The Catholic Roots of the Market Economy

The study of Medieval History has undergone extraordinary developments in the last century.

One of the recurring themes in this vast historical literature is the integral revision of the idea of the Middle Ages, the total demolition of the Enlightenment's concept of the Medieval as the "age of the dark age," or rather, an obscure age of ignorance, superstition and backwardness, the manner in which it has been presented in the past by numerous history textbooks adopted by schools of every degree, which presented it as the era preceding Humanism, the Renaissance, the dawn of modern thought.

At the same time scholars began to identify in the Middle Ages the distant origins of some of the elementary structures of modern society. New studies on scientific thinking, mathematics, the development of trade and monetary economics, manufacturing techniques and the development of culture and urban society are flourishing.

In seeking the roots of economic science, many scholars have begun to focus their attention on the doctrines developed in the fifteenth century in England and in the countries of northern Europe.

The thesis of Max Weber is well known, in which he identifies the seed of the development of modern capitalism in the Calvinist reform. Indeed, economics has its roots firmly sunk in the Middle Ages (see the monumental work of the late Professor Oscar Nuccio and the third chapter of my book: Economics and Person. The Civil Economy in the Theoretical Context of Social Market Economy-Lateran University Press, 2009). It comes as no surprise, therefore, to learn that since the thirteenth century the rudiments for the future development of theoretical economics were formed and then gradually began to be established.

Issues such as political freedom, private property, the social utility of commerce, interest, value, just price, and currency were addressed not only as a purely theoretical abstraction, but in their practical implications.

For centuries the Mediterranean region held the primacy of economic development and provided an environment for the birth of a homo oeconomicus, a rational subject pursuing its own advantage, yet in a moral and theological context, whose anthropological point of reference is a much broader, or "praxeological", homo agens concept. The so-called homo oeconomicus, which comes from medieval economic doctrine, is expressed by the theory that the economy is an architectural art and the market is interpreted as a process rather than as stationary, as a dynamic element rather than a static one. By this, we mean that in the humanists', civilists' and canonists' work we can find a clear notion of the market as a set of relations in which each tries to meet their expectations by trying to satisfy the expectations of others and so, cum-petere (to compete) is understood as the "seeking together" to overcome from time to time (and of course never definitively) the inevitable limit that distinguishes the human race.

The renaissance humanist Leon Battista Alberti, who was devoted to business activities, defended his family enterprise saying, "buisness breaks neither faith nor due honesty" ("ne' traffichi rompesse la fede ed onestà debita") and St. Bernardine of Siena, considering that, "if it is legitimate to lose it must be legitimate to win", concludes that for manufacturers and merchants it is legitimate to make a profit. The Bishop St. Anthony of Florence, sharing the same mindset stated: "Since every agent acts for an end, the immediate aim of the man who works in agriculture, wool, in industrial or similar activities, is profit." For St. Thomas Aquinas there are five basic reasons which justify profits: to provide for the family of the merchant; to help the poor, to promote the welfare of the country; to compensate the work of the merchant, to improve the merchandise. In the words of the authors mentioned, therefore, a benefit appears to be an immediate and legitimate end, necessary for the good of all, as well as essential for productive reinvestment. What is formally condemned is to consider profit as a final end to which morality is sacrificed; or to use words of a humanist of the fifteenth century: "the excessive and unlikely desire to possess" (Leonardo Bruni), in which case it is unlawful. Yet the pursuit of profit is licit, with other purpose: "the art of the merchant is ordered [...] to the work of providing the means which will contribute as an adequate instrument /e ordinata quest'arte mercantile [...] à quest'opera de la consecuzione del fine, concorrerà come instrumento atto." (Cotrugli)

Thus all differences and diatribes aside, in the market, virtues necessarily impose themselves. A new economic system, capitalism, was just beginning to form which in order to take start and grow needed, if not new techniques, at least a new understanding of practices which had long been condemned by the Church, whose anathemas were excessive in many cases. These were overcome on the one hand, with the interpretation of each type of loan and interest: damnum emergens, lucrum cessans, poena conventionalis, and on the other, by a subtle analysis that brought with it the concept of "money capital" from the definition of money for business: capita, to a live element whose strength lies in its seminal character: caput. (see Michael Novak works)

The formulation of this analysis is the original idea of the Franciscan theologian Peter of John Olivi (1248-1298) on capital, interest and just prices. The latter was analyzed by Olivi from a subjective theory of value: The complacibilitas (desirability), essential for understanding the modern theory of decreasing marginal utility. On the basis of Olivian economic thought an innovative theory of capital is founded- understood as the sum of money being allocated to the business, which already containing within itself a "seed of profit"; it is the additional ("superadiunctus") presence of this seminal value that the debtor must repay together with the money he received on loan.

The Olivian idea, accepted and extended by the Franciscan school, made progress, was diffused and even became the common opinion in moral theology through the popular sermons preached in the common language by the Franciscan St. Bernardine of Siena and the Dominican St. Anthony of Florence. In the seventeenth century it became the standard theological position of the Jesuits who began to present it as the ordinary doctrine of moralists, also becoming a source for the moral philosophy of Adam Smith.

Therefore, in the Catholic tradition, it is the Franciscan school of thought which has made a vital contribution to the theoretical analysis of the market economy, of which the social market economy proposed by Wilhelm Röpke in Germany; also by Luigi Einaudi and Fr. Luigi Sturzo in Italy, can be considered, to some extent, progeny and heir.

Is it enough to talk about "Catholic roots" of capitalism? It depends on the meaning we give to this expression. If by "capitalism" we mean a production model based on the positive role played by companies, by the market, by private property and the free, responsible and creative act of the person, anchored to a solid legal system and a clear ideal, the centre of which is itself the work of the most fascinating, elegant and valuable factor of production: human capital. I think it's hard to miss in the Greek, Roman and finally in the Christian tradition, the very roots of capitalism.

It is no coincidence that the ideas expressed by Franciscan theologians and canon and civil lawyers have encouraged the emergence of market institutions and their features. They have made a breakthrough in the subjectivist (complacibilitas) and dynamic (seminal) sense of the theory of value and in the concept of capital, this is their undoubted historical merit.

Today, fortunately, the awareness of the important contribution of the Christian tradition to the rise of free institutions, to widespread pro-labor economic thinking, is no longer a underground scientific position. This awareness has become an integral part of reflection on the Church's social doctrine and, along with a theology and a philosophy of work, there has been a serious and sophisticated analysis of the theological, anthropological and philosophical world of enterprise and how it can contribute in an unique way to a genuine and integral human development, namely to the idea of an intensive, stable and durable program of development.

Flavio Felice is an adjunct scholar at AEI.

Photo Credit: Flickr user sam_herd/Creative Commons

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