Universitas
December 2005

No. 12

Is it reasonable to believe in God? Don Boland

The merchant and the middleman Don Boland

Imperfect Science Don Boland

A Note on our article on Transubstantiation Don Boland

St. Thomas and the Problem of Evil Geoff Deegan

God's Beatitude Geoff Deegan

On the Goodness of Being According To St Thomas Geoff Deegan

Centre for Thomistic Studies | Article Index | Recommended Books | Recommended Links

The Merchant and the Middleman

(An Insight into Capitalism)

In a natural civilized exchange economy, as understood by both Aristotle and Aquinas, money plays an important part.1 But the part it plays is in the middle, not at the beginning or at the end of the exchange transaction. No matter how various and flimsy the goods and services provided, nor how diverse and curious the desires for same within any given community, the whole point of the social exchange order is for the multitude of goods and services so introduced into the exchange process to somehow end up in the possession of those who want or need them. Reduced to its simplest elements what occurs is that the shoemaker (making more shoes than his family can wear) sells some of his shoes to the farmer and sooner or later buys some food (provided let us imagine by the same farmer). The farmer has needed money to buy the shoes but he gets it back when he sells his spuds to the shoemaker. So the full exchange process from beginning to end has been completed and the money, having been introduced to be a medium only, is cancelled out.

Now we know that this rarely happens in a big city. But the mental experiment brings out clearly enough the essentials of an exchange system involving the role of money as a medium of a complete exchange. No rational person wants to end up, like a miser, with only money. No matter how complicated things may become the whole process is evidently designed to begin by providing shoes and spuds or the like and end by the wearing of the shoes and the eating of the spuds. The advantage of the exchange is that the shoemaker not only has shoes to wear but also spuds to eat and the farmer likewise. All can be clothed and fed, relatively easily, if we are willing to cooperate with one another. Money does not disappear only because as our present needs are satisfied new ones arise. So the same money can be made to do service again.2

Things of course get much more complicated as society grows. Our needs for basic things, or necessities, expand into wants for luxuries, or non-necessaries. These terms are not to be taken here to imply any moral distinction for they have to be judged in the context of each particular society.3 But, ideally, all our reasonable desires for material things are satisfied by the goods and services generally provided within each society's social exchange system. The trade between the shoemaker and the farmer, as each representing the producers and consumers respectively (since there needs to be at least two for both roles to be fulfilled), is, let us assume, free and fair.

We know that there is more to life than the satisfaction of our material needs and desires. So there is a section of the society that provides higher services which must also eat and be shod. However, these can be provided for, in exchange for what they provide. So this does not greatly affect the basic picture. We know that things do not always go smoothly and some will try to get something for nothing. This will involve some subtraction from the overall goods and services to be enjoyed and perhaps some disturbance to the social order. We will need a government and will have to make provision for its needs. But we can adjust our thinking to this. Making all necessary adjustments in this regard we still have essentially the simple process we started with.

However, there is one section of the society that we have not yet taken into account. What about the merchant who, unlike the shoemaker or farmer, does not put anything into the social fund of goods and services but, precisely as a merchant, is concerned simply to buy what is already provided or produced by someone else and sell it to someone else again (at a profit)?

Here we have to be very careful and precise, for the merchant may be also on other counts someone who provides a service. He may provide a valuable service by transporting or shipping goods to where they are needed. He may store them safely till a time when they are wanted. He may package them in a form that is more convenient to the buyers. But he does these things as a transporter or shipper of goods, as warehouseman, as a packager of goods etc, not precisely as a merchant. We may call the shipper, the warehouseman, the shopkeeper or the retailer4 and the like middlemen, as is the merchant. But the merchant is not a middleman in quite the same sense as the others.

These others are middlemen who provide a real social service to others by reason of the demands of material conditions attaching to things or products in the process of exchange, such as differences of time, place, size, number etc that are interposed between the provider or producer and the user or consumer. The merchant's middle role, however, has got something to do with the fact that money is in the middle of exchanges.5

We may get a clearer picture of the merchant's role in the exchange system by supposing that he employs the services of other people to do all these things that are subsidiary to his primary activity of buying and selling. The merchant would be quite disappointed if having met all these expenses he did not still make a profit, even taking into account some sort of reasonable recompense for his time and effort in coordinating all this.6 What, then, precisely does the merchant provide? What service does he contribute? In order to understand this we need to look a little more closely at the exchange process.

By way of preliminary we can say that the merchant's business7 is not to make goods or provide a service but to make money. Essentially his activity benefits himself alone. It is an activity that is highly individualistic. That is not to say that is necessarily anti-social, as we shall explain. But essentially his business activity or "enterprise" involves no addition to the wealth of the community, nor, to be quite clear about this, does it involve essentially any addition to the service given to others. Precisely as a merchant, he provides nothing and produces nothing and still makes a profit. How is this possible?

