Capitalism may be considered as an economic system in which in the name of competition these matters are given free rein. It is a system where no distinction is made between useful labour and productive investment, on the one hand, and the exercise of energies and skill in dealing or speculative investment, or "playing the market", on the other hand.

J. M. Keynes, in 1935 in the middle of the Great Depression, succinctly expressed the social dilemma caused by this insufficiently defined notion of investment.

"It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the individual left to himself. It happens, however, that the energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with forecasting changes in the conventional basis of valuation a short time ahead of the general public.

They are concerned, not with what an investment is really worth to a man who buys it "for keeps", but with what the market will value it at, under the influence of mass psychology, three months to a year hence." (quoted in Markets, M. Mayer, Simon & Schuster, G. B., 1989 at p. 230).

Such investment activity, often fuelled by avarice, enables the investor/speculator to profit from market instability and contributes to it. It is a particularly urgent and serious problem of contemporary economic life. The principles of its understanding and resolution, however, can be found in St. Thomas' Summa Theologiae, 11-11, 77 & 78.

Finally, there comes the art of "management" of the social (not to be confused with the public) economy . This art is that part of political prudence, or the art of government, which is concerned with how society, i.e. the members of society, provides itself with the provisions necessary for human life and well being.

It is at this level that government intervention in the economic order, in the positive sense , is justified; but only, however, in accordance with the principles and laws of true economic science and sound economic practice referred to above. Here, for instance, the government may need to institute a public monopoly for the sake of the common good, or confiscate property, with due compensation.

A most important principle of politico-economic philosophy at this level is that of "subsidiarity", as explained in the social encyclicals of the Church. This principle is directed towards the action of those in a superior political or economic position, for it concerns the preservation of all individuals' freedom of enterprise within the social economy. The complementary principle of "solidarity" is directed towards all, for it relates directly to the end of economic activity, namely, the conservation of the common good.

Unfortunately, we often become absorbed in, and enslaved to, material goods. We choose to serve Money (Mammon) rather than God. Our understanding of the elementary social relationships, then, in relation to work and employment, and to property and commerce - which form the essential subject matter of the modern science of Economics - necessarily suffers. Our social and political vision, which should principally be directed to spiritual and cultural goods, becomes contracted to the economic and material. Political science and practice becomes virtually reduced to economic science and practice, which themselves are inevitably confused and obscure.

Despite the best endeavors of governments schooled in economic science and advised by economic experts, the earthly heaven of material prosperity eludes us. For divorced from its natural and, as we have seen, supernatural context, Economics must go awry and lead us further away from our goals of even material prosperity.

The true Science of Economics, like Law and Politics, is an integral part of the whole practical study of human behavior, which depends ultimately upon Moral Philosophy (which, in its turn, is dependent upon Moral Theology). To find the most fundamental principles and laws of economic life we need to refer, therefore, to St. Thomas' commentaries on Aristotle's Ethics and Politics and, more definitively, to the second part of his Summa Theologiae.

In order to understand the modern economy, however, something more than an understanding of the natural order of society is required. For a fundamental disorder was introduced into the functioning of society at the economic level at the beginning of the modern era. With the collapse of the moral authority of the Church in the late fifteenth and early sixteenth centuries new social "forces" were released. This quickly resulted in the few in a position of power using it to further enhance their power and wealth at the expense of the many. Thus society became divided into two distinct parts, which by an internal social logic ended up in the modern era in a socio-economic system which has come to be called Capitalism.

Many factors worked towards the production of this new social order, or rather disorder, not all bad. The change of focus from things religious and other-worldly to a concern with the world of our immediate experience stimulated a new interest in exploration and adventure that opened up new worlds not only geographically speaking but also scientifically. They were exciting times, but because of the extreme social divide that had come to pass, only a few were destined to reap the full rewards of this. Despite the amazing progress in science and technology that deserved the name of an Industrial Revolution, the emerging poverty of the great majority of citizens not only did not diminish but increased to intolerable proportions.

