Industrialism and Guilds

by Arthur Penty

In a recent article in the Labour Monthly, Mr. W. Mellor criticizes National Guildsmen, saying that "they began as compromisers and they have been compromising ever since." The criticism is valid; National Guild theory was a compromise. It was a compromise between Medievalism and Industrialism, and the movement has been compromising ever since, because it was committed to a theory that attempted to reconcile irreconcilables.

The truth of this can best be demonstrated by following the fortunes of the National Guilds League, into whose hands the development of National Guild theory passed, once its organization was formed. The National Guilds League, though it borrowed Medieval principles, was modern in that it did not question the permanence and stability of our Industrial system. But having been born of a compromise it was unstable and found itself at the mercy of circumstances. The choice before the movement was whether it would become more modern or more Medieval. But upon this vital issue it could never make up its mind, and so it happened that it came to travel in opposite directions. Its theory became more Medieval and its policy more modernist and revolutionary. Let me explain.

As originally formulated, the National Guild theory was that of a number of highly-centralized Guilds working in conjunction with the State. Nowadays National Guilds are not interpreted by the League as highly-centralized Guilds, but as a federation of local Guilds, while the idea of the sovereignty of the State has so far disappeared that it no longer finds a place in the basis of the League. Thus when the League was founded its objects were stated to be:

"The abolition of the Wage System and the establishment of self-government in industry through a system of National Guilds working in conjunction with the State."

Nowadays its objects are declared to be:

"The abolition of the Wage System and the establishment by the workers of self-government in industry through a democratic system of National Guilds, working in conjunction with other functional organizations in the Community."

As explained by Mr. Cole at the Conference when the change was made, this new basis was recommended as a formula which would allow members who held different opinions as to the position of the State in a future society to remain in the League and work together for immediate practical ends. Those who believed that the State should be abolished entirely, and those who believed that the State, instead of being the all- powerful Leviathan it is to-day, would in the future be stripped of its illegitimate functions and be reduced to the position of one power among a plurality of powers, were both allowed to interpret the basis in their own way. No one apparently believed any longer in the State's absolute sovereignty.

These changes are significant. But the greatest change of all is in the attitude of the League towards Industrialism, which, from being regarded as a thing of permanence and stability, is nowadays looked upon as being on the verge of collapse. When we remember that the reason which led the movement to reject the idea of restoring the Medieval type of Guilds in favour of the idea of establishing National Guilds turned on this very issue; the advocates of Medieval Guilds, affirming that Industrialism was doomed to dissolution and decay, while the advocates of National Guilds denied it, we begin to feel that there is not much left of the National Guild position, and the fact that every departure from the original position has been in the direction of a return to the principles of Medieval social organization is a striking testimony to their truth and universality.

Though, as I have shown, the transformation of thought that took place within the National Guild Movement was in a Medievalist direction, it was, unfortunately, not consciously Medieval, but came about as a consequence of the pressure of events. But a time came when another group of forces of a very different character began to exercise an influence over it, and it was then that the central weakness of the movement came into the light of day, for it was then seen that the movement stood for nothing sufficiently fundamental to enable it to steer its course successfully between the Scylla and Charybdis of modern politics. By the end of 1919 dissatisfaction was being freely expressed with the policy of encroaching control, which hitherto had been the policy of the movement. This dissatisfaction coincided with the spread of Communist propaganda in this country, which turned the thought of the more ardent spirits in the movement from a belief in reform by constitutional means to a belief in force. Thus it came about that the trend of the movement towards Medievalism was brought abruptly to an end, and the movement became a house divided against itself, in which state of mind it has remained ever since, for neither the Revolutionaries nor the Medievalists within the League are in a sufficiently strong position to force a decision, while the centre was too hesitant to throw its weight in either one direction or the other, failing to understand that no compromise was possible between opposed beliefs. Since then the League has been waning in power, though owing to the successful organization of the Building Guilds the Guild idea has been booming in the country, and Guild literature and speakers have been in greater demand than ever.