The exchange process that starts with the provision of goods or services by two people (as suppliers) and ends with the goods or services being used or used up by the same two people (as both producer and consumer but inversely related) has money acting as the medium of the complete exchange process. This is evidently the natural or fundamental process involved. Without that we in society do not eat and wear shoes or have any of the multitudinous goods and services we take for granted every day.

Let us symbolize this kind of exchange process as CMC, with C standing for any kind of goods or service and M for money. Aristotle and Aquinas called this natural exchange.8 This does not signify barter only, as is obvious, nor does it mean to refer to "natural" in any sense of being primitive or uncivilized. "Nature" for Aristotle and Aquinas signifies the intrinsic principle in something that orders it to its perfection. So for them the civilized man is the full realization of the nature of man. It is only after Rousseau that we get the modern sense of the natural state of man represented as socially undeveloped and hardly rational.

Thus this natural exchange process is found in the highest civilizations and is the very basis of all trade. It is human community and communication expressed at the fundamental level of exchange of material goods. It is not the only communication of goods in a society. Nor is it the highest level, for, more importantly, community signifies a communication of ideas and other spiritual goods. But, like the unconscious life of the individual human person, it is fundamental and society cannot live and function without it. Even the monk and the mystic have to eat, if they may do without shoes. It is natural for humans to depend upon the goods and services provided by others. Those who seem to be able to survive without such society are to be likened, in Aristotle's description, either to brute animals or gods.9

But this process of exchange does not progress very far before human ingenuity notices another possible mode of using the money involved. Normally, of course, the shoemaker sells his shoes in order to buy other things he needs. The process of natural exchange begins with a sale and ends with a purchase so that money is first received and then expended and we all end up with what we need or want. Suppose we reverse the process. Instead of selling some goods in order to buy others, we buy some goods in order to sell the same ones. We may symbolize this as MCM.10 Seems rather a roundabout way to go about things, and all we seem to do is end up at the beginning, if we are after some goods to use or consume.

There would be no point in this second process of exchanging if we did not end up with something we want. What could that be if we have bought something not to use it or consume it but only to sell it? The end of this process can only be money; we end up in the middle. But if we end up with the same amount or value of money what is the point? If the transaction is to make any sense at all there must be some increase of money gained. So what is wanted from this process of exchange is more money (or a monetary profit). From the viewpoint of the social exchange process in which the merchant has engaged, the activity ends with money, and is ordered simply to more money.

To do this, however, it is necessary that the merchant have money to start with. If he has none of his own he will be anxious to borrow it. The shoemaker and the farmer could make an exchange without money (by barter). This secondary mode of exchange is made feasible by the use of money. It supposes someone who has money to spare and is looking for something to do with it apart from expending it on goods or services he might need or want. The merchant is not so much a man of wealth, but a man of money, his own or borrowed for the purpose. Whilst the shoemaker puts his lathe to work, the merchant is looking to put his money to work.

Superficially, then, we might be tempted to think of him as no different from any other craftsman or businessman in the social order of production and exchange of goods. Why single him out? But we are not doing this arbitrarily. He has been singled out from time immemorial and by the most celebrated of thinkers on moral and political matters from ancient times, such as Aristotle.11

For the merchant is in a peculiar position in any exchange economy. He does not deal in use values, as every one else in the exchange system does. He deals in exchange values.12 These are designed to be essentially equal between things in exchange. Essentially, the same thing in the same market has the same price. But material goods are not pure essences so all sorts of accidental things can occur to affect not only the things utility (use value) but also its price (exchange value). Differences of time and place are obvious reasons for the very same thing to vary in value.

But even without these extrinsic factors there is a reason within the very nature of exchange value that allows a variation in an objective valuation of the same thing. At the same time and place you will often find someone willing to pay more than another for the same thing. The prices of things are assessed according to a practical measure. This does not determine the exchange value of some one thing according to any fixed or mathematical equality. Though the price struck between the parties has to be expressed in a fixed ratio the justice of the transaction may name a range rather than a rigid ratio.13

So an astute merchant will almost always be able to sell the same goods again at a higher price, without anyone necessarily feeling that it is overpriced. In itself the transaction does not involve as is clear any injustice. The merchant is simply taking advantage of something accidental that pertains to the exchange of goods. Measuring the depth of the sea we will find a difference at the top of the wave from the bottom. Ordinarily we are not concerned with this and take the mean between and measure this relative to the bottom of the sea. In a similar fashion in measuring the equivalences of things according to their exchange values we (meaning most of us) are not concerned with minor differences. Someone who has an eye for detail, however, may reckon up the difference between the top and bottom of the waves and bring them into the calculations. Similarly an astute exchanger can "buy cheap and sell dear" and make a handy profit in the process. This too he can do without being unjust to either the seller or the buyer he has dealt with (even though there is the temptation to manipulate the market or "manufacture" price differences if he gets in a position to do so)14.