In classical political terms, taking England as an example, what seems to have happened was the overthrow of the rude political system of kingship that had come to prevail towards the end of the Middle Ages. This was accomplished by a powerful group of "barons" who set up an oligarchy, i.e. a political system of government based upon wealth or property; though the symbolic forms of kingship and aristocracy were retained. The religious upheavals of the time provided the opportunity for this and also provided the enormous booty that would consolidate the superiority of those who profited from it. The ones to suffer most were the poorer and weaker sections of the society, who, despite the imperfections of the existing social order, had benefited greatly from the protection of the king and the charity of the Church. For, essentially the society was ruled for the common good and there existed a general sense of solidarity with the less fortunate.

But things changed drastically within a relatively short time. An oligarchy is not interested in the common good but in preserving its property rights against others, and increasing its wealth as much as it can. In such a social atmosphere the plight of those without property is ignored by those most in a position to help. All they can rely upon is their labour. So, provided they keep fit and healthy and accident free they can survive. Apart from a fortunate few of unusual ability and ingenuity, their labour, on account of their relatively great numbers, comes cheap. So they are obliged to live from hand to mouth, with little prospect of providing for the future. Without the benefit of a social welfare system, as has per force been developed in modern times, their situation was desperate. The great advances in industrial methods and technology provided them with work but did not alleviate their poverty. The advantages went to a few who did not have to work, not to "the poor people who have to work".

Hence, we have the paradoxical result that the Industrial Revolution is probably more remembered for its inhuman character than for its technical advances. Capital, as the instruments of production, meant to be at the service of human labour, by some strange social alchemy turned into its implacable master. For, this revolution followed upon the other one that we have adverted to, one less visible because in the spiritual order of political power and economic rights.

At around the same time the nature of political and economic science underwent a change, less concerned with moralizing about how "princes" should exercise power, or "businesses" should make money, and more focused upon the new political and economic "realities". No doubt the change of mind regarding the scientific investigation of society was connected to the change of mood in regard to dealing with one's fellow human beings, especially the weaker.

Be that as it may, in terms of economic "realities" Capital and Labour took on new significance, and in fact came to signify something quite opposite to their original and natural meanings. Capital came to signify more and more the power to purchase things, including Labour, for the purpose of increasing one's wealth. That is to say Capital came to be seen as the initiator in the economic order, and Labour as the instrument. The original meaning of labour was diminished and demeaned to that of hired or employed labour. So the economic categories in production were thought of in terms of owners of capital and employers of labour (Capital), on the one hand, and those without property and necessarily employees (Labour), on the other.

To understand precisely how this change of thinking came about we will need to examine closely the roles of capital and labour in the economy. It should be noted at once, however, that the new meanings are not necessarily illegitimate, nor are the activities to which they refer necessarily immoral or demeaning. There is an economic activity where capital is in a sense an initiator of a wealth-getting process, but this is not its primary role. There is nothing wrong with referring to those whose labour is hired out as "the workers" but "worker" has a more general and fundamental sense.

These new meanings, however, became generalized because they seemed to reflect the great divide of the new or modern social "reality". This new economic order, realistically enough, was called "Capitalism". Not surprisingly it took the credit for the great increase in productive capacity issuing from the Industrial Revolution. It hardly seemed incongruous, then, if the benefits of that revolution should go mainly to the "captains of industry", the Capitalists.

This is the social reality in which the new science of Political Economy was conceived, and its propagators being enthusiastic believers in the new scientific method saw its concepts and laws as simply reflecting social and economic "reality". If its original conclusions condemned the poor labourers to a bitter struggle to obtain a bare subsistence, it was merely reflecting the realities of socio-economic life. Sadly, these new economists were serving, wittingly or unwittingly, the interests of those who profited from the new order of things. So deceived were some by this new "realistic" mentality, however, that they believed they were describing natural laws.

The most serious error of capitalist economics, therefore, lies in this distorted notion of the relation between capital and labour. It is only with Rerum Novarum that we get a clear refutation of this. The right conception of labour is thus the key to the social question [cf. Laborem Exercens]. Below we have a short discussion on the notion of employment. But the nature of labour or work is not understood unless seen as related to man, regardless of the fact that he is working for another or not. For then we see the worker and his work worthy of respect as a human person and what properly belongs to him; and capital as essentially the non-personal instrument whereby he accomplishes his work.

