This Dark Age

A manual for life in the modern world.

By Daniel Schwindt

4.6. Economic Life

General remarks

Having laid the foundations for our study by examining the role of the Church, the nature of man, the rule of his conduct, and the principles of Catholic Social Teaching in general, we can now concern ourselves with the concrete application of all of these ideas within the economic sphere.

Four phases of economic activity

The first thing to be said about the Catholic view of economic activity is that it is not nearly as simple as those of contemporary ideological systems. Reality is not only complex, but also subtle. The Church, for example, stresses justice not only in a superficial and immediate sense, but in every phase of economic activity:

“The Church’s social doctrine has always maintained that justice must be applied to every phase of economic activity, because this is always concerned with man and his needs. Locating resources, financing, production, consumption and all the other phases in the economic cycle inevitably have moral implications. Thus every economic decision has a moral consequence. The social sciences and the direction taken by the contemporary economy point to the same conclusion. Perhaps at one time it was conceivable that first the creation of wealth could be entrusted to the economy, and then the task of distributing it could be assigned to politics. Today that would be more difficult, given that economic activity is no longer circumscribed within territorial limits, while the authority of governments continues to be principally local. Hence the canons of justice must be respected from the outset, as the economic process unfolds, and not just afterwards or incidentally.”[1]

This notion of “phases” is somewhat foreign to the modern economic outlook, although it was prevalent in the traditional ideas about political economy. According to the tradition of the Church from St. Augustine to St. Thomas, there are four distinct phases which must be taken into account. These are production, exchange, distribution, and consumption.

One of the unique obsessions of modernity is its mania for oversimplification.[2] Everything must be reduced to its most basic form. As could be easily guessed, subtlety does not fare well as this tendency progresses. With Adam Smith and the birth of modern economic theory the older and more comprehensive theory was pared down to production and exchange alone (and even these were retained only in an impoverished form). Eventually a form of the third element, distribution, was re-added by the “neoclassical” economists, but no one has been willing to rediscover the fourth and most important piece—which is the actual consumption of the goods—and so these approaches are deficient.

[1] CV, 37.

[2] LS, 92, 107.

The three false commodities—land, labor, money

Modernity’s oversimplification mania always ends by ignoring vital distinctions. Sweeping generalizations are made, and things themselves are denatured so that they can be grouped into simple categories and more easily dealt with. These are the categories which contemporary economists use to speak of their subject. For example, we can mention the attempt to “commodify” various economic elements which are, properly speaking, not commodities at all. This is the case with land, labor, and money, all of which are examples of what the distributist economist John Médaille has termed the “fictitious commodities.”[1]

Commodities are “reproducible, elastic objects and services that are made mainly to be exchanged in the marketplace.”[2] Typically we are able to discern whether or not a thing qualifies as a commodity by observing its behavior on the traditional supply and demand chart. If we can adjust the price and quantity in such a way as to lead to the intersection of the supply and demand curves, we will identify the equilibrium point for this particular market and this will suggest to us that the good or service in question is, or can at least be treated with some accuracy, as a commodity. The three “fictitious commodities” do not respond in a normal way when placed on the supply and demand chart, suggesting that they are not commodities, and that a stubborn insistence on treating them as such will lead inevitably to incoherence in our theory and grave miscalculations in practice.

The failure of this test is a theoretical justification for refusing to consider certain things, such as human labor, as commodities. Yet we would be incorrect to assume that this is the sole reason for rejecting such categorizations. Catholic doctrine refuses to commodify human labor due to the dehumanizing or “objectifying” results of such a mentality, and would continue to reject this attitude on the basis of human dignity even if it were theoretically workable. Such objections will therefore be mentioned in their turn, but it is important for us to acknowledge that the neoclassical view fails in both respects: both morally and theoretically. We will now address each of the three fictitious commodities.

[1] John Médaille, Toward a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More (Wilmington, 2011), p. 70.

[2] Ibid., p. 72.

Land

Land cannot be called a commodity for the simple reason that it is not produced by human labor. Land is that which is labored upon in order to produce commodities. It is presupposed by, and is therefore prior to, all economic activities. It can in a limited sense be improved upon or impoverished by human labor, but the notions of production and reproduction break down when applied to it.[1]

If it is to be classified in conventional terms, we could most accurately call it a form of global “capital”; and in fact it is the most primordial form of capital. And although it is possible to price, buy, and sell a piece of land, its unique nature prevents it from behaving as a commodity when subjected to market forces. This is why it has been treated with special consideration throughout history. For example, it is said in the Old Testament: “The land must not be sold permanently, because the land is mine and you reside in my land as foreigners and strangers.”[2] Moreover, in the Middle Ages it was the king and the king only, who could be said to “own” any land, and everyone else—dukes, knights, peasants, villains—were only tenants in fealty to the king, who himself was only playing the role (acknowledged as such) of God, who was the true owner.

The tradition of the Jubilee is evidence of the unique nature of land ownership. Moreover, we should also mention another traditional form of land ownership known as the “commons.” This form of community ownership, complemented by an emphasis on the equitable distribution of land amongst individual owners, is constantly re-affirmed in CST.[3] In fact the conscientious re-distribution of land is openly encouraged, especially in countries where the concentration of land results in slavery (latifundium).[4]

[1] Recall here our previous observations regarding ownership of one’s body that we do not “own” ourselves as is commonly supposed. One cannot own as chattel what one cannot create.

[2] Lev 25:23.

[3] CSDC, 180.

[4] PP, 23; CSDC, 300.

Labor

Much could be, and has been, said about the nature of human work and the dignity which is its due. Nonetheless, in the modern period from the beginning of the industrial age the Christian truth about work has been opposed by various trends of materialistic and economistic thought. The most significant of these has been the desire to turn labor into a commodity, on the assumption that its price ought to be determinable based solely on market factors:

“For certain supporters of such ideas, work was understood and treated as a sort of ‘merchandise’ that the worker—especially the industrial worker—sells to the employer, who at the same time is the possessor of the capital, that is to say, of all the working tools and means that make production possible…the danger of treating work as a special kind of ‘merchandise’, or as an impersonal ‘force’ needed for production (the expression ‘workforce’ is in fact in common use) always exists, especially when the whole way of looking at the question of economics is marked by the premises of materialistic economism.”[1]

The quote above was taken from Laborem Exercens, promulgated by St. John Paull II in 1981. Ten years later, in Centesimus Annus, he applauded those who had successfully integrated these principles into their political outlook, attempting to “deliver work from the mere condition of ‘a commodity’ ”:

“…we see in some countries and under certain aspects a positive effort to rebuild a democratic society inspired by social justice, so as to deprive Communism of the revolutionary potential represented by masses of people subjected to exploitation and oppression. In general, such attempts endeavour to preserve free market mechanisms, ensuring, by means of a stable currency and the harmony of social relations, the conditions for steady and healthy economic growth in which people through their own work can build a better future for themselves and their families. At the same time, these attempts try to avoid making market mechanisms the only point of reference for social life, and they tend to subject them to public control which upholds the principle of the common destination of material goods. In this context, an abundance of work opportunities, a solid system of social security and professional training, the freedom to join trade unions and the effective action of unions, the assistance provided in cases of unemployment, the opportunities for democratic participation in the life of society—all these are meant to deliver work from the mere condition of ‘a commodity’, and to guarantee its dignity.”[2]

The subject of labor will remain a constant theme throughout the remainder of our study.

[1] LE, 7.

[2] CA, 19.

Money

“Money must serve, not rule!”[1] But money cannot be kept in its place, and indeed money will always rule, if its nature and purpose is misunderstood or if it becomes a tool for the exclusive use and manipulation of a specific class.