As mentioned above there may be all sorts of accidental circumstances attaching to things in the social order of exchanges. The merchant does not mind which ones apply. He simply deals in (accidental) price differences whether these are between places or times or from any other circumstance.15 That is the reason why it is not necessarily an unjust transaction. So far as the pure secondary commercial process of buying in order to sell (MCM) is concerned this may not of itself do any social good but then neither does it of itself do any social harm.16 Insofar as it involves certain material differences accidental to the exchange as such, such as of time and place, it can involve the rendering of a service, such as transportation and storage of the goods concerned, but this is not the basis of the merchant's profit as a merchant, i.e. as first a buyer (MC) and then a seller selling on the same goods (CM).

But, as Aristotle and Aquinas point out most forcefully, it is an activity in which it is very hard to maintain one's mental and moral balance.17 For the immediate end of it is money itself, a purely rational means, that has no natural end or limit to control the desire for same. There is a real and present danger for the merchant to fall victim to avarice or philargyria. This is not to say that the activity cannot be used with restraint and subordinated to rational limits (which St. Thomas identifies in personal, family or community needs)18. But it takes a lot of self control. Though from a social point of view its effects may be neutral, this supposes that the individuals concerned exercise the appropriate kind of rational restraint and those that don't do not become so many as to affect the social economy as a whole.

For what it can do is to introduce into the order of exchanges and society generally a different spirit. Focusing as he does on the monetary gain he individually obtains from the transaction, the merchant or entrepreneur who operates in a similar way very easily is led to believe that that is the very purpose of engaging in all trade and business. The common interest that social exchange naturally serves becomes forgotten. In fact on closer examination it will be seen that this is what has happened in the modern economy.

The new economy is characterized by the dominance of this secondary sort of "commerce" and the motives that move it. So it has been generally assumed that Adam Smith was right to make "self-interest" the motive force of all socio-economic life.19 What is worse, this was regarded, at least by the early political economists, as the natural order of things economic.20 Though this sentiment no longer obtains the modus operandi of the merchant has become equated with economic "rationality" and a whole new "science" built upon it.21

Certain peculiar characteristics appear in an economy so affected. Artificially great differences of time and distance are created between sellers and buyers. It seems as if they belong to different nations To sell becomes the central problem. Middlemen are accordingly multiplied. Contrast the position of the old style shoemaker, who as an independent craftsman has hardly survived modern industrial "progress". In suburbs and small towns or villages where he operated he had his shop (with workroom and storeroom) and sold direct to his customers whose needs were obvious and predictable. Take also the independent dairy farmer, in the process of extinction. He was able to sell from his farm to the nearest townsfolk whose "demand" was clear and constant. The shoes could be tailor made and the milk could be consumed fresh without refrigeration.

What has happened in the new money motivated economy? Things seem to be turned upside down. In order to trade we have to buy first, for which many will need to borrow. In order to produce we have to buy (or hire) beforehand both capital and labour. There is a lag time between both purchase of goods and sale (in the new commerce) or between the "purchase" of capital and labour (in the new style industry) and their "sale" in the products. This creates a need for more money. Goods are accumulated with a view to an uncertain sale. A whole new "industry" needs to be created - advertising - to induce people to buy what we have produced or have on hand to sell. Money splits the process of sale and purchase, rather than unites it.

The commercial and industrial enterprises that operate according to the new commercial spirit (thankfully not all do so; the society could not support it) are divorced from their customers not only in time and space but also more radically.22 There is a loss of a sense of community and even of common humanity. The nexus of the natural trading community has been fractured. This trade, rather than uniting the seller and the buyer separates them; for it constitutes the seller as someone who is not also a buyer in the same exchange system. Like the traveling salesman he comes to town as a seller only, seeking the buyers' money and nothing else. His (the seller's) buying has not been done as a co-operative effort with his customer whose goods he will in turn buy. The merchant has come to market to sell only. He then moves on, or back into a secure, and secluded, life among those like himself.

This spirit, if allowed to dominate spoils community relations, alienates rather than associates the diverse sections of the community (most relevantly the rich and the poor). It engenders in those who profit the spirit of the miser enjoying his wealth in private; it engenders in those who are sold the goods an uneasy sense of being pawns in a game of moneymaking. The whole process promotes in all an individualistic outlook.

The extraordinary thing is that we have the "advantages" of modern industry and commerce so drummed into us that we forget what we have lost. We are told that now we benefit from "economies of scale", that there are more products to choose from, that the modern economy has resulted in the miracles of new technology. These technological advances are not to be denied but they are mainly mechanical and material, in no way compensating for the human and social cost. Take the means of communication, it does not seem too paradoxical to say that the media is the message, so empty is the content.