But it will be instructive to examine where the notion of capital itself as prior to and in some way superior to labour comes from. With this we will also get a clearer notion of what Capitalism means. Obviously, the word "Capital" is given a certain priority because "Labour" is conceived as hired labour . So Capital is taken to stand for the employer, who in the modern scheme of things is ultimately the owner of the capital needed in the enterprise. The employee/labourer is obviously inferior to the capitalist/employer in this relationship.

Capital, therefore, in so far as it stands for the employing class, the same as the propertied class, is the initiator and director of the enterprise and Labour as standing for the employed or labouring class is subject to the direction of Capital. In regard to this relationship, it is to be understood that, though Capital is not entitled to treat Labour as a mere instrument or material in the production or other economic process, the relative subjection, in this sense, of Labour to Capital is not what is to be criticized. Indeed, it belongs to the nature of the relationship.

No doubt this relative superiority of the propertied class to the labouring class has played a part in capital being conceived as more significant, economically and therefore socially, than labour. From the individualistic perspective of a person whose object in life is wealth (i.e. who is ruled by the vice of greed) this is a "natural" conclusion. He would expect the society to which he belongs to protect his interests and those in a like position to him.

But, in the use of capital itself, taken as an item of wealth, there is an apparent reason for believing that it is absolutely prior to anything else in the economy and therefore to be preferred even to the welfare of persons occupied as labourers. Their inability to obtain work i.e. their unemployment, is thus not to be regarded as a reason to adjust the economic system. If any sustenance or assistance is to be given to such labourers, or Labour, it lies outside the economic order of things and is a matter of "policy". Naturally enough, this way of thinking must conceive the economy in impersonal terms. This means that it conceives Capital and Labour in the same terms as economic "factors" and gives precedence to Capital. So we have here a notion of Capital not as standing for owners of capital but as an economic "factor" that demands precedence, by right of its priority as a primary cause of economic production and a prime mover in the exchange process. This is a subtler notion of Capital, and consequently of Capitalism, that lies at the root of the priority given in modern economic thinking to Capital over Labour.

Where might this notion have come from? Even before the political revolutions which followed closely on the religious revolution that came to be known as the Protestant Reformation there was another revolution happening in economic thinking and practice whose repercussions were spreading all through Europe. Max Weber famously attributed the rise of modern Capitalism to the Protestant Reformation, and in particular to Calvinism. But this thesis has been shown to rest on very flimsy grounds. For the spirit of Capitalism was quite definitely to be found in Catholic countries and well before the Reformation.

It was resisted by the religious and even political authorities of the time. But the religious and political orders had their own problems to deal with; which were to end in the religious and political revolutions referred to. What was this other early revolutionary movement? It was in fact a revolution in thinking and practice in commerce. It had to do with the rise to power and prominence in the social economy of the merchant. It introduced into the relatively settled economic life of the late Middle Ages something quite alien to its spirit. It is not something that today we regard as alien at all; indeed it rather rules our lives, especially in regard to the way we conduct our businesses.

The early manifestation of the spirit of Capitalism, however, was like the entry of a foreign body into a natural organism. Strenuous efforts were made at first to reject it; but it grew to such proportions that the natural body proved too weak to do so; and with the passage of time it accommodated itself to it, and finally reached the position where it adapted its life to its presence. Something of the significance and power of this commercial revolution may be gathered from considering the difference between the moral strictures against usury of the modern world and the pre-modern. However, though it involved a change of attitude to the morality of lending of money (in modern terminology, finance) it was more fundamentally a new attitude to the role of money in exchange of goods (commerce), something familiar to the merchant, indeed, belonging to his stock in trade. In the end, indeed, the commercial revolution joined up with the other revolutions happening in the religious and political orders and also with the scientific and technological revolutions that define the modern world.

It is difficult to trace cause and effect in social and historical matters. But it is noteworthy that the first battles for liberty as understood in modern philosophy seem to have been fought in the area of trade. Freedom of trade was what the mediaeval merchants demanded and won relatively early in the piece. The kind of freedom achieved was a concrete expression of the emerging philosophy of Liberalism. The freedom demanded in the other areas of social concern was of a pattern with this new commercial freedom. It was demanded as something that belonged to the individual with little or no regard being paid to the claims of the state and religion. That is to say the fight for freedom took on the name of liberalism, but its fundamental characteristic was that of individualism, in relation to political authority, and of atheism, in relation to religious authority. What this meant was that the notion of individual freedom was converted, or perverted, into an absolute value, something circumscribed in no way by social justice or morality.

