The Catholic View of Economics
F.R. Hoare
When Karl Marx wrote the Communist Manifesto in 1848, he pointed out the problems of capitalism and its disastrous effect on society. Marx correctly stated that capitalism was destroying family, property, and Faith. Catholics share, to a degree, Marx’s criticism of capitalism as Hilaire Belloc explains in The Servile State. Capitalism makes the individual the primary economic unit, rather than the family. Work outside the home, first the father and children and then the mother, pulls apart the family unit just as family work on the farm and in the workshop hold it together. Capitalism is the enemy of private property because unfettered competition takes property out of the hands of the many and concentrates it in the hands of the few. (How many small businesses in rural towns can long survive the arrival of Sam Walton’s Wal/Hyper-Mart?) Capitalism is the enemy of the Faith because it requires an atmosphere that excludes moral considerations from economics in order to pave the way for the unfettered reign of “market forces.” The disaster that follows is left to the charity of others (thousand points of light?) with no consideration to the injustices that caused the disaster.
“Liberal” comes from the Latin word liber, which means “frees” individuals and societies from the teachings of Christ and His Church. It “frees” from the truth of Christ that truly sets one free (cf. Jn. 8:32). It appears to be freedom, but it is slavery. Capitalism is simply economic liberalism. It seeks to free the economic life of society from the moral constraints of the Gospel. It is amoral economics and therefore Godless and atheistic economics.
Although Catholics partially share Marx’s critique of capitalism, there are a few big differences. And for our purpose here, this difference is key: Marx saw capitalism as temporarily useful because it was destroying the Christian society built by the Church during the Age of Faith. In turn, Marx foresaw socialism fulfilling its “historical destiny” by destroying capitalism to finish what it had begun. Catholics do not see this process as good, but as bad. We do not want property in fewer and fewer hands, but in more and more hands we have Catholic social principles to guide us in this restoration. It is important for us to remember that Catholic social principles are not pie-in-the-sky dreaming. We can say that for sure, as Catholic civilization has existed as an historical fact. It is now largely destroyed, but it was a reality for centuries, far from perfect, but a reality nonetheless.
In the following article, F.R. Hoare gives us seven principles to put our economic system back on the Catholic hinges that it was taken off of several centuries ago. These principles are called "radical" because they get to the root of the problem (the Latin word for root is radix). These principles would help to convert amoral capitalist economics to moral Catholic
economics. Some of these principles are a bit deep and you will need to think, but the most important are simple:
"1) The existence of God should be made the starting point of economic reasoning" and
"2) The fundamental laws of economics are moral laws; Our Lord Jesus Christ said it a little differently, "But seek first the
It has become a matter of urgency to cease arguing about the extent to which economic science need take morals or religion into consideration. In present circumstances we need nothing less than an economics that is itself a system of morals in its basic principles.
At one time it was an accepted thing that economics was a more or less mathematical science, into which morals could only enter as a disturbing element. Even the philanthropists asked no more than that moral considerations should occasionally be allowed to temper the practical conclusions drawn by scientific analysis. Unhappily, practical experience showed that economic processes, and the men who worked them, having once been set in motion without regard to morals, did not easily admit the introduction of morals at a later stage.
Even those who by their religious profession acknowledged that morals should come first were generally willing to agree that the case of economics was "somehow different." They did this even when they had a sound system of moral philosophy to draw on. As for those who had no sound philosophy behind them, but only amiable intentions, their attempt to regulate economics by morals was foredoomed to failure. For they proposed to substitute for non-moral economics, not a system of economic justice, but selections from the Sermon on the Mount. Many of these selections, however, were not originally intended as rules of justice but as counsels to those who would attain Christian perfection by going beyond economic justice and rising spiritually superior to economic injustice. Consequently they do not provide a basis for a system of economics.
By contrast with these feeble or misdirected attempts to put economics on an ethical basis, the Russian Revolution came to many as an inspiration. For the economic theories of Karl Marx, though closely related on the technical side to those of his contemporaries, introduced into their formulas certain violent moral judgments (concerning, for example, the dis. possessing and exploitation of "the workers") which turned their practical application upside down and gave what has been called a "Messianic" flavor to his own vision of the future of the working class. This appeal to something like a religious emotion in economics was strengthened by Marx's elimination of any kind of supernatural religion from his system and his elevation of economics to be itself the key to all history and the measure of all values.
