Monday, January 15, 2007

Opposing the Austrian Heresy

by Christopher Ferrara


I am privileged to introduce Dr. Peter Chojnowski's article "Corporation Christendom: The True School of Salamanca," which deftly exposes how the teaching of St. Thomas Aquinas, Sts. Bernadine of Siena and Antonino of Florence, and the late Spanish Scholastics on just prices and wages has been misrepresented by proponents of the so-called Austrian School of economics.

Dr. Chojnowski's article is an important first step in mounting a traditional Catholic response to the swelling ambitions of the Austrian school, whose two major divines, the deceased liberal Jewish thinkers Ludwig von Mises and Murray Rothbard, wrote the foundational works of the Austrian movement: the massive tome Human Action (1949) by Mises, and the equally massive Man, Economy and State (1962) by Rothbard. These two books comprise the Old and New "Testament" of what amounts today to a cult of radical social and economic laissez faire, which, sad to say, claims a growing number of Catholic adherents.

A CULT OF LAISSEZ FAIRE

I do not use the phrase "swelling ambitions" or the word "cult" lightly. The Mises Institute, founded to preach a gospel of social and economic "liberty" to the world, boasts of the movement's success in near-messianic terms. As the Institute—headed by a Catholic, Lew Rockwell—recently declared:

We have been remarkably effective in building a global movement for liberty and its intellectual foundation. Today Austrians and libertarians form a cohesive movement the world over, united on principles, publishing as never before, and teaching the multitudes through every means available. For this reason, the Austrian School has been called the most coherent and active international intellectual movement since Marxism.1


The Mises Institute's tribute to Rothbard on the tenth anniversary of his death savors of a cultic dulia:

And so, to dear Murray, our friend and mentor, the vice president of the Mises Institute, the scholar who gave us guidance and the gentleman who showed us how to find joy in confronting the enemy and advancing truth, the staff and scholars of the Institute offer this tribute, alongside the millions who have been drawn to his ideas. May his works always be available to all who care to learn about liberty and do their part to fight for the cornerstone of civilization itself. May his legacy endure forever [!] and may we all become happy warriors for the cause of liberty.2


Heaven and earth may pass away, but Rothbard's words will not pass away.

WHAT KIND OF THOMIST IS THIS?

Rothbard befriended a number of prominent Catholics during his life, but evidently was converted by none of them. He professed to be a "neo-Thomist" because of his peculiar secularized notion of "natural rights" detached from any divine endowment. Rothbard (and other Austrians) attempted to pass off his version of natural rights as likewise sanctioned by the Spanish Scholastics, but of course no Scholastic philosopher ever held that there could be natural rights without a divine Obligor to give them the force of natural law, which is man's innate participation in the eternal law. There can be no rights without an obligor, nor law without a lawgiver. And if there is no divine Creator who endowed man with a fixed nature, what sense does it make to speak of human "nature" and "natural" rights in the first place? Rothbard's "scholarship" attributing to St. Thomas and Suarez the "absolute independence of natural law from the question of the existence of God…"3 was not only shoddy; it was nonsensical on its face.4

Rothbard's natural-right theory was limited to the (non-existent) "ownership" of one's own body and the ownership of private property attaching on first appropriation of unused resources.5 Since these were the only two natural rights Rothbard recognized as universally binding, he (like the strict utilitarian Mises) would limit the power of government to the protection of those rights only. Thus, he defined "freedom" as "the absence of invasion [his emphasis] by another man of any man's person or property."6

Based on his concepts of natural rights and freedom, whose deviance from Catholic teaching needs no demonstration, "dear Murray" advocated not only the legal right to abortion but also the right to sell one's children (i.e., to sell the ownership of parental rights), or, if one prefers, to let one's children starve to death. The latter "right," wrote Rothbard, "allows us to solve such vexing questions as: should a parent allow a deformed baby to die (e.g., by not feeding it)? The answer is, of course, yes…."7 Rothbard was certain, however, that "in a libertarian society, the existence of a free baby market will bring such 'neglect' down to a minimum."8 These views of "dear Murray" are enunciated in his Ethics of Liberty, which Mr. Rockwell promotes as part of "the core" and one of the ten "must haves" of Austrian literature.9

FREEING PRICES AND WAGES FROM MORALITY

In demonstrating that the Austrians have not accurately presented the Scholastic teaching on the just wage and the just price, Dr. Chojnowski has done much more than to make an academic point. As he points out, Mises (and, even more so, Rothbard) advocated a social order that negate[s] Christendom and every social, economic, and moral teaching of the Catholic Church [and] also renders "inoperative" the entire Classical moral and philosophical tradition.