As for the advantages of economies of scale, let G.K. Chesterton's opinion be listened to, for he was living at the end of the nineteenth and the beginning of the twentieth centuries, in the very heyday and triumph of this spirit. "The big commercial concerns of to-day are quite exceptionally incompetent. They will be even more incompetent when they are omnipotent. Indeed, that is, and always has been, the whole point of a monopoly; the old and sound argument against a monopoly. It is only because it is incompetent that it has to be omnipotent. When one large shop occupies the whole of one side of a street (or sometimes both sides), it does so in order that men may be unable to get what they want; and may be forced to buy what they don't want. That the rapidly approaching kingdom of the Capitalists will ruin art and letters, I have already said. I say here that in the only sense that can be called human, it will ruin trade, too." (Utopia of Usurers and other essays)

That is to say, improvement by economies of scale, except where mechanical uniformity rather than human diversity is concerned, is essentially a delusion. Talking of the monopolist millionaire of his day23, Chesterton says: "Now, the chief of the fairy tales by which he gains this glory and glamour is a certain hazy association he has managed to create between the idea of bigness and the idea of practicality." (op. cit.) But there is no real connection here - the opposite is rather true regarding our real and important needs.

The same holds for the argument for greater choice. There is a multiplication of goods, principally of uniform make, that suits a mechanical mode of production, not the precise needs of the users; more shoes can be made but it is hard to find one that fits (so we take the nearest fit). A more inefficient and wasteful system of production and exchange would be hard to imagine; not to speak of the throw away economy. It is only be reverting in some fashion to the economy of the "small" craftsman that any useful quality is returned to goods.24 The necessity to expend huge sums on advertising is an admission of failure to be able to provide or produce what people want. A large part of the commercial and industrial effort (and budget) has to be expended on manufacturing not goods but wants.

How the modern economy's need for advertising has affected art is thus described by Chesterton: "I should say the first effect of the triumph of the capitalist (if we allow him to triumph) will be that that line of demarcation [between art and advertising] will entirely disappear. I do not necessarily mean that there will be no good art; much of it might be, much of it already is, very good art. You may put it if you please in the form that there has been a vast improvement in advertisements … But the improvement of advertisements is the degradation of artists. It is their degradation for this clear and vital reason: that the artist will work, not only to please the rich, but only to increase their riches which is a considerable step lower …and … the artist-advertiser will often be assisting enterprises over which he will have no moral control, and of which he would feel no moral approval. He will be working to spread quack medicines, queer investments … and to this base ingenuity he will have to bend the proudest and purest of the virtues of the intellect, the power to attract his brethren, and the noble duty of praise." (op. cit.)

Indeed, this is not the only human virtue that may be bent to "this base ingenuity". As Aristotle noted long ago of the spirit behind this "commercial" mode of doing business, any natural virtue, moral as well as intellectual, e.g. courage,25 may be similarly bent. "Nevertheless some men turn every quality or art into a means of getting wealth [money]" (Polit. I, 9). What distinguishes the modern from the ancient economy in this regard is the extent of the domination of the social exchange system by this moneymaking spirit and the success of the propaganda of those who benefit from it.

The infinite desire for money, which is by that very fact disordered, and a personal and social evil, is subtly shifted by the new Economic Science to being the supposed motor of economic prosperity and progress. The fundamental principle stated at the start of practically every modern textbook of Economics is that our wants are unlimited.26 Hence, the fundamental economic fact is that of the "scarcity" of goods. Here the notion of wealth is confused with that of money. The desire for money for its own sake cannot be satisfied, for it knows no natural limit. The desires for natural wealth, i.e. the useful goods to which exchange is naturally ordered, are readily satisfied in a civilized society that is rightly ordered.27 Following on this confusion the two opposed modes of exchange are not able to be distinguished.

Though, of course, the distortion of the exchange process is not the only evil in human and social affairs, nor the only evil that in our times is called good, it is perhaps the one with regard to which we as a society have in modern times been most deceived. Even today after the devastating exploitation wrought by it in its heyday, and the even worse oppression arising out of the violent social reactions blindly lashed out against it, its propagandists are hard at work preaching its virtues and treating anyone who would oppose it as obscurantist and unscientific.

To what then should we attribute the evident economic benefits we do enjoy in spite of the heavy incubus of this species of evil? We underestimate the power of natural exchange and the great good that it naturally generates. With the growth of society so also grows, to an amazing degree, the benefits of socialization and solidarity. The progress and development of production and trade has occurred because of the natural exchange process; not because of the unnatural process, but in spite of it.