When, therefore, his principles seemed to be visibly embodied in a Socialist Republic in Russia at a moment of world-wide physical and moral confusion, an enthusiasm for them was generated that had something of the character of a religious revival, with the USSR for a Church. In little more than a decade from this Revolution Marx's hitherto comparatively neglected dogmas had established themselves over the greater part of the globe as a goad for the masses and an opiate for the intellectuals.
Now, in so far as it really brought back to the world a desire for economic justice and for bettering the lot of the dispossessed, and led the way in giving effect to this desire, Marxist Communism did a good and much-needed work. But in so far as it conceived of economic justice wholly in terms of a single class, even though the largest-indeed, in so far as it thought in terms of classes of any kind, to the exclusion of the individual and families-it could never give the world a universally satisfying justice or one founded on the true needs of human nature. And in so far as it made economic betterment an end in itself, and taught that all the values of human life could be realized by an economic change, it made economic betterment worthless and human life a mockery. For in so doing it cut men off from God, Who alone can give life its final meaning.
Since, therefore, this exclusively class outlook, with its corollary of class hatred, and this materialism, with its corollary of militant atheism, are fundamental tenet of Marxist Communism, the restoration of an ethical outlook in economics by its agency has been, on the balance, not a gain to the world, but an unparalleled disaster. It calls, moreover, for action to counter it, which, to be effective, must also be on the moral plane, and at least as radical.
This need was recognized by the political opponents of Bolshevism. Mussolini and Hitler each in his own way met the Marxist challenge by an economics based on a kind of counter-morality. Mussolini borrowed some of the leading ideas of Catholic sociology and tried to combine them with something like a pagan worship of the State. Hitler's appeal was wholly pagan, and based economics, like politics, on a kind of religious worship of the German race; and he sought to enforce his system on so-called inferior races with as fanatical a cruelty as the Bolsheviks used in enforcing theirs upon so-called class enemies.
During the same period, Catholic statesmen in a number of countries made beginnings in reconstruction on the basis of traditional morality that at least bore witness to a growing sense of the need of meeting a moral revolution in economics with a moral counterrevolution.
If this need existed before the renewal of the Great War, it was intensified beyond all measure after it. The Nazi pact with the
Thus, when the sheer destructiveness of the war itself came, making it certain that drastic economic and social reconstruction must be undertaken in Western Europe, it had become certain also that nothing short of a completely radical reconstruction on the basis of absolute morality could hold its own against the Bolshevik economic creed.
The Purpose of The Seven Principles
When we speak of economic reconstruction on a moral basis it is not meant that the whole of economics can be comprised in a moral code. The view of economics as a non-moral, quasi-mathematical science contains this much truth: that a great part of it must always consist of technical description and analysis, since it has to determine what economic aims are technically practicable and what are the most efficient methods of attaining them.
But the subject matter of economics is, after all, a field of human activity, namely man's efforts to supply his material needs. Its material aims, therefore, must ultimately be judged by their conformity to the moral ends of human life, and its methods by the moral standards of human conduct.
We must start, therefore, from certain truths of natural religion and morality, which, for our present purposes, must be assumed without argument. Thus, we assume the existence of an all-good God, Whom it is our highest work to serve. We assume that men are free agents in all their deliberate acts, and responsible for them to their conscience and to God. We assume also that the nature of man, like that of every other living thing, is built to follow a definite pattern of behavior and cannot fully realize its possibilities unless it does follow it; and, further, that in the case of man, owing to his moral freedom, this behavior pattern consists, not only of physical and mental laws, but also of moral laws, that is to say, of laws binding, not by physical compulsion, but by moral obligation.
Finally, we assume that the moral powers of man (generally called his virtues), by which he is enabled to fulfill these moral laws, conform to the same general pattern in all men (just as his physical powers do), though they may vary in strength from individual to individual as the result of heredity, training, and use or misuse. Thus, one man may be courageous by nature, another courageous chiefly by training or self-discipline; some men grow up honest but lose the habit of honesty by giving way to the temptations of a particular position; but all men have in them at least the rudiments of courage, honesty and the rest.
These are unchanging facts of the spiritual order. Between them and the technical problems of economics there lies a gap, and the seven principles set out in this outline are intended to bridge it. It will be well, before explaining them one by one, to give the complete list of them without comment.