Dr. Chojnowski is here referring to a fundamental truth of human existence affirmed by Western man from the time of the pagan philosophers to the great anti-liberal popes of the 19th and early 20th centuries: i.e., that man is ordered by his very nature to life in society under a common ruler and set of laws, and that this arrangement, called the State, is necessary not only for the maintenance of peace but also for the achievement of virtue, which means "becoming as like to God as it is possible for man to become."10 As Pope Leo XIII declared in Libertas, his monumental encyclical on the nature of human liberty:

Even the heathen philosophers clearly recognized this truth, especially they who held that the wise man alone is free; and by the term 'wise man' was meant, as is well known, the man trained to live in accordance with his nature, that is, in justice and virtue.11


The Misesian-Rothbardian system, going even beyond the French Revolutionaries and The Declaration of the Rights of Man, utterly rejects this concept of the State. As Rothbard wrote in Ethics of Liberty:

[T]he great failing of natural-law theory—from Plato and Aristotle to the Thomists and down to Leo Strauss and his followers in the present day—is to have been profoundly statist rather than individualist.


That is, the entire Western tradition is wrong and "dear Murray" is right. Following Rothbard, many (if not most) contemporary Austrians would not only limit the power of the State to the mere prevention of violence and theft (a la Mises), but would abolish the State altogether in favor of a Utopian "anarcho-capitalist" polity in which social order is maintained entirely by insurance companies 13 and other private contractual agencies. As the libertarian scholar Ralph Raico explains:

Contemporary Austrian economists, following in Mises's footsteps, have by and large adopted a more radical form of liberalism. At least one of them, Murray N. Rothbard…has gone even further in his anti-statism. It is to a large degree due to Rothbard's "libertarian scholarship and advocacy"…that Austrianism is associated in the minds of many with a defense of the free market and private property to the point of the very abolition of the state, and thus of the total triumph of civil society….14


Thus, Marxist and Austrian alike envision a withering away of the State, although they arrive at their dreamland from opposite sides: the one by way of abolishing private property, the other by exalting it to the summum bonum of politics (even if, as Rothbard allowed, "personal ethics" might have a higher aim in view).

Seen against this background, the Austrians' attempt to cast the Spanish Scholastics as proto-Austrians, an undertaking begun by Rothbard, is highly significant. The aim here is to persuade us that it is perfectly Catholic to believe that "the market price is the just price" without further moral inquiry, and that this is true always and everywhere, both as to wages and commodities. Of course, to accept this dictum is to reject the teaching of seven consecutive popes, both pre- and post-conciliar, who hold quite to the contrary on the question of just wages: Leo XIII, St. Pius X, Pius XI, Pius XII, John XXIII, Paul VI, and John Paul II have all insisted on precisely the point that the "market wage" and the just wage are not morally equivalent, as an employer is bound in justice to pay, whenever conditions allow, a living wage sufficient for the ordinary support of a dependent worker and his family, no matter what "the market" supposedly dictates. As Pope Leo declared in Rerum Novarum (§63):

[T]here 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 offeree and injustice….


As the Austrians would have it, the Spanish Scholastics shared their theory that prices and wages arise from the sum total of subjective utility assessments by parties to exchanges (i.e., what each party thinks the good or service to be acquired or given up is worth in terms of serving needs or wants on his personal scale of values), rather than by such objective factors as cost plus reasonable profit, what is needed to maintain one's station in life, or the commonly estimated intrinsic value of a good. As Dr. Chojnowski shows, however, the Austrians' own writings admit (or at least inadvertently reveal) that the Scholastics did not teach this absolutist view. Rather, as the renowned traditional Catholic economist Heinrich Pesch, S.J., pointed out in Volume V of his encyclopedic treatise on economics, Lehrbuch der Nationalokonomie, the Scholastic teaching on the just price involved "a combination of 'subjective' and 'objective' factors, as these exert decisive influence on the price formation." These factors included not just subjective utility but also "the qualitative capacity of the goods for satisfying human wants," the "work and costs involved in producing and making the goods available," and, most damaging to the Austrian claim, "the general [objective] value estimation and the officially set price" in keeping with the common legal practice in medieval times of ceiling prices fixed by the prince, especially as to the necessities of life.15 Indeed, even on the question of wages the Spanish Scholastics were in general agreement with the later papal view that in the labor market "compulsion was possible due to disadvantage in bargaining power held by either employee or employer" and that "[c]ollusion associated with labor market combinations might require an impartial observer to establish the just wage, properly reinforced by legal rule"16—not exactly music to Austrian ears.