Indeed, there may appear to be a real connection between the new commerce and industry and certain advances in science and technology. Thus it would seem to be incontrovertible that the technological advances in transportation and communication grew out of the new economic spirit. The demands of the new commerce and industry led to, or at least contributed to, many new discoveries and inventions. But on closer examination, and from a properly rational consideration, it will be seen that these "demands" were only the occasion of, not the cause of, these advances in human science and technology.28

The "revolution" in commerce and industry that has taken place in modern times names only a socially significant turn to the alternative way of using money in the exchange process. This is not of itself unnatural or immoral, as explained above, though it inevitably degenerates into such where men lack a clear commercial moral code. Unfortunately, this has turned out to be the case and it is reflected in the "liberation" of economic thinking from morality with the development of a pure or value-free "economic science". This new intellectual position on the nature of the exchange economy has therefore tended to free rather than restrain men in their pursuit of profit for its own sake. We have to contend, then, not only with a moral problem but also with an intellectual one, which tends to obscure the seriousness of the moral.

We are, of course, not passing judgment on individual merchants, or on particular commercial modes of operation, even in their secondary sense. There is a place for them in a naturally based economy, though they deal in accidental differences. Still less are we passing judgment on the (other) middlemen and their roles in the modern economy, whether demanded according to the ordinary (accidental) requirements of production and exchange or because of the artificial "distance" created between commercialized providers (merchant sellers) and consumers (final buyers) in modern society.

The fact that middlemen tend to be multiplied in the modern economy does not mean that they do not provide an "essential" (indispensable) service. Even where the need for them is from a "diseased" state of the social economy, they may be as necessary and valuable as a coronary by-pass.29

We do want, however, to distinguish this kind of middleman from the merchant in relation to the whole process of the exchange of goods. That is so we can isolate the role of the merchant and relate it to that of money in the exchange process. His is a legitimate role, provided he controls it by reference to the needs of the community, or of himself and his family within it. Everyone else, including middlemen, is naturally controlled by those to whom they provide their goods or services. In the natural order of exchanges the benefit or profit is mutual and consists in goods or services that satisfy; hence it is something eminently social. In the other exchange process the profit is solitary and consists in more money that as such cannot satisfy; it is essentially individualistic. In the exchange process, it is the merchants, and their industrial entrepreneurial counterparts, who alone employ the secondary mode of exchange (MCM). Everyone else, including all other middlemen, can be represented as employing the primary and natural mode (CMC).