1) The existence of God should be made the starting point of economic reasoning.
2) The fundamental laws of economics are moral laws.
3) The essential moral rights and duties of man spring from his own nature and not from the State.
4) Economic justice will be best attained (other things being equal) in an economic system resting upon independent individual status.
5) The pattern of life of an economic community is best regulated if the State is built up of spontaneous and self-governing groups each fulfilling a distinctive economic function.
6) An economic system serves real needs best when its objectives are conceived in terms of goods and services rather than of money.
7) The natural needs of men and women as producers and consumers, and not the potentialities of mechanization, monetary technique and salesmanship, are the proper measure of both production and consumption.
God, the Moral Law, The State, and the Individual in Economics
We must now proceed to explain and comment briefly on each of these seven principles in turn, beginning with the first:
1. THE EXISTENCE OF GOD SHOULD BE MADE THE STARTING POINT OF ECONOMIC REASONING.
It is not enough, for the purpose of economic thought and controversy, that God's existence should be believed and that He should be the object of religion. It is necessary to make it clear that His existence bears directly upon the solution of economic problems and to show how it does so.
This working-out of theism in the field of economics and sociology is related to simple theism much as what may be called the sociological atheism of Marxist Communism is related to the atheism of the continental Liberalism that descends from the French Revolution.
That atheism is often complete enough in the theological sphere but stops short at the application of its principles to economic and social life. It professes, indeed, to found its political and economic system on natural liberty and the rights of man without reference to God, but its very appeal to natural liberty and rights is a survival of Catholic philosophy. Indeed, it was this retention of these ideals cut off (by atheism) from their logical basis and their limiting principles that was responsible for the economic lawlessness of the Liberal era. Marx had an easy task in pointing out the license and exploitation that followed in the train of this inconsistent individualism and, with better logic, constructed a new philosophy of human society based from the beginning upon atheistic premises, complete with economic determinism and the absolute subordination of the individual to the class or the community.
Somewhat similarly, the theists of the 19th century stopped short at applying their principles to the economic system except as a kind of afterthought which could do little more than expose them to ridicule. Marxism must be met by a theism that permeates the whole of our economic thinking and by an economies that is theistic from the outset.
The second of our principles is:
2. THE FUNDAMENTAL LAWS OF ECONOMICS ARE MORAL LAWS.
This principle follows from the fact that men remain morally responsible for their deliberate acts in all circumstances, including their economic relations.
In the Middle Ages economists had no doubt that economics was, at bottom, the science of how men ought to behave to one another in the course of getting a living. Hence they dealt primarily with men and their behavior, and only secondarily with goods and money and their accumulation. They emphasized the sinfulness of avarice and of taking advantage of another's urgent necessities; they held that the craftsman was under a moral obligation to do good work; they required that wages, prices, and rates of interest should be just and not merely competitive; and so forth. They rightly considered that to disregard these principles was bad economics.
In the second half of the 18th century economists began to teach openly that each man should pursue solely his economic self-interest. They tried to bring this into a system of morals by declaring that the economic uniformities resulting from this simplification of motives constituted a natural harmony; but the practical effect of their doctrine was to put economics into a separate compartment of life, outside morals, ruled by jungle law under slogans like "business is business."
In the next phase of Liberalism the economic uniformities in question came to be regarded as inexorable laws of nature against which rebellion was as futile as against the law of gravitation. This determinism was used to prevent philanthropists from trying to mitigate the system. Marx gave a fresh turn to it by representing the existing economic system, and all economic change, as brought about entirely by a predetermined historical process.
Our second principle cuts at the root of all these heresies. So far from admitting that moral considerations constitute a deviation from the strict path of economic truth, it implies that maladjustments even on the strictly economic plane may be traceable to moral error.
The third principle follows closely upon the second:
3. THE ESSENTIAL MORAL RIGHTS AND DUTIES OF MAN SPRING FROM HIS OWN NATURE AND NOT FROM THE STATE.
The significance of this lies in the fact that human nature was made by God, so that the essential moral rights and duties of men have an absolute claim upon them. The State can in no way release men from this claim, which it did nothing to create.