Now the underlying cause of this failure of the National Guild Movement is that it has never been honest with itself over the question of Industrialism. When at the beginning of its career it believed Industrialism to be a thing of permanence and stability, it was in a more or less defensible position. But when it came to the conclusion that our Industrial System was breaking up, the justification of its general policy disappeared, for what could be the use of seeking to superimpose Guilds over present-day Industrial activities if those activities did not possess within themselves the elements of stability? Clearly this crisis could have been met in only one way, by broadening the basis on which the movement rested, by frankly recognizing that the problem of restoring Guilds is only one among many problems that will have to be faced before the social problem can be solved. Yet on this more general fundamental problem of society the National Guild Movement has absolutely nothing to say. On the contrary, it continues the Socialist tradition of thought of assuming that the only social problems are finally those of organization and ownership. For Guildsmen, when they speak of changing the system, mean little more than changing the ownership of the system. Hence, the real issue with them is finally the problem of how power may be attained. But it is obvious that the attainment of power and a capacity to use it for the public advantage are two entirely different things, and what reason is there to suppose that if the Labour or the Communist Party succeeded to power, they would not be just as much at the mercy of economic forces of society as capitalists are to-day? Frankly I can see none, for neither Socialists, Communists or Labourites recognize the existence of the problem of men and machines that lies at the centre of the economic problem. And because they do not recognize this problem, it is a certainty that they would be at its mercy. They would be as impotent in the face of the present economic morass as the present Government, differing with them only to the extent that they would at least attempt to be more generous and equitable in their attitude towards the workers.

If we compare Socialist thought to-day with the Socialist thought that penetrated the Chartist Movement, we may say that while current thought is of a far more practical order, with more precision in detail, there is not the same grasp of the main essentials of the problem that confronts society as in Chartist times. To explain my meaning, let us consider the different meanings attached to the proposal to abolish the Wage System in Chartist times and in our own, for it is our link with the past. As expounded by the National Guild Movement, the Wage System is defined as being a state of things in which labour is bought and sold as a commodity in the same way as other commodities are bought and sold, and its abolition is the demand that labour no longer be bought and sold in this way. As such it is really a demand for the regularization, stabilization and moralization of the wage relationship and for industrial maintenance during times of unemployment. But when Socialists of Chartist times demanded the abolition of the Wage System they meant what they said. They meant that the system of distributing purchasing power by means of payment for work done was incompatible with the unrestricted use of machinery. They saw that if machinery is to reduce labour to a minimum then it follows that some other system of distributing purchasing power must be substituted for the present one of payment for work done. For the Wage System breaks down entirely when machinery becomes automatic. Hence it was they demanded that purchasing power should no longer be dependent on the receipt of wages, and it was as a means of creating a new social order, in which it would be possible to distribute purchasing power independent of payment for work done, that they came to demand the abolition of the private ownership of land and capital, and the means of production and exchange. The one was the necessary corollary of the other.

But Socialists and Guildsmen to-day have not that same intellectual grip of the general situation as had their predecessors of Chartist times. Their ideas are not organically related to any central idea. On the contrary, they believe in a number of separate ideas, more or less loosely related, but which are not part of an organic whole. In the Report on Fabian Policy, the abolition of the Wage System is rejected as an impracticable proposal, which in the sense in which it was understood by the Chartists is perfectly true. It is impracticable. But apparently Fabians had no suspicion whatsoever that the idea was logically related to the problem of machinery, which was the reason for the Chartist advocacy of the doctrine (equally impracticable) of the abolition of private property in land, capital, and the means of production and exchange, which doctrine the Fabians retained, in sublime unconsciousness of its origin, basing their propaganda on an accessory idea, and rejecting the proposal which gave it at least a logical validity. Guildsmen, like the Fabians, were so completely unaware that there was any connection between the Chartist demand for the abolition of the Wage System and the problem of machinery, that when they revived the phrase they came to interpret it as meaning the regularization, stabilization and moralization of the wage relationship, entirely unaware of the fact that such a policy is impossible so long as the unrestricted use of machinery is permitted. But when truth is turned out of the front door, it has a way of coming in at the back, and the incompatibility of the wage relationship with the prevailing system of industry, which the early Socialists rightly connected with the unrestricted use of machinery, has in these latter days come to be connected with the problem of credit, and in connection with the Douglas-New Age Scheme, the demand is made for "dividends for all" on the assumption that the dividend is to be considered the successor of the wage.

Now this idea is sufficiently plausible to gain converts among people who do not see clearly what such a suggestion involves. Such people object to the idea of wages for several reasons. In the first place, because the receiving of wages seems to imply a servile status; in the next because on the wage basis, artists and poets, scholars and others who do not do work that is of immediate economic value get left out in the cold; and lastly, because the distribution of purchasing power on the basis of payment for work done does not suggest to many minds a sense of the corporate responsibility of society for the welfare of its individual members.