After the completion of the religious and political revolutions which, though they were fought in the name of the same kind of liberty for all, in fact resulted in the victory of the relatively few - who took over the ownership of the property of the losers, and much else besides - the new commercial spirit and the new oligarchic system of government together determined the form of modern social life. Having similar ends, namely, wealth and money, there was inevitably rivalry between them.

This anti-establishment concept of liberty, which served the interests well of the original revolutionaries, has in the end been turned against them, as they became the establishment. But this is a story of modern movements against Capitalism, as is Communism, and therefore material for another discussion. We are concerned to understand precisely what Capitalism consists in and how it arose.

By priority it is a commercial phenomenon; but it is also an industrial one. Both, however, end in the exact contradiction of their principle of liberty, in a virtual monopoly of the market and enslavement of the labouring poor. In the end it is these two things that characterize Capitalism as it has come to be understood. We are, of course, talking about it in its pure and fully developed form. Many today hold a modified version of it, and allowance has to be made for the many mitigations of it in practice. Not the least of these mitigating factors has been the new "socialization" that occurred after the horrors and devastation of the two World Wars, as was noted by Pope John XXIII in Mater et Magistra.

In terms of economic exploitation the lowest point of modern society had perhaps been reached at the end of the nineteenth century when Leo XIII described the multitude of workers as "surrendered, isolated and helpless, to the hard-heartedness of employers and the greed of unchecked competition". Working conditions did start to improve (thanks in no small measure to the influence of Rerum Novarum); but by 1931 things had again become as bad as ever, Pius XI saying "the whole economic life has become hard, cruel and relentless in a ghastly measure."

Part of the problem for the working poor, as Leo XIII observed, was the fact that they had been rendered "isolated and helpless", reduced to being "the masses" with no organized structure. Previously, there had been a significant body of associations to which they belonged, which helped them when in need and defended their rights where necessary. The modern politico-economic system, which we know as liberal Capitalism, succeeded in destroying the network of intermediate associations that had done the huge job the State was now being called upon to do. As Pius XI put it " … things have come to such a pass that the highly developed social life which once flourished in a variety of prosperous institutions organically linked with each other, has been damaged and all but ruined, leaving thus virtually only individuals and the state. Social life lost entirely its organic form. The state, which now was encumbered with all the burdens once borne by associations rendered extinct by it, was in consequence submerged and overwhelmed by an infinity of affairs and duties." That was the beginning of the Welfare State.

But, after the end of the Second World War, for various reasons economic life in the West began to improve at a rapid rate. A most significant factor was no doubt the huge psychological boost experienced in the defeat of tyranny and the victory for freedom, a freedom fought for by all and therefore not to be denied to any regardless of their social position. With the weakening of the hold of liberal individualism on the minds of those in power, a social and economic philosophy already shaken by the Depression, the State was ready to increase its aid to the poor and defend the rights of the property-less laborers.

But, of itself the State was not equal to the task. If it were not for the fact that the people themselves, now more confident in their abilities, began to re-institute the variety of voluntary associations (of which trade unions are only one form), in which one finds the companionship and support of like people, the condition of the "masses" would not have been greatly improved. Moreover, by this voluntary socialization, individuals are able to preserve their self respect and sense of independence despite falling on hard times. The social welfare or security provided by the state, however, tends to be impersonal and to cultivate a situation of dependency.

This is not to say that this process of socialization has avoided the problem of the creation of an unwieldy Welfare State, or that the evil effects of liberal individualism have been overcome. In fact, as already noted, there have been for some time signs of a resurgence of what Pope Paul VI called "the liberal ideology", holding itself out as the only logical alternative to the socialist ideology, which has now been discredited by the collapse of communism in the USSR.

Capitalism, therefore, and its political counterpart Liberalism, is very much a live theory about how economic life should be organized, or not organized. Let us then resume our examination of its distinctive character.