The State can create secondary and purely political rights and duties, such as the right to an old-age pension or the duty to keep to the left when driving on the road; and, if these secondary rights and duties are consistent with the eternal moral law and the general moral purpose for which the State exists, they have a certain moral validity so long as the State upholds them. Furthermore, the very existence of men in a Political community gives a fresh turn to the way in which the rights and obligations of the eternal moral law fall upon individuals. Thus, the right and duty of a man to restrain someone who is threatening him or his neighbors, and to bring home to him the dictates of the moral law, may eventually fall upon a prison governor who was not directly threatened by the original violence.
But these alterations in what is called the incidence of the moral law do not constitute alterations in the moral law itself; and, if they were stretched so as to amount to violations of it, the fact that the State ordered them would not make them moral or legitimate. The fundamental moral rights and duties of men, so far from being alterable by the State, are the standard by which all secondary and political rights and duties, and all fresh applications of the fundamental ones, must be judged.
The fundamental ones include:
(a) The duty of self-preservation and self-maintenance at the level of human decency, and the right of access to the means of carrying this out.
(b) The right and duty of parents to rear children in a way befitting responsible creatures and (normally) in the family circle, and the right of access to the means to this end also.
(c) The duty of maintaining justice and charity in all relations with fellow men, not excluding industrial and business relations, and the right (in a political community) to the protection of the law in fulfilling this duty.
(d) The right to scope in economic life for self development, both natural and spiritual.
All these rights and duties bear directly upon economics, because they require that the economic system should provide securities and opportunities fog certain ways of living based upon them.
The fourth principle asserts that:
4. ECONOMIC JUSTICE WILL BE BEST ATTAINED OTHER THINGS BEING EQUAL IN AN ECONOMIC SYSTEM RESTING UPON INDEPENDENT INDIVIDUAL STATUS.
The essence of status is the secure tenure of a position, in the present context, of an economic position. By contrast with status, the security given by a contract, besides being temporary, may be nullified by the fact that, while one of the parties to it was in a position of economic security when he made it, the other was not, so that he made it under economic constraint and had to accept unjust terms. A person in possession of some permanent economic security is in a position to insist upon the recognition of his moral rights in any bargain he makes.
Moreover, if his status takes the form of ownership of means of production, he will be to that extent less dependent upon bargaining, or upon other persons or the State, or upon external circumstances of any kind, and under less pressure to violate his conscience in his working life. In addition, he will have more opportunities for using his working life constructively for his moral development. The maximum degree of economic self-sufficiency and stability is given by tenure of land by a family which cultivates it so as to supply their primary material needs.
It is not necessary for these purposes that the tenure should be full ownership. They were served by (for example) the land tenures of the Middle Ages, even in the case of the serf, who, though obliged to remain on his plot of land and render services for it, could not be deprived of the occupation and use of it. They can be fulfilled to some extent even in a large 20th century industrial unit if each worker has a real share in the ownership and control, though he cannot dispose of any part of the plant himself.
Indeed, absolute ownership, accompanied by the right of unlimited accumulation, may militate against the moral purposes for which property rights exist. It may weaken the owner's sense of the obligations attaching to property and at the same time enable him to override the property rights of others. The purposes of property are as a rule best fulfilled, and least likely to be violated, if there is a wide distribution of property proportioned to function; that is to say, if the head of each family holds or has assured access to what he and his family can personally use in winning their livelihood. In this way property becomes the security for each man's moral rights in the economic order and the basis for a true industrial democracy and neighborly charity.
The opposite effect is produced when each individual's economic status depends directly upon the State. The State is necessary in order to protect the property that gives the citizen status, but its own guarantee of status is not an adequate substitute for that property. It is more likely to reduce the citizens to a condition of servitude to the State.
The Structure and Aims of an Economic System
The fifth of our principles relates individual status to the organization of a Political and economic society:
5. THE PATTERN OF LIFE OF AN ECONOMIC COMMUNITY IS BEST REGULATED IF THE STATE IS BUILT UP OF SPONTANEOUS GROUPS EACH FULFILLING A DISTINCTIVE ECONOMIC FUNCTION.
In communities in which most citizens have a reasonably assured economic status, their natural sense of justice and their instinct for social conduct will go a long way to ensure the observance of moral rights and duties in the pattern of community life, at least in very small and simple communities. But the size of most States of recent times makes the citizens so remote from one another in every sense, and makes their economic relations so indirect and complicated, that they lose the sense of how to shape their conduct towards one another.