In our experience a great deal of the disagreement regarding monetary policy stems from misconceptions, confusions, and a general lack of knowledge concerning the nature of money itself. When faced with the question, “What is money?” it seems that most of us have dealt with it, as a concept, for so long that we take its nature as something commonsense; but if we stop to consider it in any detail, we realize that we have no idea how our money system actually functions. Thus, at the risk of digressing too far from our subject, we will attempt a brief description of money and its behavior under the present system.

i. The nature and purpose of money. Money is not wealth, but rather it represents wealth. It is a unit of account used in trade which represents a claim on the circulating wealth in the economy. All money is therefore fiat currency, which means that it is created “out of nothing” and established by social agreement.

What establishes a currency as “official” is the fact that it is declared legal tender and accepted by the government for the payment of taxes. This ensures that money will always retain at least some value. This also hints at the method of regulation of the money supply: when the government needs the money supply to shrink, it can tax the money out of existence—when the money supply needs to grow, the government can simply “spend” new money into the economy. This creates a “dynamic” and adjustable money supply.

A dynamic money supply is an essential component of a stable economy for the simple reason that economies are subject to constant fluctuations. A simplistic example may suffice:

Imagine that in some village the only product on the market is wheat, and that the harvest one year is 1,000 bushels. The community adopts a paper currency and prints $1,000 dollars. In this situation, $1.00 amounts to a claim on 1 bushel of wheat. This is the value of that dollar. But the next year a farmer develops a new method of crop rotation or fertilization and the village produces 2,000 bushels of wheat. This means that the economy doubled in size. In this situation, if the money supply remains at $1,000, the value of the currency will double, leading to unfortunate results in terms of savings and outstanding loans. That’s why, if the village economists are paying attention, they will simply spend another $1,000 into the economy, perhaps on infrastructure or education. The money supply will then grow in proportion with economy. By ensuring that the money supply mirrors the market, the market will remain stable. If, on the other hand, the village economists had adopted gold or some other commodity-money, they would suffer chaos since the quantity of gold is not adjustable but is tied directly to supply. Under a “gold standard” the value of the currency would not be able to adjust itself in accordance with the market, and values would be thrown askew. In short, the economy would become subject to the vicissitudes of inflation and deflation.

This is why, even if it sounds counter-intuitive, the quantity of money must be capable of shrinking or expanding, because the economy itself is always shrinking or expanding—more so as markets become larger and more complex. This is why attempts to adopt static (or mostly static) commodities as official currency—gold, for instance—are doomed to failure. These commodities can be monopolized or scarce. The supply then falls out of sync with the market as a whole, at which point the value of the money rises or falls without any necessary connection to the needs of the market. Money’s only purpose is to facilitate trade, and under these conditions it will instead disrupt it. The market itself will become subject to the supply of gold, or whatever commodity happens to be in use as currency.

ii. Money as a commodity. As we said above, money is not meant to be traded: it is meant to facilitate trade. This means it is not something manufactured for a market, even though it has no meaning apart from the market. That there is such a thing as a “money market” is itself a sign of dysfunction. When money comes to be treated as a commodity—when we come to believe we can “put our money to work” for us—we are left with a situation where those with an accumulation of money also have a virtual accumulation of goods which they are encouraged to “sell” at a price in order to make a profit. Individual’s begin to “rent out” their money, just as you’d rent out a car and charging for its use. In other words, those who have money can loan it out and collect interest.

This is not the same as investment—for in investment it is assumed that one’s earnings will be proportional to the profits of the endeavor. If the endeavor turns out to be unprofitable then the investor gets no income. But when interest is collected on money without regard to the profits earned from its actual use, this is called usury, and has been condemned by everyone from Moses to Christ to the medieval Church, even if it has become the basis of the entire modern economy. The most significant problem with a system in which usury is normalized is that it automatically stacks the deck against the poor. If money makes money, then the more money you have, the more you will be in a position to make. Those with more will make more while those with less will make less, and this will create a perpetual disadvantage in the market toward those who are least in a position to bear that disadvantage. Likewise it will confer perpetual benefit on those which have least need of the advantage.

iii. The fractional reserve system. It is possible to go one step further, not only tolerating usury but adopting it as a basis for the money system itself. This is precisely what has occurred in the contemporary economy in the form of the fractional reserve system. Henry Ford found this system so absurd that he famously remarked that, were the American people to understand it, there would be a revolution before breakfast.

The method of this system is implied in the name: “fractional reserve banking.” Within this system a bank is only required to have on deposit a small fraction of what they loan, say 10%. For example, if you were to deposit $10,000 in the bank, the bank would be required to keep $1,000 “on reserve.” The bank could then create loans for the remaining $9,000. However, none of the original deposit is actually loaned out. This is why, when you go back to the bank, they will never reply: “Sorry, your money is on loan.” On the contrary, they simply “create” the new loan amount as a debit in the borrowers account. The $9,000 of created loan money now counts as a new deposit on the banks books, and so the bank now has $19,000 “on deposit,” even though the original deposit was only $10,000. In addition, this means that $900 of the imaginary money will be marked for the 10% reserve, and then the rest of the “deposit” can be used to create another loan for $8,100. Again, this “new money” is not subtracted from the deposits, but is instead created by a flick of the pen as a new debit in the bank’s books. Again and again, 10% of the new deposit will be marked for reserve and the rest used to create loans, and so on, until the original deposit of $10,000 is transformed by fractional reserve magic into $90,000. Almost all of this consists of purely imaginary loans on the bank’s books. And on all of this debt, created out of thin air, the bank collects interest.

This process, although we have simplified it somewhat for our purposes here, is how money is created in the modern economy. This means that the videos you watched in school that showed actual paper dollars rolling off of the presses in “the mint” actually do not at all represent the real process of money creation. Paper money only makes up about 3% of the money supply. The other 97% is created through fractional reserve banking, for the benefit of the banks, and on which these banks collect interest.

iv. Money as debt. The observant reader will have already realized that under such a system almost all circulating money is actually debt. The dollars you have in your bank account actually represent the balance of a loan that you or someone else took out at some point and which was itself based on nothing but a charter granted to a private bank.

Now this is, of course, quite in accordance with the concept of money as a thing created out of nothing (“fiat”), except that it has been perverted and rendered dysfunctional. In healthy cases the fiat currency is adjusted (increased or diminished) based on the requirements of the economy, while in the case of the fractional reserve system, the nation is placed in such a position as to be required to borrow the use of its own money…at interest to private banks. In such a system the banks own the money supply and the rest of the nation rents it.

Needless to say, this short-circuits the public purpose of an adjustable money supply and instead creates what is called a “perverse incentive” on the part of the banks to create as many loans as possible, because every new loan means new income in the form of interest. Not only does this destroy the stability of the money supply, but it also makes the risk of the credit market completely one-sided. Even if it looks at the outset like banks do take on risk since borrowers could always default, but the results of the 2008 collapse have proven that what actually happens in such systems is quite different. When borrowers default, the banks, being “too big to fail,” are simply bailed out by the State, which is to say, by the taxpayers. For the borrower it is a lose-lose, and for the banker it is a win-win. And at the root of the whole system is a validation of the same usurious principles that have been condemned through the millennia.

v. Possibilities. Keeping in view the fact that the Church does not deal in technical solutions, we must restrict ourselves to the presentation of the system as it is, and the brief mention of alternatives which seem to conform to the principles of reason and the Christian tradition. It is not our purpose here to argue in favor of any one solution, or to suggest such a technical preference on the part of the Church. While it seems quite clear that the fractional reserve system is incompatible with the doctrines of the Church, any suggestions above pertaining to what might be an appropriate solution should be taken as simplistic and offered merely for the purposes of contrast. That is to say, any real solution will be more complicated than the simple abolition of the fractional reserve system, although such an act would be a decent start.