Why the Austrian insistence on an exclusive subjective utility theory and the resulting "free agreement" as the only criterion of justice in prices and wages? Why do the Austrians seriously defend Scrooge 17 and the practice of price-gouging desperate consumers during emergencies,18 when the voice of conscience in every reasonable man cries "outrageous" and "unfair"? The answer is that if there is no objective standard of a just price or wage, and if the just price or wage is—in every case, always and everywhere—simply the market price, then the market becomes totally "self-regulating" and thus immune from moral correction of its abuses by either the Church or public authority. If the just price is nothing more than the market price, then, conveniently enough, the market never fails to achieve justice so defined. This means that the market's marvelous "self-regulating" capacity can then be cited in favor of an entire "free market society" based on "the market principle," wherein human action in general is free from any "external" norm of justice imposed by law, save that which governs economic exchange: i.e., the absence of violence or theft. As Rothbard argued in a passage full of loaded terminology:

Every time a free, peaceful unit-act of exchange occurs, the market principle has been put into operation; every time a man coerces an exchange by the threat of violence , the hegemonic principle has been put to work. All the shadings of society are mixtures of these two primary elements. The more the market principle prevails in a society, therefore, the greater will be that society's freedom and its prosperity. The more the hegemonic principle abounds, the greater will be the extent of slavery and poverty….19


THE AUSTRIAN HERESY

The effort to "baptize" what has rightly been called (in a broad, non-canonical sense) "the Austrian heresy" would lead us only to a "purified" form of the same social order condemned by every pope from Pius VI through Pius XII. As faithful Catholics understand, however, Murray Rothbard had no idea what "freedom" means, nor any authority to teach the world about the nature of social liberty. The whole truth about social liberty is to be found only in the teaching of the Magisterium, a single paragraph of which contains more wisdom than the entire bloated corpus of Austrian political philosophy. As Pope Leo taught in Libertas Praestantissimum:

[T]he eternal law of God is the sole standard and rule of human liberty, not only in each individual man, but also in the community and civil society which men constitute when united. Therefore, the true liberty of human society does not consist in every man doing what he pleases, for this would simply end in turmoil and confusion, and bring on the overthrow of the State; but rather in this, that through the injunctions of the civil law all may more easily conform to the prescriptions of the eternal law….What has been said of the liberty of individuals is no less applicable to them when considered as bound together in civil society. For, what reason and the natural law do for individuals, human law, promulgated for their good, does for the citizens of States.20


Pope Leo here describes with marvelous concision the only concept of social liberty to which Catholics can adhere. Nor should we entertain the argument by certain Catholic Austrians that the Church's concept of social liberty is out of the question today, and that we must settle for an expedient compromise with "the facts." Speaking of precisely this sort of liberal Catholic, Pius XI declared:

Many believe in or claim that they believe in and hold fast to Catholic doctrine on such questions as social authority, the right of owning private property, on the relations between capital and labor, on the rights of the laboring man, on the relations between Church and State, religion and country…on the social rights of Jesus Christ, Who is the Creator, Redeemer, and Lord not only of individuals but of nations. In spite of these protestations, they speak, write, and, what is more, act as if it were not necessary any longer to follow, or that they did not remain still in full force, the teachings and solemn pronouncements which may be found in so many documents of the Holy See, and particularly in those written by Leo XIII, Pius X, and Benedict XV. There is a species of moral, legal, and social modernism which We condemn, no less decidedly than We condemn theological modernism.21


Finally, we can reply to these social modernists, who call for a compromise of the Catholic ideal, by citing against them Rothbard's own exhortation never to forsake a "radical idealism":