  1. Cf. Aristotle, V Ethics 1133 b 10-30; Aquinas In V Ethics, lectio 9. The rational necessity for money arises when transactions in goods or services are not able to be completed in the present - Sic ergo pro necessitate futurae commutationis numisma, id est denarius, est nobis quasi fideiussor quod si in presenti homo nullo indigent sed indigeat in futuro, aderit sibi afferenti denarium illud quo indigebit (para. 986 in fine). Trade between places widely separated also gives rise to a rational need for money as a medium of exchange. Cf. I Politics ,c. 9 1257 a 35-41 Money's natural role or essential purpose is to facilitate exchange of the useful goods we have need of. (cf. I-II, 2, 1 c)
  2. Essentially money is conventional, i.e. its utility as money arises from will, the agreement of those in the exchange system. But the exchange value conventionally imposed on it (whatever form the money may take) is not arbitrary, but is tied to the values of the goods being exchanged. Aquinas, following Aristotle, notes that the value of money is variable as are the goods it measures but being a measure its value ought to be so instituted as to hold its value more so than anything else - taliter debet esse institutus ut magis permaneat in eodem valore, quam aliae res .(para. 987) This connection with goods and their values clearly is the case where certain goods are conventionally used as money (e.g. gold and silver). But even where money is pure credit (i.e. based in a mere promise to pay) it takes its value through reference to the values of goods in the exchange system. Even in a relatively stable economy exchange values or prices will fluctuate from accidental factors. Money as well will be affected by such accidental factors. But fundamentally the money in my possession truly reflects over time and in different places the value of goods that I have to offer or promise to offer to others in exchange. The big mistake in monetary theory is to confuse the distinction between money (wealth only in this relative sense) and goods or wealth in the positive sense. This is a mistake to which the merchant mentality is especially prone. We would do well to note St. Thomas' clear distinction between money (as artificial wealth) and natural wealth. (I-II, 2, 1 c)
  3. Though thus to some degree relative to the state of the society in which one lives the distinction is not simply subjective. One has a moral obligation to make a practical prudential judgment based upon the application of this distinction to one's own circumstances. Cf. RN, 35 "But when the demands of necessity and propriety have been met, it is a duty to give to the poor out of that which remains. "Give that which remains as alms." [13] These are duties not of justice, except in cases of extreme need, but of Christian charity, which obviously cannot be enforced by legal action. But the laws and judgments of men yield precedence to the law and judgment of Christ the Lord, Who in many ways urges the practice of alms- giving."
  4. "Retail trade", though commonly used, is thus not a strictly accurate translation of Aristotle's notion of social exchange (mediated by money) whether of the first kind or the second. See discussion below.
  5. This is not to say that it is always easy to distinguish the merchant from the other middlemen for he generally conducts his business of buying in order to sell by making use of their services. The transport of goods wanted from another place, for instance, might be done by the ultimate buyer (consumer) who would have to count the cost of this in the cost of the goods to him. Or he may employ someone to arrange the transport and pay for his services in this regard. Similarly the merchant, in the course of carrying out his business, might do the carrying himself or arrange for another to do it. In all these cases the physical transport of the goods, and its cost, are something quite distinct from the exchange that is taking place. The merchant's role as such, as is made clear below, relates solely to the act of exchange.
  6. Though such a profit does not strictly speaking relate to anything that he has of himself provided or produced (the profit arises purely from taking advantage of a price differential attaching to the same things or products), it is, as explained below, a legitimate source of income if it is made to serve the merchant's genuine personal or family needs or those of his community. In such a case the merchant is entitled to treat it as if it were a payment for shrewdly making such exchanges. In this case the merchant "lucrum expetit non quasi finem, sed quasi stipendium laboris". Cf. II-II, 77, 4 c in finem:
  7. Though we are talking about the merchant as someone engaged in a particular occupation what we say applies equally to any act of exchange by individuals that is a case of buying in order to sell again at a profit [symbolized below as MCM].
  8. The distinction we make here is to be found in II-II, 77, 4c. "As the Philosopher says in 1 Politics twofold is the exchange of things. One indeed quasi natural and necessary, through which there is had exchange of one thing for another, or of things and money, on account of the necessity of life." [translations here and below mine] Note inclusion of monetary transactions in this natural mode of exchange. It is called quasi natural because "natural" is used in this context not in a physical but in a moral sense.
  9. Cf. Aristotle I Politics, c. 2, 1253 a 1-4.
  10. This is what Aristotle calls "chrematistic" exchange and Aquinas in the Summa Theologiae "negotiatio". This is the name St. Thomas gives to the second mode or species of exchange. "But the other species of exchange is either of monies for monies, or of whatsoever things for money, not for the sake of [having] things necessary for life, but for the sake of making a profit." (II-II, 77, 4c) In his commentary on Aristotle's Politics (In I Polit. Lectio 8 Para. 129) St. Thomas uses the terms "necessaria pecunitiva" and "non necessaria pecunitiva" to make the same distinction as it applies to transactions involving money (pecunia). We should take careful note of the difference between the two considered purely from the point of view of the form of the exchanges. It should be noted that St. Thomas is doing two things here. He is making an important philosophical distinction between two species of exchange, which considered in themselves are opposed as quasi-natural and quasi unnatural. Then he is giving the reason why the first is to be commended (prima commutatio laudabilis est) and the second is to be condemned (negotiatio, secundum se considerata, quandam turpitudinem habet). The reason is that the first is naturally (i.e. from the very form of it) ordered to, and thus limited by, the needs of living. The second, on the other hand, is not so naturally ordered, but from itself serves only the desire for gain or profit which knows no limit but tends to infinity. (quantum est de se, deservit cupiditati lucri, quae terminum nescit sed in infinitum tendit). Modern moralists (including Thomists) in discussing