[1] EG, 58.

The essence of capitalism

The very term “capitalism” signals the nature of its ideological error: just as the “humanist” revolution placed too much exclusive emphasis on the human order, so the capitalist revolution represents one more step down this same path. While humanism shifted emphasis from God to man, capitalism shifts emphasis from man to things. Traditional civilization had God for its pivot; Renaissance civilization had man; modern civilization has the economy. This last transition amounts to a reversal of the proper hierarchical relationship between material goods and the human being—or capital and labor.

Very early in the development of CST the Church acknowledged the need for cooperation between these two elements in the economic process: “Neither capital can do without labor, nor labor without capital.”[1] But man must always maintain priority, and it is precisely this priority that becomes lost through “the development of a one-sidedly materialistic civilization.”[2]

Once materialism gains sway, it is only a matter of time before the material component of the economic process supersedes the human one:

“In all cases of this sort, in every social situation of this type, there is a confusion or even a reversal of the order laid down from the beginning by the words of the Book of Genesis: man is treated as an instrument of production, whereas he—he alone, independently of the work he does—ought to be treated as the effective subject of work and its true maker and creator. Precisely this reversal of order, whatever the programme or name under which it occurs, should rightly be called ‘capitalism.’ ”[3]

This particular error will reappear whenever man is,

“…treated on the same level as the whole complex of the material means of production, as an instrument and not in accordance with the true dignity of his work—that is to say, where he is not treated as subject and maker, and for this very reason as the true purpose of the whole process of production.”[4]

Here the reader is encouraged to recall what was emphasized earlier in our discussion of morality, which was that the human subject is never to be treated as a mere means.[5] With the nature of man degraded in this way, his relationship with material wealth becomes inverted. Capital then overthrows man as the most significant factor in economic considerations.

[1] RN, 28.

[2] LE, 7.

[3] Ibid.

[4] Ibid.

[5] Section IV, 6d.

The separation of ownership from work

Chronologically, as well as logically, this inversion of the relationship between capital and labor is preceded by another more subtle development. In order for capital and labor to be placed in opposition, they first must become distinct. For example, the man who owns his own shop and works from within it as its proprietor could never conceive of his activity as a duality of “capital and labor.” For him such an antimony does not exist. In order for the capital-labor duality to come into existence, he must assume one of the roles and abdicate the other. For example, he may transition into the role of an owner who pays employees to run his business instead of running it himself. In such a case, he limits his role to that of proprietor of the establishment (capital) and hires wage-workers (labor) for the day to day maintenance of the place, filling orders, keeping shop, etc. Now and only now do we begin to see the two parties mentioned above—one representing capital and the other labor.

Further, because capitalism takes competition as a positive force in its theory, it exacerbates this division. Thus, we find Leo XIII lamenting the fact that “the hiring of labor and the conduct of trade are concentrated in the hands of comparatively few; so that a small number of very rich men have been able to lay upon the teeming masses of the laboring poor a yoke little better than that of slavery itself.”[1] Here are sown the seeds of concentration, inequality and strife.

[1] RN, 3.

Forces of concentration unleashed

Isaiah issued a warning to the Israelites: “Woe to you that join house to house and lay field to field, even to the end of the place: shall you alone dwell in the midst of the earth?”[1]

Clearly, then, the Christian aversion to the concentration of ownership and wealth has ancient roots. It should therefore not come as a surprise when the popes waste no time in condemning it. In order for the principle of private property to be realized, economic systems that favor concentration are to be avoided. This is because a society in which only a few possess property is one in which the institution of property is diseased, for how could it be considered healthy when, for the majority of men it does not exist? What is called for are “centrifugal” forces in the economy as opposed to the “centripetal” forces of capitalism.[2]

[1] Isa 5:8.

[2] OA, 44.

Capitalism as economic liberalism

The popes use the terms capitalism and liberalism almost interchangeably and always with a negative connotation:

“[W]e are witnessing a renewal of the liberal ideology. This current asserts itself both in the name of economic efficiency, and for the defense of the individual against the increasingly overwhelming hold of organizations, and as a reaction against the totalitarian tendencies of political powers. Certainly, personal initiative must be maintained and developed. But do not Christians who take this path tend to idealize liberalism in their turn, making it a proclamation in favor of freedom? They would like a new model, more adapted to present-day conditions, while easily forgetting that 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.”[1]

This “erroneous affirmation of the autonomy of the individual” lies at the heart of capitalism’s praise for individualism, self-interest, and competition which leads to social Darwinism.

[1] OA, 35.

Socialism as the child of capitalism

Clearly there is no place in CST for the capitalist ideology. But at the same time we must be careful to avoid that even greater error, which arose as a false cure for the capitalist disease, a cure that was worse than the disease itself, called socialism:

“To remedy these wrongs the socialists, working on the poor man’s envy of the rich, are striving to do away with private property, and contend that individual possessions should become the common property of all, to be administered by the State or by municipal bodies. They hold that by thus transferring property from private individuals to the community, the present mischievous state of things will be set to rights, inasmuch as each citizen will then get his fair share of whatever there is to enjoy. But their contentions are so clearly powerless to end the controversy that were they carried into effect the working man himself would be among the first to suffer. They are, moreover, emphatically unjust, for they would rob the lawful possessor, distort the functions of the State, and create utter confusion in the community”[1]

These words come from Leo XIII who would later be praised by Pius XI for his rejection of both liberalism (capitalism) and socialism: “He sought no help from either Liberalism or Socialism, for the one had proved that it was utterly unable to solve the social problem aright, and the other, proposing a remedy far worse than the evil itself, would have plunged human society into great dangers.”[2] “…let all remember that Liberalism is the father of this Socialism that is pervading morality and culture and that Bolshevism will be its heir.”[3] Liberalism as used within this context, and as we always find it within CST, refers directly to the ideological tenets of capitalism, which is simply another name for economic liberalism.

[1] RN, 4.

[2] QA, 10.

[3] QA, 122.

Capitalism and socialism as two ideologies to be avoided

The following passage from Economic Justice for All embodies the attitude of CST toward the extremes of ideology:

“Some people argue that an unfettered free-market economy, where owners, workers, and consumers pursue their enlightened self-interest, provides the greatest possible liberty, material welfare, and equity. The policy implication of this view is to intervene in the economy as little as possible because it is such a delicate mechanism that any attempt to improve it is likely to have the opposite effect. Others argue that the capitalist system is inherently inequitable and therefore contradictory to the demands of Christian morality, for it is based on acquisitiveness, competition, and self-centered individualism. They assert that capitalism is fatally flawed and must be replaced by a radically different system that abolishes private property, the profit motive, and the free market. Catholic social teaching has traditionally rejected these ideological extremes because they are likely to produce results contrary to human dignity and economic justice.”[1]

CST is the guardian of the “invariable middle”—the “narrow way”—which is to say CST promotes the universal principles of truth and justice and is in this sense immune to the tunnel vision of ideology, which always emphasizes one truth to the expense of all others.

[1] Economic Justice for All, 128-129.

Against forms of materialistic ‘economism’

In order to summarize the complaint the Church places at the feet of both capitalism and socialism, we can refer to the broad notion of economism. Economism is the reduction of all social concerns to the economic or material level, on the assumption that if the economy succeeds, all other social goods will be fulfilled as a result. While rarely acknowledged openly and adopted as such, this sort of economism is very common in practice. This is true even for those nations who would still explicitly deny materialism in its doctrinaire form.