The Liberalism of the nineteenth century tended to leave men to pursue their individual interests with the minimum of policing or moral guidance, on the theory that this would in the long run conduce to moral and economic harmony. Actually it brought about moral and economic anarchy. In the reaction against Liberalism the State tends to fill the void by planning in detail the social and economic relations of its citizens and, in the moral sphere, by extending its authority so as to override the moral rights of the individual by a moral code of its own.
It is practically impossible, in a large State, to avoid falling into one or other of these extremes unless intermediate groups are introduced, standing between the individual and the State. Each group needs to be composed of individuals having real contact and common interests with one another and collectively fulfilling a distinctive function in the community. All those concerned in a single industry or profession, such as agriculture or engineering or teaching, form such a group, and all the groups together should represent all the major economic activities of the community.
In this way the internal arrangements and practices of each industry are controlled, both in their technical and in their moral aspects, by those immediately concerned, and by all sections of them acting together; while its relations with other industries and with the community as a whole are regulated by the common council of the State in which all the groups take part. It is essential, however, that the groups (or "corporations" as they are commonly called now) should as far as possible come into existence spontaneously and have real lives of their own; otherwise they are little more than agents for an all-powerful central government, as they became in Fascist Italy.
The sixth principle is as follows:
6. AN ECONOMIC SYSTEM SERVES REAL NEEDS BEST WHEN ITS OBJECTIVES ARE CONCEIVED IN TERMS OF GOODS AND SERVICES RATHER THAN OF MONEY.
Goods and services must in any case be the real foundation of even the most elaborate monetary economy, which cannot in the long run command confidence unless they exist to back it. But this fact is not sufficient to prevent men from going very far astray from realities, both moral and material, as a result of thinking primarily in terms of money. For example, under a monetary economy the phrase "a favorable balance of trade" describes a state of affairs when more goods are leaving the country than entering it. Or again, millions of needy men, whose country possesses natural resources amply sufficient, with their labor to supply their needs, are allowed to rot in idleness because no monetary profit can be expected from setting them to work.
Money is certainly necessary in all but the very simplest economic communities in order to bridge gaps between the production of goods and the satisfaction of wants. For example, when a workman does not produce the goods he himself needs, or has no control over what he produces, he must be remunerated by wages, so as to buy elsewhere. Similarly, when the productive activity of a factory has to begin long before the products can be marketed, the owner needs money, either saved or borrowed, to pay wages in the meantime.
This is all very well, but there is a tendency to stereotype these gaps and make them appear part of the order of nature. Thus, the wage system seems to give sanction to the separation of men from both the tools and the fruit of their labor, making their labor an article for sale rather than an activity with a purpose. Similarly, international trade, instead of being a supplementary device whereby countries obtain comforts and luxuries which they cannot produce for themselves, becomes an institution for the sake of which nations are deliberately specialized until they become incapable of supplying themselves even with necessities.
Furthermore, money is treated, not only as an instrument for the exchange of commodities, but as if it were itself a commodity to be dealt in for profit. This is a constant cause of profit-making that is intrinsically immoral (for money is not a commodity of this kind). In addition, it creates new vested interests in perpetuating and exaggerating those gaps which must be bridged by money.
Practically every operation in industry comes to be financed by loans, so that it is burdened by the interest upon them and liable to be dislocated by organized gambling on the prospects of a profitable return on them. Even the money used in these transactions comes into existence as debt on which interest must be paid wherever it circulates. A class is called into existence whose sole business is to exploit the dependence of the system upon money, and which claims the right to create money for that purpose. And, since money permeates the system at every point, it wields a power often greater than the State's.
Finally, money, thus made the touchstone of every transaction, has every moral disqualification for this role. It is wholly undiscriminating. One hundred pounds is one hundred pounds whether it is the profit on good work or on fakes, on necessities or on luxuries, on goods that meet a demand or on goods for which an artificial demand has to be created. It has no natural limits, upwards or downwards, such as define (for example) the amount of land a family can cultivate effectively; so that it affords the maximum of opportunity for the unequal distribution of wealth. And these very characteristics, together with its efficiency as an instrument of power, give it an unequalled hold as an object of avarice.