The free-market economist F. A. Hayek, himself in no sense an extremist, has written eloquently of the vital importance for the success of liberty of holding the pure and "extreme" ideology aloft as a never-to-be-forgotten creed. Hayek has written that one of the great attractions of socialism has always been the continuing stress on its "ideal" goal, an ideal that permeates, informs, and guides the actions of all those striving to attain it….Hayek is here highlighting an important truth, and an important reason for stressing the ultimate goal: the excitement and enthusiasm that a logically consistent system can inspire.22


Catholics can certainly subscribe to Rothbard's sentiment in "holding aloft" their own "never-to-be-forgotten creed" concerning true liberty. The Catholic creed of liberty is to be found in the doctrine handed down to them, not by liberal Jewish thinkers, but by the Church that God Incarnate founded to make disciples of all nations. We can only thank Dr. Chojnowski for standing in opposition to those, including misguided Catholics, who would advance another ideal of human society.

Mr. Ferrara is President and Chief Counsel of the American Catholic Lawyers Association, Inc., a religious organization dedicated to defending the civil rights of Catholics in litigation and public discourse. Mr. Ferrara's next book, Liberty, the God That Failed: The Church's Answer to Social and Economic Liberalism, will be published in June.

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1. "Mises Institute Supporters Summit: Radical Scholarship," http://_www.mises.org /upcomingstory.asp?control=68.

2. "The Unstoppable Rothbard," Jan. 7, 2005.

3. Rothbard, Murray, The Ethics of Liberty (New York: New York University Press, 2002), p.4.

4. As Fr. Copleston observed, Suarez certainly taught that "God is, indeed, the author of the natural law; for he is Creator and He wills to bind men to observe the dictates of right reason." History of Political Philosophy, Vol. III, p.385. Without the divine will, natural law and natural rights as such cannot exist, for what obliges man to observe the "natural rights" of others if there is no God to impose the obligation? The later Scholastics merely emphasized the intrinsic goodness of the natural law against the nominalism of William of Occam, who held that the validity of the natural law depended solely on the arbitrary will of God, Who could, if He so willed, make murder a natural right.

5. Ethics of Liberty, p.43.

6. Ibid., p.42.

7. Ibid.

8. Ibid.

9. See ("Ten Must Haves") http:// www.mises.org/store/category.asp7Customer ID= 848567 &ACBSessionID= euoZXmrhabgTmkMTw5DX&SID=2&Category JD=10; ("The Core") http://www.mises.org/ Study Guide Display.asp?SubjID=116. Like all doctrinaire liberals, Rothbard allowed that abortion and the willful starvation of children could be seen as morally wrong according to "personal ethics," but he insisted that the State has no right to prohibit such conduct.

10. Copleston, A History of Philosophy, Vol.1, p.218 (concerning Plato's definition of the pursuit of virtue).

11. Libertas Praestantissimum, §6.

12. Rothbard, Ethics of Liberty, p.21.

13. See, e.g. Hans Hermann Hoppe, [I]Democracy: The God that Failed (New Brunswick, NJ: Transaction Publishers, 2004), p.247: "Widespread agreement exists among liberal-libertarians such as Molinari, Rothbard… as well as most other commentators on the matter that defense is a form of insurance and that defense expenditures represent a sort of insurance premium…the most likely candidates to offer protection and defense services [in place of government] are insurance agencies."

14. Ralph Raico, "The Austrian School and Classical Liberalism," at: mises.org/etexts/aus-trian liberalism.asp.

15. Heinrich Pesch on Solidarist Economics, Excerpts from the Lehrbuch der Nationalokonomie (Oxford: University Press of America, 1998), p.218.

16. Ibid., p.475.

17. Michael Levin, "In Defense of Scrooge," Dec. 18, 2000, at http://www.mises.org/ fullstory.aspx?control=573.

18. John R. Lott, Jr., "Especially During Disasters," http://www.lewrockwell.com/lott /Iott29.html. Lott, apparently, is not a formal Austrian, but his arguments, published on this major Austro-Libertarian website, are typical of this school.

19. Murray Rothbard, Power and Market, Online Edition, p. 1363.

20. Libertas Praestantissimum, §10.

21. Ubi Arcano Dei, §§60-61.

©January 2005
Vol. XXVIII, Number 1
The Angelus

Interview with Thomas Storck

On Cooperative Ownership

John Médaille Interview in Romania

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