In order to understand the commercial aspect of Capitalism it is necessary to examine the nature of commerce or exchange. This I have done elsewhere in various papers. There are in fact two modes of exchange, as noted long ago by Aristotle and dealt with explicitly by St. Thomas. The first mode is what Aristotle called natural. This is not to be taken in a simplistic way. By "natural", in relation to society, Aristotle means "civilized", or what is fully in accord with the rational nature of man. Thus it includes exchange mediated by the rational means of money. The second mode he termed "unnatural", though, as St. Thomas points out the better term is "non-natural", or "artificial".

Put shortly, the difference between the two modes is in their ends; the first is ordered to the satisfaction of natural needs or rational wants; the second to the possession of money, which being a purely rational means, knows no natural end. Using C for natural wealth and M for money we can symbolize the two as CMC, for the first, and MCM, for the second. The first is the process of exchange engaged in by those who bring something tangible to the exchange transaction; the second is by those who do not but who utilize the process itself to make money by buying in order to sell again at a profit. Now this is precisely the business of the merchant, though anyone can operate in the same fashion and make a profit. No particular skill in producing things or providing a service is required. What is required is the possession of money to start with and knowledge of price differences and movements.

If we substitute the moral terms "ethical" and "unethical" for "natural" and "unnatural" we are close to the intent of Aristotle's mind. Aristotle intends these equivalents when talking about usury as "unnatural". But the second mode of exchange is only unethical if it in fact means the pursuit of an end that lacks any limit, i.e. of money for its own sake. The desire for money of itself does indeed lack any limit. But St. Thomas points out that it may be voluntarily limited to natural needs or rational wants.

If we think of capital as money we can see how Capital has a priority in the production of a certain kind of profit. Now, if we modify the notion of the industrial process to conform to the notion of buying, or "investing" in, the physical capital and Labour required in some productive enterprise - so that the products can be sold at a profit after subtracting the cost of the physical capital and Labour - we can see how this Capital is necessarily the prime mover in the whole process, and as such entitled to the whole resultant profit. Labour in this vision of things is a cost to be kept to the minimum possible so that profit may be maximized. Thus we see how the spirit of Capitalism comes to pervade not only the commercial but also the industrial aspects of economic life.

The mentality of Capitalism, then, is determined by the possession of money to start with, and the aim to use it to make more money. The second mode of exchange, become dominant in the economy, can and does take advantage of the parlous position of the labourer in the area of production. The difference is that this kind of exploitation is much more impersonal. Business is business, after all.

Thus, the modern worker has two masters. One is the already inordinately wealthy, who "gives" him gainful employment, at the going rate (for the common worker a generally depressed rate). The other is and the man of money, his own or borrowed, who "buys" the labour (and physical capital) as cheap as he can get it, and sells it again in the product of such labour (and physical capital). It is all done in the name of liberty, a free contract for wages in the first case, and a freely competed price for labour in the second.

We thus have two reasons for the dominance of Capital, from which the name Capitalism comes, signifying the priority of capital over labour. In modern Capitalism both strains have merged with a general theory of freedom of production and trade. Unnoticed is the fact that the freedom is all on the side of those having property and money. On the side of those without both there is only the freedom of taking the price demanded for the goods they need and the price offered for their labour, or perish; unless someone else comes to their aid, in justice or in charity.

The true picture of Capitalism, in the full development of its unbridled state, is then that of oligopoly in industry and commerce and of government, perhaps democratic in form but oligarchic in reality, the very antitheses of economic freedom and true democracy.

In the economy of recent times, however, this economic system of Capitalism has been very much curtailed by government regulations and circumscribed by a public opinion better educated in social morality. But excessive government regulations have brought their own problems and public opinion is easily changed. So we have the present trend towards a return to original style Capitalism, promoted by its advocates as the natural ally of Democracy (itself affected by a similarly flawed notion of freedom).

The above considerations have necessarily taken us away from the investigation of the "physiology" of social economy, being concerned more with "pathology". WE need to return to the study of the social order in its essentials, though this must per force be also done by the examination of a body with serious health problems.