Once economism becomes the ruling attitude of a society, its “image” of man is automatically defaced. St. John Paul II describes the historical development of this process as follows:

“This consistent image, in which the principle of the primacy of person over things is strictly preserved, was broken up in human thought, sometimes after a long period of incubation in practical living. The break occurred in such a way that labour was separated from capital and set in opposition to it, and capital was set in opposition to labour, as though they were two impersonal forces, two production factors juxtaposed in the same ‘economistic’ perspective. This way of stating the issue contained a fundamental error, what we can call the error of economism, that of considering human labour solely according to its economic purpose. This fundamental error of thought can and must be called an error of materialism, in that economism directly or indirectly includes a conviction of the primacy and superiority of the material, and directly or indirectly places the spiritual and the personal (man’s activity, moral values and such matters) in a position of subordination to material reality. This is still not theoretical materialism in the full sense of the term, but it is certainly practical materialism, a materialism judged capable of satisfying man’s needs, not so much on the grounds of premises derived from materialist theory, as on the grounds of a particular way of evaluating things, and so on the grounds of a certain hierarchy of goods based on the greater immediate attractiveness of what is material.”[1]

[1] LE, 13.

The doctrine of diffused property

The Church’s proposed solution to these errors is based on the nature and needs of man, and can now be put forth in three short quotes from Rerum Novarum. It embodies the idea of a “centrifugal” economy in which widely distributed property is the norm.

First Leo XIII notes the sad conditions brought on by unrestrained capitalism:

“…the hiring of labor and the conduct of trade are concentrated in the hands of comparatively few; so that a small number of very rich men have been able to lay upon the teeming masses of the laboring poor a yoke little better than that of slavery itself.”[1]

Then he condemns the Marxist solution:

“To remedy these wrongs the socialists, working on the poor man’s envy of the rich, are striving to do away with private property, and contend that individual possessions should become the common property of all… But their contentions are so clearly powerless to end the controversy that were they carried into effect the working man himself would be among the first to suffer.”[2]

Finally, he proposes the true solution, which is opposed to both capitalism and socialism:

“…private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners.”[3]

[1] RN, 3.

[2] RN, 4.

[3] RN, 46.

Work and the human person

“Work is a good thing for man—a good thing for his humanity—because through work man not  only transforms nature, adapting it to his own needs, but he also achieves  fulfilment as a human being and indeed, in a sense, becomes ‘more a  human being.’ ”[1]

Work, much like the Sabbath, was made for man, and not man for work.[2] It is a good. And not only is work good, but it is also an obligation:

“Work is, as has been said, an obligation, that is to say, a duty, on the part of man. . . Man must work, both because the Creator has commanded it and because of his own humanity, which requires work in order to be maintained and developed. Man must work out of regard for others, especially his own family, but also for the society he belongs to, the country of which he is a child, and the whole human family of which he is a member, since he is the heir to the work of generations and at the same time a sharer in building the future of those who will come after him in the succession of history.”[3]

Because he senses these goods, we can assume that under normal circumstances man desires to work. He is not inherently lazy, as the social pessimists would have us believe. He feels compelled to action through the drive to develop his faculties and exercise his personality through productive activity. This is what work is for, and it is through the fulfilment of this purpose, and not merely by providing for material needs, that work is considered good. Devoid of these “supra-economic” benefits, work is not good because it is no longer human. Considered as a means of material production and nothing else, work becomes mere mindless toil.

The fact that in modern times men are taught to be grateful for any kind of work whatsoever, simply because it is more or less “productive,” is evidence of an idolatry of work.[4] That it is possible for there to be work which is productive yet not good does not find a place in our thinking, but it is found in Christian philosophy. C.S. Lewis acknowledged it, and not many would call C.S. Lewis a pessimist:

“…the great mass of men in all fully industrialized societies are the victims of a situation which almost excludes the idea of Good Work from the outside…Unless an article is so made that it will go to pieces in a year or two and thus have to be replaced, you will not get a sufficient turnover. A hundred years ago, when a man got married, he had built for him (if he were rich enough) a carriage in which he expected to drive for the rest of his life. He now buys a car which he expects to sell again in two years. Work nowadays must not be good.”[5]

Lewis provides two examples—prostitution and advertising—which he classes together as analogous (although not morally equivalent).[6] The point is that for work to be good, it needs to fulfill certain subjective needs of the human being in addition to producing a good effect in the material world.[7]

[1] LE, 9.

[2] LS, 128.

[3] LE, 16.

[4] SRS, 28.

[5] C.S. Lewis, “Good Work and Good Works,” The World’s Last Night and other essays.

[6] Ibid.

[7] SRS, 29.

Subjective and objective purposes of work

Distinctions are important, and since the battle against modern ideology is mainly a battle for lost distinctions, a significant part of our project is the re-introduction of subtlety into the economic framework. This is of particular importance when we are discussing the value of human work, which, unlike purely mechanical “work” as executed by machinery, must be considered from both its subjective and its objective points of view, each of which have a legitimate purpose.

The objective meaning of work is the most familiar to us, and in fact it is often the only meaning which has been retained in the present day. Its meaning is embodied in the command to “subdue the earth” and finds expression in the cultivation of crops, the domestication of animals, and the perfection of technology for the purposes of forming the material powers of creation according to man’s will.[1] The great successes of science and research, fully embraced by the Church within their proper limits, each play a part in the realization of the objective meaning of work.

If we turn now to the concept of work in its subjective sense, we find ourselves in territory that seems a bit more alien to us. And yet, returning to the command to “subdue the earth,” which pertains to the objective meaning of work, we realize that it is only in the subjective sense that we can understand why man is given this command. By what right does he subdue creation? Here we find that the objective meaning presupposes a responsible subject, which is to say a person:

“Man has to subdue the earth and dominate it, because as the ‘image of God’ he is a person, that is to say, a subjective being capable of acting in a planned and rational way, capable of deciding about himself, and with a tendency to self-realization. As a person, man is therefore the subject of work. As a person he works, he performs various actions belonging to the work process; independently of their objective content, these actions must all serve to realize his humanity, to fulfil the calling to be a person that is his by reason of his very humanity.”[2]

The truth that the “sources of the dignity of work are to be sought primarily in the subjective dimension, not in the objective one,”[3] are at the heart of the Christian tradition. We must ask first if the work is human, and only then can we begin to measure its industrial efficiency. Our ignorance of the priority of the subjective element, which is to say the primacy of the person in work, is further evidence of the inversion of principles which takes place once the economistic mentality grips a civilization.

[1] LE, 5.

[2] LE, 6.

[3] Ibid.

Direct and indirect employers

Another useful second distinction, the absence of which has proven particularly harmful in application, is between direct and indirect employers:

“The distinction between the direct and the indirect employer is seen to be very important when one considers both the way in which labour is actually organized and the possibility of the formation of just or unjust relationships in the field of labour.”[1]

It has become the custom to acknowledge only the direct employer, so much so that today when anyone deals with the concept of employment, this is the only type of employment they mean. If we re-introduce the concept of the indirect employer, we are immediately forced to acknowledge the very real interdependence between nations, as well as between individuals within a nation. What, then, is the meaning of these two terms?

“Since the direct employer is the person or institution with whom the worker enters directly into a work contract in accordance with definite conditions, we must understand as the indirect employer many different factors, other than the direct employer, that exercise a determining influence on the shaping both of the work contract and, consequently, of just or unjust relationships in the field of human labour…The concept of indirect employer includes both persons and institutions of various kinds, and also collective labour contracts and the principles of conduct which are laid down by these persons and institutions and which determine the whole socioeconomic system or are its result.”[2]

While the indirect employer is composed of a certain aggregate of social and political elements, it is nonetheless a distinct entity which must be acknowledged for the role it plays in economic action. And because both the direct and indirect employers have legitimate roles, they also have their respective duties which must be fulfilled simultaneously:

“The responsibility of the indirect employer differs from that of the direct employer—the term itself indicates that the responsibility is less direct—but it remains a true responsibility: the indirect employer substantially determines one or other facet of the labour relationship, thus conditioning the conduct of the direct employer when the latter determines in concrete terms the actual work contract and labour relations. This is not to absolve the direct employer from his own responsibility, but only to draw attention to the whole network of influences that condition his conduct. When it is a question of establishing an ethically correct labour policy, all these influences must be kept in mind. A policy is correct when the objective rights of the worker are fully respected.”