this question, fail to take sufficient account (indeed generally take no notice) of the fact that there are two diametrically opposed kinds of exchange (the second per se knowing no limit, though a limit can be extrinsically (voluntarily) imposed, thus curing its quandam turpitudinem). They discuss commercial morality by treating all kinds of exchange as essentially the same and then try to distinguish them morally purely by reference to the profit motive of the individual exchangers. From a philosophical point of view this completely ignores the formal distinctions (in terms of what is naturally good or not naturally good) that must be made before one brings voluntarily imposed limitations into account (important as they are). In regard to the first kind, though it is naturally good, one may voluntarily use it badly. Conversely, though the second kind considered in itself is not good, one can make it good - by voluntarily subordinating it to our natural needs. The formal difference is not fully brought out by St. Thomas in the Summa, where CMC is paired with barter (CC) and MCM with pure money-changing (MM), but the distinction clearly relates to the fact that, in the first natural form of exchange, money occupies its natural position as a medium of exchange only (cf. I-II, 2, 1 c), but, in the second "unnatural" form, money (the love of which as such knows no limit) becomes a sort of end of the whole exchange process. ("dictum est de non necessaria pecunitiva, quae scilicet acquirit pecuniam in infinitum, sicut finem ." (para 129 cited above). What is most significant in regard to the oversight of this essential distinction in regard to the very "mechanism" of the exchanges themselves is that it prevents one having a clear concept of what Capitalism is (for a fuller discussion see my article "Capitalism - its definition")
  11. Cf. I Politics, c. 10 1258a 38-42
  12. Op. cit. c. 9 1257 b "retail trade [meaning MCM or MM] is the art of producing wealth, not in every way, but by exchange. And it is thought to be concerned with coin [money]; for coin is the unit of exchange and the measure or limit of it. And there is no bound to the riches which spring from this art of wealth getting" Cf. also St. Thomas' commentary on this passage In I Polit.lectio 7 para 121: "but that exchange [pecunitiva] which is 'retail trade' [campsoria] multiplies monies, not in all ways, but only through the exchanges of monies. Hence it is totally about money, because money is the principle and end of such an exchange, when money is given for money." Though it may be thought that St. Thomas' discussion here is with reference to pure money-changing (MM) the analysis can be extended also to buying goods with money in order to sell them for more money (MCM), as St. Thomas in fact does in the Summa Theologiae II-II, 77 c. See also ad 4. "non quicumque carius vendit aliquid quam emerit, negotiatur: sed solum qui ad hoc emit ut carius vendit." (Not everyone who sells something dearer than he bought is engaging in "retail trade" [MCM], but only one who buys in order that he may sell dearer.")
  13. Cf. St. Thomas, II-II, 77, 1,ad 1 "iustum pretium rerum quandoque non est punctualiter determinatum, sed magis in quadam aestimatione consistit, ita quod modica additio vel minutio non videtur tollere aequalitatem iustitiae". ("the just price sometimes is not determined to a point, but rather consists in a certain estimation, so that a small increase or decrease is not seen as taking away the equality of justice".)
  14. See notes 22 & 23.
  15. Prices of the same things may be different in different places for reasons that apply to the places concerned. The merchant may buy them where they are cheap and sell them where they are dear. He would expect to make a handsome profit even after the costs of transport are paid. The transporting of the goods to the place where they are needed is to be considered a true service and so that cost should be added to the price paid by the merchant to calculate his true profit as a merchant. This profit differential then becomes a difference purely from the accident of place or distance (involving no idea of service). The same analysis could be done in respect of a difference of time only after the costs of temporary storage (refrigeration etc) have been paid by the merchant. The merchant has not been the one to produce or provide the goods. He has simply bought and sold them. Some might think that at least the merchant has done a service in finding a buyer who needs the goods. But his activity was not needed to do this. Buyers' needs for particular goods are not peculiar to one, as if the seller has to seek out the right buyer. The merchant posed as a buyer to the original seller (who was disposed to sell it to anyone at the same price). The merchant has simply found another buyer who because of the inherent elasticity of the just price is prepared to pay more. It is quite accidental therefore that the goods fulfill the need of this particular buyer and not of another.
  16. Cf. II-II, 77, 4 c "Lucrum tamen, quod est negotiationis finis, etsi in sui ratione non importet aliquid honestum vel necessarium nihil tamen importet in sui ratione vitiosum vel virtuti contrarium." ("profit nonetheless, which is the end of 'retail trade' [dealing], though in its objective concept it does not denote anything worthwhile or necessary, yet neither does it denote in its objective concept anything vicious or contrary to virtue." (this translation is deliberately somewhat stilted, to retain the literal sense as far as possible). Note carefully that the notion of profit as used here applies only in reference to the second kind of exchange [MCM]. The farmer's and the shoemaker's monetary profit from selling their goods [CM], insofar as it is the means necessary for them to buy [MC] what they need, is something intrinsically good and necessary. The merchants buy in order to sell; all others sell in order to buy.
  17. Cf. Aristotle I Politics, c. 9; for which reason St. Thomas, quoting Scripture, would exclude the second kind of exchange from clerics, inter alia, "propter frequentia negotiatorum vitia, quia 'difficiliter exuitur negotiator a peccatis labiorum', ut dicitur Eccli. 26, [28]". To highlight the essential difference between these two kinds of exchange, St. Thomas goes on to say that there is nothing against clerics engaging in the first kind of exchange. "Licet tamen clericis uti prima commutationis specie…" (II-II, 77, 4, ad 3).
  18. II-II 77, 4 c ad finem
  19. This fundamental assumption can be verified in any book on Economics from Adam Smith on.
  20. This was the fundamental assumption of the Classical Political Economy from Ricardo to J.S. Mill, many even seriously suggesting that the psychological "law" of self-interest or the "motive of profit" occupied a comparable position in Economic Science to Newton's universal law of gravitation in Physics.