The seventh principle safeguards certain needs of man's nature which economic activity exists to serve but which are liable to be overlooked amid the triumphs of economic technique. It runs:
7. THE NATURAL NEEDS OF MEN AND WOMEN AS PRODUCERS AND CONSUMERS, AND NOT THE POTENTIALITIES OF MECHANIZATION, MONETARY TECHNIQUE AND SALESMANSHIP, ARE THE PROPER MEASURE OF PRODUCTION AND CONSUMPTION.
The purpose of production is consumption, and until recently there was no question, except for a tiny fraction of mankind, of production exceeding man's natural needs as a consumer. Man's power of producing commodities did not exceed his capacity for consuming them profitably, and commonly fell far below it. The use of mechanical power and, still more recently, of mechanized mass-production has enormously increased man's capacity for producing commodities without making any corresponding increase in his capacity for consuming them.
There is, of course, a sense in which a man's capacity for the consumption of goods is almost unlimited. He can make some kind of use of yachts, cars, mansions, grouse-moors and so on. But if we are speaking of a standard of living that is to be widely distributed, then the amount that any one person can consume with enjoyment in the course of his life has comparatively narrow physical limits. Finally, if we take it into account, as we should, those elements in human nature which cannot be satisfied by material goods and are stifled by the over-consumption of them, we arrive at quite definite natural standards, which vary with individuals and classes but are discoverable by each man for himself and which wise men make it part of their business in life to discover. Consuming capacity, therefore, has lagged behind producing capacity, and this has caused production to become largely speculative and to depend to an increasing degree upon the creation of an artificial demand by advertisement and salesmanship. Monetary technique has also been used to expand demand artificially, and the use of it has been seized upon, not only by businessmen seeking profit, but by propagandists preaching increased consumption as an ideal.
This creation of an artificial demand, besides being responsible for great financial disorders, has been disastrous morally. It puts the means before the end and, in serving the means, of necessity inverts the true scale of values; for the means are mass-production, which by its nature puts quantity before quality and the material before the spiritual.
Moreover, the process violates man's nature, not only as a consumer, but also as a producer. Machines are not in themselves either good or bad, and some can be made to serve the higher needs of those who use them. But mechanization, or the general employment of mechanical methods to eliminate the human element in production, inevitably tends to frustrate the very purpose for which it is advocated.
It eliminates craftsmanship (except for a very small minority of technicians) and eliminates also the small units in industry, with the scope they give for personal qualities. Furthermore, it inflicts direct injury on those whom it employs, by requiring them to work as automatons under great nervous strain, and by exacting a servile discipline in the factories, where men are herded and treated in the mass.
Commentary on the Seven Principles as the Basis of an Economic System
The seven principles formulated and briefly explained in the foregoing outline, form, when taken together, a connected whole, linking the fixed realities of the spiritual world and of human nature to economics in such a way as to provide the basis for a complete economic system.
The first principle puts the whole subject matter of economics in its true perspective by displaying the pursuit of material well-being, not as an end in itself, but as an instrument in the service of God. Regarded as an end in itself the pursuit of material well-being cannot do other than drag men down to a merely material level. Regarded as an instrument for God's service it acquires dignity and an eternal value even in its merely technical devices.
The second principle sets up again for the guidance of economists those moral signposts which Adam Smith classed with superstitions concerning witchcraft, but which did in fact save the medieval economists from the confusions and chaos of later economic science. It requires us to reintroduce boldly into economic discussions the ethical precepts condemning (for example) injustice in wage-fixing, extortion by monopolies, and the whole practice of usury. It forbids us to be intimidated by so-called economic laws which purport to have the inflexible character of the laws of mechanics but in fact depend on assumptions concerning human nature that beg the whole question.
These so-called laws beg the question because they assume, not only that men will naturally act in economic life from the single motive of avarice, but also that they will be left to do so without remonstrance from either Church or governments. But our second principle asserts that there can be no sound economic life unless the Church teaches, and governments enforce, the moral law even in the economic sphere, leaving the equations of the economists to adjust themselves to the altered standards of conduct.
The third principle tells us that the State, though the proper agent for enforcing the moral law in the political community, is not the source of the moral law and has no right to override it. Thus this principle vindicates the right of the family and the individual to enjoy certain fundamental liberties and opportunities and fulfill certain fundamental duties attaching to them as human beings before ever the State came into existence. These rights and duties include, moreover, the whole business of maintaining individual and family life at a decent material standard and economic relations with others at a decent moral standard; and this principle by implication lays upon the State the duty of protecting and fostering these activities.