“The concept of indirect employer is applicable to every society, and in the first place to the State. For it is the State that must conduct a just labour policy.”[3]

In short, because political society forms the overarching framework in which labor agreements, working conditions, and wages are determined, it has a responsibility above and beyond that of the “direct employer” when it comes to the formation and direction of those agreements. This is a necessary consideration before proceeding to the specific agreement between employer and employee—the agreement called the “labor contract.”[4]

[1] LE, 16.

[2] LE, 16-17.

[3] LE, 17.

[4] See also: LE, 18-19.

Agreements between employer and employee

In our discussion of justice we distinguished between commutative, distributive, and social justice. The direct agreements between employer and employee fall under the domain of commutative justice, which is the justice of exchange and is the most basic order of economic justice. However, these agreements must meet certain conditions beyond “mutual consent” in order to be considered just. They are not automatically just simply because the employer offered the contract and the employee accepted, for the right of the worker is not something determined by the worker himself, but is determined by an objective standard:

“Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.”[1]

In addition to commutative justice, this contract must be capable of taking into consideration the requirements of distributive and social justice.[2] This is the “political logic” which must participate in and guide all “economic logic”:

“Economic life undoubtedly requires contracts, in order to regulate relations of exchange between goods of equivalent value. But it also needs just laws and forms of redistribution governed by politics, and what is more, it needs works redolent of the spirit of gift. The economy in the global era seems to privilege the former logic, that of contractual exchange, but directly or indirectly it also demonstrates its need for the other two: political logic, and the logic of the unconditional gift.”[3]

[1] RN, 45.

[2] CV, 35.

[3] CV, 37.

Stakeholders over shareholders

We would also be remiss if we neglected to mention the role of investment in the contemporary economic situation, which is acknowledge by the Church in its teachings. In order to consider it properly, however, we must introduce a third distinction, pointing out the difference between shareholders and stakeholders.[1]

“Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value. Owing to their growth in scale and the need for more and more capital, it is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and the results of his company, and it is becoming increasingly rare for businesses to depend on a single territory. Moreover, the so-called outsourcing of production can weaken the company’s sense of responsibility towards the stakeholders—namely the workers, the suppliers, the consumers, the natural environment and broader society—in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility. Today’s international capital market offers great freedom of action. Yet there is also increasing awareness of the need for greater social responsibility on the part of business. Even if the ethical considerations that currently inform debate on the social responsibility of the corporate world are not all acceptable from the perspective of the Church’s social doctrine, there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference.”[2]

The variety of points made here cannot be explored individually in detail, but should serve to illustrate the need to make the intended distinction in our economic considerations. That corporate entities can be pressured by “absentee” proprietors with little or no long-term interest in the enterprise and no ties to the geographical area of the business makes for a problematic arrangement for those persons most directly involved in a business’s future.

[1] On the priority of stakeholders, see LS, 183.

[2] CV, 40.

Competition or cooperation?

The Church calls for cooperation over and against competition. Dozens of citations could be listed,[1] but we must limit ourselves here to a few. The interested reader will have no problem extending the list on his own.

“Just as the unity of human society cannot be founded on an opposition of classes, so also the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching. Destroying through forgetfulness or ignorance the social and moral character of economic life, it held that economic life must be considered and treated as altogether free from and independent of public authority, because in the market, i.e., in the free struggle of competitors, it would have a principle of self direction which governs it much more perfectly than would the intervention of any created intellect. But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life—a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated.”[2]

“Individual initiative alone and the mere free play of competition could never assure successful development. One must avoid the risk of increasing still more the wealth of the rich and the dominion of the strong, whilst leaving the poor in their misery and adding to the servitude of the oppressed…an economy of exchange can no longer be based solely on the law of free competition, a law which, in its turn, too often creates an economic dictatorship. Freedom of trade is fair only if it is subject to the demands of social justice.”[3]

With respect to cooperation we may add the following:

Economic initiative is an expression of human intelligence and of the necessity of responding to human needs in a creative and cooperative fashion. Creativity and cooperation are signs of the authentic concept of business competition: a ‘cumpetere’, that is, a seeking together of the most appropriate solutions for responding in the best way to needs as they emerge.”[4]

[1] CSDC, 420.

[2] QA, 88.

[3] PP, 33 and 59.

[4] CSDC, 343.

Self-interest and the profit motive

The two terms which go to form this section’s heading amount to spiritual poison for the society that attempts to adopt them as its guiding principles. Man has always been eager to discover that philosophy by which he can consider himself moral without first having to make himself good. It is only very recently that he has finally achieved it, and he did this through the doctrine of self-interest.

Its basic premise is that, if each of us behaves selfishly, then the net outcome will be an increase in overall happiness. We find this at the heart of capitalism, which teaches its adherents that self-interested economic behavior is the engine of the economic progress; we also find it at the heart of sexual libertinism, which teaches that if we would just “leave each to his own,” then we would all be happier and better off. Both teach men to think of egoism as a sort of indirect path to altruism. By caring only for yourself, and leaving everyone else to do the same, society benefits as a whole, even if you never consciously acted in an unselfish manner. A man can care best for society by caring only for himself. Thus, the Gospel is finally made irrelevant. Even more, if selfishness is believed to be the key to happiness and the engine of progress, then unselfishness becomes a vice and the Gospel is not merely irrelevant but is reversed: its teachings are not just unnecessary, but are in fact a menace and must be expelled. Although this may sound like hyperbole, it is precisely what has been done in popular egoistic philosophies like that of Ayn Rand.

An expression of consequentialism

Here we begin to understand why it was necessary to dwell on the principles of Catholic morality earlier in our study.[1] We observed that man’s concrete action and the will behind the action must both be conformed to the good in order for the act to be moral. If self-interest is in itself unhealthy, it does not matter if it produces vast amounts of wealth for the world. We may not do evil that good may come of it, and that is all there is to it. There is no praise for the man who “unintentionally” helps society when his only conscious choices were to help himself. The doctrine of self-interest fails not because it lacks productive value (although arguments could certainly be made that it fails here as well), but because of the habit it instill in the soul. For what good is it for a man to gain the whole world, yet forfeit his soul? [2]

[1] See section on Morality above.

[2] Mk 8:36.

Self-interest fuels the growth of the State

It is also worth mentioning that Aquinas saw the tendency toward self-interest as one of the reasons government must exist. Logically, then, the more selfish the population becomes, the more it will need to be parented by the State. The greater the emphasis on self-interest, the greater the need for a superior authority to look after the common good: “For where there are many men together and each one is looking after his own interest, the multitude would be broken up and scattered unless there were also an agency to take care of what appertains to the commonweal.”[1]

In a fully self-interested society, what “agency” is there to look to the commonweal but the totalitarian State? And this is precisely what the Church does not want. The State has a proper sphere, which is larger than some moderns would prefer to admit, but it is forced out of this sphere today by the very individualism that pretends to condemn state-overreach. Through individualism and the doctrine of self-interest, all intermediate groups and associations are torn apart, leaving only the State to pick up the pieces, growing into a behemoth in the process:

“…things have come to such a pass through the evil of what we have termed ‘individualism’ that, following upon the overthrow and near extinction of that rich social life which was once highly developed through associations of various kinds, there remain virtually only individuals and the State.”[2]

[1] DR, 8.

