This Dark Age

A manual for life in the modern world.

By Daniel Schwindt

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.

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