The fourth principle indicates the method by which the third principle may best be put into effect, namely by ensuring to the individual, with his family, an economic status in virtue of which he can exercise his economic rights and fulfill his duties and at the same time be safeguarded against any tendency on the part of the State to exceed its proper functions. This principle requires us to examine the nature of private property and of the right to it, and also the limits to that right. In so doing it points us to the first element of a sound structure of an economic society, namely widely distributed private property, in one form or another, held under the State's protection.
The fifth principle adds a second structural element, namely the corporative organization of industry and of the State itself. This form of organization, like individual status, is both an aid to applying the moral law in economic life and a method of economic construction. In the former capacity it provides a channel for those moral instincts that operate especially through social and collective action. As a method of economic construction it is particularly designed to secure an adjustment of interests and willing cooperation between the various grades of participants in each industry (operatives, management, directorate and investing public), between the different industries, between the banks and industry, and between producers and consumers.
It is, therefore, doubly qualified for giving concrete expression, adjusted to the economic realities of the moment, to the conception of justice in the matter of rents, profits, interest, wages, and conditions of labor and in the operations of trusts and monopolies.
It creates also the possibility of State planning without the dangers of planning conducted solely by a centralized government. The central technical problem of a planned economy (and, indeed, of an economic system of any kind) is the adjustment of supply to demand. Closely connected with this are the problems of the adjustment of investment in producers' goods to the consumption of consumers' goods and of the stabilization of the price level to eliminate the industrial cycle. All these problems of economic interdependence are dealt with most safely by the mutually interdependent organs of the
The sixth principle clears away the chief technical obstacle to these adjustments of interests and this comprehensive planning, namely the habit of thinking of the economic process primarily in terms of money and bringing all economic problems to the test of monetary profit and the well-being of the money market.
That habit is an unending source of confusion and misdirection in economic life. For example, the proper status of agriculture in any particular community can never be judged aright so long as the first consideration is that invested capital should obtain a high or a speedy return. For agriculture can never render a return of that kind where acreage is restricted. Consequently, in a country like
Moreover, the whole question of the place to be accorded in the national economy to international trade is wrongly stated when it is put in terms of , monetary profit. For that depends upon local advantages in costs of production of special commodities, and tempts men to exaggerate those at the cost of the nation's general productive resources in men and soil, for the decay of which no artificially stimulated interchange of commodities can permanently compensate.
Similarly, we can tackle the elimination and prevention of large-scale unemployment constructively and directly in terms of idle labor and unused productive resources if we discard the notion, inseparable from the private creation of credit, that money applied to industry must necessarily be burdened by the requirement that it should earn the market rate of interest.
This principle points, therefore, to the control by the State of the creation and cancellation of credit by the banks, and to the assertion by the community of their ultimate authority over money in all its forms. It points also to the control of the stock market, particularly of its speculative elements, in order that its fluctuations may become merely a reflection of the state of industry and not a disturbing factor in it.
The seventh principle sets very necessary limits to the use of the monetary stimulus, or any other, to any part of the economic whole. For, just as the sixth principle subordinates money to commodities and services, so this last principle subordinates commodities and services to the human persons who are meant to benefit by them. It puts, not only monetary technique, but also advertising and salesmanship, in their proper place in relation to the consumer; and puts the use of machinery, the standardization of industrial processes, "Taylorism," and all such impersonal and depersonalizing aids to production, in their proper place in relation to the producer.
It indicates, also, the fallacy underlying the conception of the
An elementary knowledge of fallen human nature, however, and observation of existing leisured classes, combine to refute this claim. The capacity for using leisure creatively depends largely on the training that the creative powers receive in productive work that calls for their exercise. Methods of production that degrade or stifle these powers, while increasing the craving for leisure, at the same time destroy the capacity for using leisure well.
Moreover, the requisite training of the creative powers and the habit of using them can only be acquired (so far as the vast majority of mankind are concerned) under discipline; and the natural discipline for their acquisition is necessary productive work. If the training is to be enforced in leisure time upon a population with minds rendered vacant and nerves exhausted by their work as machine-tenders, the
By contrast with this delusive mirage, the seven principles safeguard all the essentials of human freedom at the same time as they provide a basis for an exact investigation of the technical problems of economic science.