[2] QA, 78.

Profit motive as the engine of economic growth

Profit undoubtedly has a role to play, both from the standpoint of personal motivation and as reward for labor, and also as a measure of the success of an enterprise. However, when sought for itself alone it becomes greed plain and simple.

The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy.[1]

Not only does the blind pursuit of maximum profit lead to the abuse of workers who must rely on wages for their living,[2] but it can also obscure the fact that profitability does not, in itself, imply that an enterprise is playing a positive role in society.[3] On the contrary, “it is possible for the financial accounts to be in order, and yet for the people—who make up the firm’s most valuable asset—to be humiliated and their dignity offended.”[4] The goal of profit, legitimate within limits and as a measure of the health of a business, must be kept in harmony with the dignity of the person and the proper concern for environmental health, both of which are superior values.[5]

Perhaps the most disconcerting result of an all-embracing desire for profit is the fact that it inevitably excludes all those businesses and individuals who would choose to operate by a different motivation, and this is unjust. “Space also needs to be created within the market for economic activity carried out by subjects who freely choose to act according to principles other than those of pure profit, without sacrificing the production of economic value in the process.”[6]

[1] LS, 195.

[2] LE, 11.

[3] CCC, 2424.

[4] CA, 35.

[5] LS, 190.

[6] CV, 37.

Market autonomy and the “free” market

Nowhere in Catholic doctrine do we find support for the absolute autonomy of the market (the idea that the market is capable of “regulating itself” without any interference from outside or above). On the contrary, St. John Paul II claimed that “the conviction that the economy must be autonomous, that it must be shielded from ‘influences’ of a moral character, has led man to abuse the economic process in a thoroughly destructive way.”[1]

While it is legitimate to speak of “autonomy” with respect to economic activities, what is meant is always a relative autonomy, which must be circumscribed within the limits of a superior order, which is to say an ethical order:

“The Church’s social doctrine, while recognizing the market as an irreplaceable instrument for regulating the inner workings of the economic system, points out the need for it to be firmly rooted in its ethical objectives, which ensure and at the same time suitably circumscribe the space within which it can operate autonomously.”[2]

And so we find ultimately that the so-called “free market,” a notion which concerns the particular conditions of relative economic freedom in a given political order, are always limited and directed by the needs of the political order. If we allow the relative freedom of the market to become absolutized, then we allow a legitimate good to become transmogrified into a source of evil:

“All of this can be summed up by repeating once more that economic freedom is only one element of human freedom. When it becomes autonomous, when man is seen more as a producer or consumer of goods than as a subject who produces and consumes in order to live, then economic freedom loses its necessary relationship to the human person and ends up by alienating and oppressing him.”[3]

We noted above that any freedom, in order to remain legitimate, must maintain a constant connection with truth and goodness. Likewise, economic freedom must be placed within the overarching context of morality.

[1] CV, 34.

[2] CSDC, 349.

[3] CA, 39.

Morality and economic theory

The Church insists that there are always moral connotations to economic activity.[1] In the words of Benedict XVI, quoted already in an earlier section but worth repeating here: “Every economic decision has a moral consequence.”[2] To say this another way, economics cannot, like the physical sciences, be conceived as governed by a system of impersonal laws on which moral judgment has nothing to declare. This is why, until quite recently, the field was called “Political Economy,” and never simply “Economics.” Moreover, the moral aspect of the market includes not only the typical activities of buying and selling, but extends also to investments and the use of financial instruments which are becoming ever more abstract and complex.[3] Because justice is central to economic activity, we must not forget to consider justice in every phase of that process.[4]

To summarize, we refer to Quadragesimo Anno:

“Even though economics and moral science employs each its own principles in its own sphere, it is, nevertheless, an error to say that the economic and moral orders are so distinct from and alien to each other that the former depends in no way on the latter. Certainly the laws of economics, as they are termed, being based on the very nature of material things and on the capacities of the human body and mind, determine the limits of what productive human effort cannot, and of what it can attain in the economic field and by what means. Yet it is reason itself that clearly shows, on the basis of the individual and social nature of things and of men, the purpose which God ordained for all economic life. But it is only the moral law which, just as it commands us to seek our supreme and last end in the whole scheme of our activity, so likewise commands us to seek directly in each kind of activity those purposes which we know that nature, or rather God the Author of nature, established for that kind of action, and in orderly relationship to subordinate such immediate purposes to our supreme and last end.”[5]

[1] CSDC, 330-335.

[2] CV, 37.

[3] CV, 40; CA, 36.

[4] See section III, 7a-d.

[5] QA, 42-43.

Consumerism

Through the confusion of quantity with quality, the production and consumption of economic goods comes to be seen as an end in itself. This leads to consumerism, a mentality in which it is assumed that “economic growth,” by whatever means and without respect to the quality or kind of goods being produced, and without concern for the kind of appeals being made to the public, is always beneficial. Although this is rooted in a healthy desire to improve man’s worldly situation, it quickly transforms into something else:

A given culture reveals its overall understanding of life through the choices it makes in production and consumption. It is here that the phenomenon of consumerism arises. In singling out new needs and new means to meet them, one must be guided by a comprehensive picture of man which respects all the dimensions of his being and which subordinates his material and instinctive dimensions to his interior and spiritual ones. If, on the contrary, a direct appeal is made to his instincts — while ignoring in various ways the reality of the person as intelligent and free — then consumer attitudes and life-styles can be created which are objectively improper and often damaging to his physical and spiritual health. Of itself, an economic system does not possess criteria for correctly distinguishing new and higher forms of satisfying human needs from artificial new needs which hinder the formation of a mature personality. Thus a great deal of educational and cultural work is urgently needed, including the education of consumers in the responsible use of their power of choice, the formation of a strong sense of responsibility among producers and among people in the mass media in particular, as well as the necessary intervention by public authorities…It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed towards ‘having’ rather than ‘being’, and which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself.[1]

Pope Francis has emphasized this point time and time again,[2] with particular focus on what he calls the “throw away culture.”[3]

[1] CA, 36.

[2] LS, 34, 50, 184, 203, 209, 210, 215, 219, 232.

[3] LS, 16, 22, 43; EG, 53.

Intermediate Organizations—Unions

The Church encourages the formation of what it calls “intermediate organizations,” “intermediate bodies,” or “intermediate associations” which can close the gap between ownership and work that has been created through concentration of property.[1] Often, when mention is made of “civil society,” it is precisely these intermediate social groupings that are being referred to.[2] In this sense, such intermediates form the link between families and the State in such a way that the “graduated order” sought by the principle of subsidiarity can be realized to its fullest measure.

Closely related to this call for intermediate organizations, although serving a much more specific purpose, are the workers associations known as unions. These unions “grew up from the struggle of the workers—workers in general but especially the industrial workers—to protect their just rights vis-à-vis the entrepreneurs and the owners of the means of production.”[3] Unions were necessitated when work became divorced from ownership and created a class of men whose only power in the market was price they could get for their physical labor. Because such a situation inevitably puts the laborer at a distinct disadvantage, unions today play a necessary role in society[4] and are considered part of the “right of association”:

“All these rights, together with the need for the workers themselves to secure them, give rise to yet another right: the right of association, that is to form associations for the purpose of defending the vital interests of those employed in the various professions. These associations are called labor or trade unions.”[5]

[1] CSDC, 281.

[2] CSDC, 356.

[3] LE, 20.

[4] CSDC, 305-307.

[5] LE, 20.