We should say something further, therefore, about the particular socio-economic institutions of Property and Employment, as they are in some way natural, if historically realized imperfectly. However, these particular topics will be dealt with later.


It is called the theoretical part of the study only because it is the most remote from practice or application. It belongs, nonetheless, to a strictly practical study, for the principles are practical principles. In the same way we speak of the Science of Ethics and the Principles of Medicine.

2 To be economical is to avoid inadequacy or super-adequacy (waste) in the use of means. That is, the very notion of economy consists in sufficiency of means.

3 Some imagine that the Church has had to change its stance on usury in modern times. They seem not to notice what Pope Leo XIII has to say about it, in the encyclical universally regarded as containing the modern restatement of the Church's fundamental doctrine on social and economic questions. Cf. RN 6: "A devouring usury, although often condemned by the Church, but practised nevertheless under another form by avaricious and grasping men, has increased the evil;" Whatever that new form may be this does not sound like a retraction of the traditional condemnation.

4 See Commerce and Capitalism, by D.G. Boland Ll. B., Ph. D., Centre for Thomistic Studies Inc., Sydney, 1989.

5 The word "State" is ambiguous. For, it sometimes stands for society as a whole, sometimes for that organ of society that is the government. The word "public" too suffers from a corresponding ambiguity. By public economy we mean here the "household" affairs of the government.

6 The government's control over its own public property and affairs is direct but its intervention in regard to the legitimate activities of individuals and intermediate associations can only be of a subsidiary kind.

7 Political intervention of a "negative" sort is required in order to correct injustice. It may also be required to restrain excesses, e.g. of speculative activities that have reached the stage of upsetting social and economic order.

8 Such a social or political economy was by no means perfect but there is a basis in truth in the description of the England of that era as "Merrie England".

9 In this discussion, we will generally denote the modern meanings by capitalizing the initial letters of capital and labour.

10 Pope Paul VI, cf. OA 35: " … at the very root of philosophical liberalism is an erroneous affirmation of the autonomy of the individual in his activity, his motivation and the exercise of his liberty".

11 They have not had it all their own way. Violent opposition from those oppressed, in the name of the very freedom by which the new regimes in politics and economics rose to prominence, and repeated condemnation by the Church of the injustices perpetrated, have forced intervention by the State and a curtailing of the freedom of Capital by a newly created Labour Law. More and more the oligarchic character of Government has had to make concessions towards democracy. Still we may say that realistically the hold of the inordinately wealthy on power, in both political and economic terms, remains strong; which power they have attempted to retain by astutely making concessions that have changed the symbolic forms of government from that of kingship and aristocracy to those of republicanism and democracy, with the real character of political power still oligarchic, if much reduced in effectiveness. Thus the modern day notion of "democracy" is defined in terms of procedure, rather than substance; somewhat similarly to the notion of "natural justice".

12 This is the face of Capitalism as from the end of the nineteenth century, clearly discerned by Pope Pius IX and G.K. Chesterton. After the recent demise of Socialism in Europe, many, including some Catholics, forgetful of the history of Capitalism which showed its true colours, wish it to be interpreted as simply exhibiting the true notions of freedom and justice that the Church has argued hard and long for. An unnecessary ambiguity is therefore introduced into the discussion. A parallel reinterpretation is proposed in respect of Liberalism. "But do not Christians", asked Pope Paul VI in the same place as above quoted, "who take this path [ostensively 'for the defence the individual against the increasingly overwhelming hold of organizations, and as a reaction against the totalitarian tendencies of political powers'] tend to idealize liberalism in their turn, making it a proclamation in favour of freedom? .. while easily forgetting that at the root of philosophical liberalism is an erroneous affirmation of the autonomy of the individual in his activity, his motivation and the exercise of his liberty"..

13 Cf. Octogesimo Adveniens (1971), 35.

14 Capitalism- its definition (see website of G. K. Chesterton Institute for Faith and Culture Oxford: www.secondspring.co.uk/economy/forum.htm);Profit -its definition (see CTS website: www.cts.org.au); The Merchant and the Middleman (shortly to be placed on the CTS website); A Case of Rotten Apples (also on G.K.C. website).

Don Boland

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

This article posted April 2005. It was published in Universitas, No. 11 (2005).
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