  21. The fundamental assumption of modern Economics (if in recent times some economists are at last coming to question it) is that it is pure economic rationality for the individual or firm to "maximize" (monetary) profit without reference to any notion of a limit. For modern Economics it is this infinity of our desire for wealth that creates "the economic problem", namely that of having to choose between the limited resources available to satisfy unlimited wants. Any standard modern textbook on Economics can be consulted to verify this most fundamental of economic assumptions. So entrenched is it that practically all introductory textbooks on Economics begin with the discussion of desire (as unlimited) and scarcity. The standard introductory course on Economics (Econ. 101) in universities and tertiary educational institutions, notably in the USA, begins by asserting that Economics is the study of choices, of the ways we have to deal with scarcity. For the sake of verification of this one can consult the website of the Canadian University of Manitoba, but a search of Econ.101 as offered in any higher educational institution selected at random would generally produce the same result. Yet such an assumption that our desire for material wealth is unlimited is palpably false and only sustainable by a confusion of wealth with money, and a failure to distinguish the two opposed kinds of exchange.
  22. This becomes exacerbated by the tendency to monopoly. The merchant and the modern entrepreneur are ever on the lookout for ways and means of increasing the differential between the buying price and the selling price of the goods they deal with. The "natural" way for them to achieve this is by using the advantage that (the increase in) their money power gives them in (the increase in) their buying power, relatively to others in the market for the goods. Being a larger buyer than most, means that they can "bargain" with other sellers or producers on more favourable terms and achieve a price lower than otherwise. On the other hand, monopoly in any degree gives them the power to sell at a price higher than a truly competitive one. The only restraint upon this process of maximization of the price differential (which determines the level of monetary profit) is a quasi-physical one, in that the "traffic" in the goods, i.e. the initial suppliers or sellers on the one hand, and the ultimate buyers on the other, can only support a certain minimum and maximum price respectively. Thus the trick is to obtain the "optimum" price overall considering the amount of goods that can be sold at a certain price of the individual units. More sophisticated methods of maximizing profit have been devised in more recent times. One very effective way of doing this is by cutting the cost of human "resources" that one is required to "buy" in the business of making a profit. One needs of course to be quite ruthless in this exercise for it is after all a matter of economic efficiency (read "maximization of profit").
  23. We have had occasion to refer to the association of this secondary mode of exchange with monopoly. It is connected with the fact that there is no natural limit to the desire for monetary profit. So "growth" for its own sake is very easily made a basic idea of business for the merchant and the modern entrepreneur. "Greed is good" may not be something that they consciously subscribe to, for that is too crass. But many would subscribe to the belief that growth as such (i.e. without limit) is good. Monopoly, most literally taken, which means "one seller", where one has most control over the price of one kind of goods (so one is in the happy position of being able to charge "all that the traffic will bear"), perfectly realizes the dominance of this secondary mode of exchange over the whole economy. Such total dominance in respect of too many kinds of goods, however, cannot be achieved without bringing about the end of exchange altogether
  24. Cf. CA, 36 " In earlier stages of development, man always lived under the weight of necessity. His needs were few and were determined, to a degree, by the objective structures of his physical make-up. Economic activity was directed towards satisfying these needs. It is clear that today the problem is not only one of supplying people with a sufficient quantity of goods, but also of responding to a demand for quality: the quality of the goods to be produced and consumed, the quality of the services to be enjoyed, the quality of the environment and of life in general."
  25. With regard to moral virtues we are talking here not about them strictly taken, which virtues cannot be badly used, but about the natural disposition that underlies t
  26. Cf. note 21
  27. Cf. I-II, 2, 1 ad 3 "appetitus naturalium divitiarum non est infinitus; quia secundum certam mensuram naturae sufficiunt. Sed appetitus divitiarum artificialium est infinitus:" (The desire for natural wealth is not infinite, because it [such wealth] according to a certain measure suffices for [the needs of] nature. But the desire for artificial wealth [money] is infinite")
  28. The rapid rise of the United States of America to a position of economic superiority over every other nation on earth may be attributed to the natural productiveness of a society endowed with a rapidly growing population freed from the restrictions of old and defective human institutions, and from the restraints of not so old social divisions based upon privileged wealth and position. Unfortunately, however, it was not too long before America herself fell victim to the same malaise that all human flesh is prone to in this regard. Indeed, it adopted not only the practice (MCM) but also the theory with alacrity, even crediting its good fortune to this new "commercial" spirit, and becoming its champion. Thus, it is still said that America is the land of opportunity where anyone might become a millionaire, as if one could do that by dint of hard work. But this rather applies to the fact that in America one has the greatest license to engage in a moneymaking venture (with money borrowed for the purpose) where it is possible, if one is astute (and perhaps unscrupulous) enough, to make a lot of money even today. It is also the case too, sadly, that the social, including the economic, disorders that inevitably flow from such commercial license are there most manifest.
  29. The producers and original suppliers to the great merchant companies of today may be heard complaining that it is the middlemen who get the lion's share of the price paid by consumers for their goods or products. But this comes from a confusion regarding the notion of middlemen. Those that provide a real service are as much at the mercy of the monopolistic merchant corporations as are the original providers and ultimate consumers. The "independent" or small business long distance hauliers hardly get it easy.

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

This article posted Dec 2005. It was published in Universitas Number 12 (Dec 2005)
Permission is granted to copy or quote from this article, provided that full credit is given to the author and to the
Centre for Thomistic Studies, Sydney, Australia.
We would be grateful to receive a copy of any republication.