The just price

The conventional wisdom would have us believe the market has the last word when it comes to the value of commodities, and that fluctuations in pricing always correspond to real changes in the value of things based on legitimate demand combined with scarcity or surplus in the supply. Added to the principle of maximum profit, competition, and self-interest, this means that a seller should always seek the highest price, and the buyer the lowest, and that this will naturally lead to a point of equilibrium, and this price located at this point will be the most just. But it should be clear by now that things are never so simple, and that such a simplistic view is the result of ideological thinking in an attempt to convert economic activity into an amoral process between two selfish individuals.

Referring back to St. Thomas Aquinas, we find a different view:

“It is written (Matthew 7:12): ‘All things . . . whatsoever you would that men should do to you, do you also to them.’ But no man wishes to buy a thing for more than its worth. Therefore no man should sell a thing to another man for more than its worth.”[1]

To take advantage of another’s need in order to extract a higher price for an item (which in the conventional view would amount to simply obeying the laws of supply and demand) is immoral because raising the price based on another’s circumstances is to attempt to “sell what you do not own.” You are claiming the advantages of circumstance as if it were your own labor that brought it about, and on this pretense you are profiting unjustly at your neighbor’s expense. Often the disadvantage of one’s neighbor has nothing to do with the labor of the craftsman, and is an opportunity for charity rather than for profit. To capitalize on such a situation amounts to a species of fraud:

“It is altogether sinful to have recourse to deceit in order to sell a thing for more than its just price, because this is to deceive one’s neighbor so as to injure him.…if the one man derive a great advantage by becoming possessed of the other man’s property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer. Now no man should sell what is not his, though he may charge for the loss he suffers…On the other hand if a man find that he derives great advantage from something he has bought, he may, of his own accord, pay the seller something over and above: and this pertains to his honesty.”[2]

The Church teaches that there is a “just price” which is objectively determinable and which does not depend solely on market conditions and the circumstances of the buyer and seller. The just price is a central principle in the Christian economic tradition. The forces of the market are always to be taken into account, of course, but they are never the only factors. We are assured that in some cases the “prices that are freely agreed upon can turn out to be most unfair. It must be avowed openly that, in this case, the fundamental tenet of liberalism (as it is called), as the norm for market dealings, is open to serious question.”[3]

Moreover, we must remember that not all prices are subject to market forces in the same way:

“It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to needs. But this is true only for those needs which are ‘solvent’, insofar as they are endowed with purchasing power, and for those resources which are ‘marketable’, insofar as they are capable of obtaining a satisfactory price.”[4]

The three fictitious commodities (land, labor, money) are all examples of non-marketable resources.

[1] ST II-II, q. 77, a. 4.

[2] Ibid.

[3] PP, 58.

[4] CA, 34.

The living wage

Just as there is a just price for commodities, it must be stated even more emphatically that there is a just price for one’s labor. This is known in CST as the “living wage”:

“Let the working man and the employer make free agreements, and in particular let them agree freely as to the wages; nevertheless, there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner. If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice.”[1]

In fact, St. John Paul II suggested that a low regard for human labor, which causes work to be priced too low, degraded men, led to unemployment, and exacerbated poverty[2]—a point on which he was later affirmed by Benedict XVI.[3]

The living wage is not, therefore, a number. It is a standard of judgment and is elastic. It will change depending on time and place, but this does not mean that it is entirely arbitrary. Whether or not a wage is just can be determined by the application of several measures:

1) Are families in general living at a standard of decency appropriate to their society?

2) Are they able to accomplish this without working extremely long hours?

3) Are women and/or children forced to work at inappropriate tasks, at inappropriate hours, or under inappropriate conditions in or for the family to subsist?

4) Can families provision themselves without recourse to government assistance?

5) Can families provision themselves without recourse to consumer credit?

While the actual wage amount that qualifies as living, and therefore just, may vary, it must always satisfy the demands suggested above. This is why we describe it not as a figure but as a dynamic standard. Also, it should go without saying that this standard requires the application of human judgment and cannot be left to the determinations of the market, which are always stacked in favor of capital and will never result in a just wage.

We can also mention that even in purely economic terms, a living wage is beneficial for a society. Wages pressured always and everywhere to a minimum naturally minimize demand, which leads to recession, which leads to failures in supply, which leads to stagnation. The living wage is therefore a practical as well as a moral principle.

Leo XIII complemented this teaching with an added warning—that it is better, concerning these issues, to have recourse to the intermediate associations which we’ve already discussed:

“In these and similar questions, however—such as, for example, the hours of labor in different trades, the sanitary precautions to be observed in factories and workshops, etc.—in order to supersede undue interference on the part of the State, especially as circumstances, times, and localities differ so widely, it is advisable that recourse be had to societies or boards such as We shall mention presently, or to some other mode of safeguarding the interests of the wage-earners; the State being appealed to, should circumstances require, for its sanction and protection.”[4]

The reasoning here is of course according to the principle of subsidiarity, and it is appropriate because a local association is in a much better position to determine the needs of the parties involved. Having once more referred to these intermediates, which are unfortunately all too rare in our day, we can illustrate their purpose by adopting a historical example of such an organization: the guild. This will also give us a working example of the other principle related to this economic order.

[1] RN, 45.

[2] LE, 8.

[3] CV, 63.

[4] RN, 45.

The example of the guild system

The term “guild” is largely dead, or is at least devoid of historical meaning where it is still employed. The guilds were not “clubs” of individuals with similar interests, as we might find a “quilting guild” today; nor were they analogous to modern labor unions. In fact, the phrase “labor union” signals the difference: for while modern unions are formed exclusively of workers who have nothing but their labor to bargain with, the guilds were formed by “working owners” whose strength lay in their ownership as much as in their labor. Thus, in this respect, we can see that modern unions have been rendered necessary precisely due to the division between ownership and work, or capital and labor, a division which does not make any sense in the guild context.

The guilds, thriving primarily throughout the Middle Ages, were cooperative associations. Neither private nor public, they served the role of the “intermediate organizations” mentioned earlier.[1] By serving as this link between individual and State—a link which no longer exists in contemporary society—craftsmen were able to wield political strength while nonetheless retaining their independence from a distant political authority. As such, they were able to provide for their membership in ways that are unthinkable today.

In his massive survey of history, Will Durant described how incredibly diverse the divisions were among the crafts, and how organized. He found that the leather industry, for example, had separate guilds for “skinners, tanners, cobblers, harness makers and saddlers.” Likewise, among carpenters there were “chest makers, cabinetmakers, boatbuilders, wheelwrights, coopers, twiners,” and so on.[2]

As to the functions and features of the guilds, Durant reports that:

“Guild rules limited the number of masters in an area, and of apprentices to a master; forbade the industrial employment of women except the master’s wife, or of men after six P.M.: and punished members for unjust charges, dishonest dealing, and shoddy goods. In many cases the guild proudly stamped its products with its ‘trademark’ or ‘hallmark,’ certifying their quality… Competition among masters in quantity of production or price of product was discouraged, lest the cleverest or hardest masters become too rich at the expense of the rest; but competition in quality of product was encouraged among both masters and towns. Craft, like merchant, guilds, built hospitals and schools, provided diverse insurance, succored poor members, dowered their daughters, buried the dead, cared for widows, gave labor as well as funds to building cathedrals and churches, and pictured their craft operations and insignia in cathedral glass.” A guild would also often “provide for its members insurance against fire, flood, theft, imprisonment, disability, and old age. It built hospitals, almshouses, orphanages and schools.”[3]

Now consider for a moment the astounding level of autonomy exhibited here in this massive project of cooperation. Consider how socially competent these organizations much have been. Notice also that while these groups regulated themselves, they did not do so by verdict of anonymous and far-removed legislators, but of their own accord based on the principles of justice they perceived. Needless to say, such an accomplishment would be completely impossible under the aegis of self-interest, competition, and maximized profit.

The guilds not only regulated the conditions of work, wages, quality control, and the just price within the trade, but provided equivalents to modern insurance, social security, public works and philanthropy.

[1] Section III, part 5b; section V, part 10.

[2] Will Durant, The Age of Faith (New York, 1950), p. 635.

[3] Ibid., pp. 635-636.

The Catholic call for a return to the guild principle

We are justified in offering this somewhat detailed examination of the guild system for two reasons:

First, the social teachings of the Church refer repeatedly to this institution by name, so we are assured that whatever it was, the Church generally approved of its existence. Second, the guild system lends itself so well to a point by point application of the principles of CST. Thus, we mention it here not because it was perfect or because we expect the guild system to be resurrected precisely in its historical form—rather, we offer it as an illustration in order to show that the principles defended by the Church have been successfully applied in the past. Therefore they could be applied again, even if the new applications do not manifest themselves in precisely the same form as the guilds of the Middle Ages. Our goal is not to transplant an extinct institution into alien soil—for again, CST offers principles and not technical solutions—but to offer a very developed solution that is capable of exemplifying our ideal and proving it as a legitimate possibility.

“In any case…some opportune remedy must be found quickly for the misery and wretchedness pressing so unjustly on the majority of the working class: for the ancient workingmen’s guilds were abolished in the last century, and no other protective organization took their place. Public institutions and the laws set aside the ancient religion. Hence, by degrees it has come to pass that working men have been surrendered, isolated and helpless, to the hardheartedness of employers and the greed of unchecked competition.”[1]

Shortly afterward, St. Pius X would echo a similar call, and for precisely the same reasons, emphasizing the value of history and its examples when it comes to our efforts at solving contemporary problems:

“…since in the clash of interests, and especially in the struggle against dishonest forces, the virtue of man, and even his holiness are not always sufficient to guarantee him his daily bread, and since social structures, through their natural interplay, ought to be devised to thwart the efforts of the unscrupulous and enable all men of good will to attain their legitimate share of temporal happiness, We earnestly desire that you should take an active part in the organization of society with this objective in mind…be convinced that the social question and social science did not arise only yesterday; that the Church and the State, at all times and in happy concert, have raised up fruitful organizations to this end; that the Church, which has never betrayed the happiness of the people by consenting to dubious alliances, does not have to free herself from the past; that all that is needed is to take up again, with the help of the true workers for a social restoration, the organisms which the Revolution shattered, and to adapt them, in the same Christian spirit that inspired them, to the new environment arising from the material development of today’s society.”[2]

And finally, in perfect unison with his predecessors, Pius XI would make the same call at great length and detail in the celebrated Quadragesimo Anno:

“The social policy of the State, therefore, must devote itself to the re-establishment of the Industries and Professions. In actual fact, human society now, for the reason that it is founded on classes with divergent aims and hence opposed to one another and therefore inclined to enmity and strife, continues to be in a violent condition and is unstable and uncertain.

“Labor, as Our Predecessor explained well in his Encyclical, is not a mere commodity. On the contrary, the worker’s human dignity in it must be recognized. It therefore cannot be bought and sold like a commodity. Nevertheless, as the situation now stands, hiring and offering for hire in the so-called labor market separate men into two divisions, as into battle lines, and the contest between these divisions turns the labor market itself almost into a battlefield where, face to face, the opposing lines struggle bitterly. Everyone understands that this grave evil which is plunging all human society to destruction must be remedied as soon as possible. But complete cure will not come until this opposition has been abolished and well-ordered members of the social body – Industries and Professions – are constituted in which men may have their place, not according to the position each has in the labor market but according to the respective social functions which each performs. For under nature’s guidance it comes to pass that just as those who are joined together by nearness of habitation establish towns, so those who follow the same industry or profession—whether in the economic or other field—form guilds or associations, so that many are wont to consider these self-governing organizations, if not essential, at least natural to civil society.

“Because order, as St. Thomas well explains, is unity arising from the harmonious arrangement of many objects, a true, genuine social order demands that the various members of a society be united together by some strong bond. This unifying force is present not only in the producing of goods or the rendering of services – in which the employers and employees of an identical Industry or Profession collaborate jointly – but also in that common good, to achieve which all Industries and Professions together ought, each to the best of its ability, to cooperate amicably. And this unity will be the stronger and more effective, the more faithfully individuals and the Industries and Professions themselves strive to do their work and excel in it.

“It is easily deduced from what has been said that the interests common to the whole Industry or Profession should hold first place in these guilds. The most important among these interests is to promote the cooperation in the highest degree of each industry and profession for the sake of the common good of the country. Concerning matters, however, in which particular points, involving advantage or detriment to employers or workers, may require special care and protection, the two parties, when these cases arise, can deliberate separately or as the situation requires reach a decision separately.

“The teaching of Leo XIII on the form of political government, namely, that men are free to choose whatever form they please, provided that proper regard is had for the requirements of justice and of the common good, is equally applicable in due proportion, it is hardly necessary to say, to the guilds of the various industries and professions.

“Moreover, just as inhabitants of a town are wont to found associations with the widest diversity of purposes, which each is quite free to join or not, so those engaged in the same industry or profession will combine with one another into associations equally free for purposes connected in some manner with the pursuit of the calling itself. Since these free associations are clearly and lucidly explained by Our Predecessor of illustrious memory, We consider it enough to emphasize this one point: People are quite free not only to found such associations, which are a matter of private order and private right, but also in respect to them ‘freely to adopt the organization and the rules which they judge most appropriate to achieve their purpose.’ The same freedom must be asserted for founding associations that go beyond the boundaries of individual callings. And may these free organizations, now flourishing and rejoicing in their salutary fruits, set before themselves the task of preparing the way, in conformity with the mind of Christian social teaching, for those larger and more important guilds, Industries and Professions, which We mentioned before, and make every possible effort to bring them to realization.”[3]

[1] RN, 3.

[2] Pius X, Apostolic Mandate.

[3] QA, 82-87.

On adaptation

We wish to remind the reader once more, because the point is easily forgotten, that the Church does not attempt to transplant technical solutions from one period to another, but to defend principles which are timeless. Thus, the popes return again and again to the institution of the guild because of its exceptional value as an illustration. As Leo XIII implored so long ago in Humanum Genus:

“[T]here is a matter wisely instituted by our forefathers, but in course of time laid aside, which may now be used as a pattern and form of something similar. We mean the associations of guilds of workmen, for the protection, under the guidance of religion, both of their temporal interests and of their morality. If our ancestors, by long use and experience, felt the benefit of these guilds, our age perhaps will feel it the more by reason of the opportunity which they will give of crushing the power of the sects. Those who support themselves by the labour of their hands, besides being, by their very condition, most worthy above all others of charity and consolation, are also especially exposed to the allurements of men whose ways lie in fraud and deceit. Therefore, they ought to be helped with the greatest possible kindness, and to be invited to join associations that are good, lest they be drawn away to others that are evil. For this reason, We greatly wish, for the salvation of the people, that, under the auspices and patronage of the bishops, and at convenient times, these guilds may be generally restored. To Our great delight, sodalities of this kind and also associations of masters have in many places already been established, having, each class of them, for their object to help the honest workman, to protect and guard his children and family, and to promote in them piety, Christian knowledge, and a moral life.”[1]

The observant reader will have noticed that, by entering a discussion of the guild and its organizational structure, which is largely extra-economic, we have moved beyond the realm of economic activity and into the political. At this point, then, we can take up that sphere more explicitly.

[1] HG, 35.