Now when we come to examine these objections we find they are based upon a confusion of thought. Wages, it is true, are apt nowadays to connote a servile condition, but this is not because a system of payment for work done necessarily involves any degradation, but because under modern conditions it so happens that most people who do any useful work are in a servile condition. Under the Medieval Guild system, the journeymen and apprentices received what were, technically speaking, wages; but we do not associate such payments as they received with the evils of the Wage System because, though wages existed under the Guilds, they did not imply the brutal and inhuman relationship which wages do to-day, for labour was not then a commodity, the price of which was determined by the competition of the markets, but was paid for at a fixed rate determined by the Guilds, of which both masters and men were alike members. Moreover, the journeyman only remained a wage- earner during the earlier part of his life. He could look forward to a day when, as a matter of course, he would set up in business on his own account, for as there was a limit placed to the number of assistants any master could employ, opportunities for advancement were open to all who desired to use them. The Wage System therefore did not in those days present itself as an evil in the way it does to-day. On the contrary, it is the growth of large organizations, on a basis of the subdivision of labour and the unrestricted use of machinery, that has created the evils which we associate with the Wage System to-day; for under such conditions, those personal relationships which humanize life tend to disappear, and their place is taken by a cash-nexus divorced from all sentiment and personal regard. It is such conditions that make the Wage System to-day so brutal, but if the use of machinery were restricted and the subdivision of labour abolished as we demand, that disturbing element which makes wages at once so uncertain, brutal and servile would be removed.

The Medieval Guilds accepted payment for work done as being the normal thing in society, but that did not preclude them from giving aid to the sick and unfortunate or of treating exceptional circumstances in exceptional ways. But owing to the fact that under industrialism all the normal human relationships have become degraded, people are always seeking to make the exception into the rule. Thus because under our existing economic system work that is of no immediate economic value cannot command proper remuneration, they repudiate the normal thing that payment should be for work done, in order that some provision shall be made for the exceptional. But surely this is irrational, for there is no reason why a system of payment should be uniform. It was in the past frankly recognized that certain kinds of activities depended upon patronage, and this should be recognized to-day. But again there is the same prejudice against patronage as against wages, because like all right and human things, it lends itself to abuse. The Church and Guilds in the Middle Ages were the patrons of learning and the arts, and if restored they would become such again in the future. It is because of the decline of the one and the disappearance of the other that learning and the arts are in such difficulties, but it is vain to suppose that people can ever be led to make the exception into the rule. For if they have not sufficient interest in these things as to be willing to act as their patrons, there is no prospect whatsoever that they could be induced to turn the economic system upside down in order that such exceptional activities may be provided for.

And the instinct of the people would be right, for if payment in the future is not to be on a basis of work done, then we must have industrial conscription, for how otherwise is the necessary work of the community to get done? And I don't see how the artist or poet is going to fare advantageously under such conditions. The Church and Guilds might be persuaded to discriminate in their favour, but I cannot see it happening under a national system of industrial conscription.

Further, it is necessary to consider how such a proposition as "dividends for all" would in practice be applied. Reformers may have visions of a wonderful system of industry under which all existing evils would be abolished and each individual have complete and absolute liberty, but in practice the popularization of such an idea could have no other effect than to create a popular vested interest in the maintenance of the existing system of industry with all its abuses. For you cannot abolish the Black Country and draw dividends on it, since the two ideas are mutually exclusive.

But is there anything practical at all in this proposal of "dividends for all?" It is obvious that it can only be theoretically justified on the assumption that the present system has within itself the elements of permanence and stability. If the wage system were the only thing that was breaking down, then the plea that purchasing power must in the future be distributed by means of dividends rather than wages would at any rate be plausible. But the fact is that simultaneously with the breakdown of the wage system, there is going on the breakdown of every other institution in modern society. Politics, religion, art, industry, technical skill, the institution of the family, and all other social traditions are in a state of disintegration. As it is apparent that all these problems are organically related to each other, it is evidently impossible to effect change or reform in any one of them apart from dealing with the problem of machinery that lies behind them all. Thus, to go no further, "dividends for all" is only possible on the assumption that our financial and industrial system can be preserved.

This brings me to the central idea of the Douglas-New Age Scheme which we must now proceed to consider. Mr. Douglas sees, as most people who think do, that the deadlock that has overtaken industry is no ordinary trade depression that will gradually disappear before the normal operations of demand and supply as previous depressions have done. On the contrary, he maintains that the present situation is the logical outcome of the pursuit of the policy of Maximum Production on a basis of bank credit. Our system of credit, he says, upsets the balance between supply and demand by reason of the fact that whereas credits are given for increasing production, they are not given for increasing consumption. That Mr. Douglas has put his finger on the immediate cause of the present deadlock, apart from the economic confusion resulting from the war and the stupidities of the Peace Treaty, is not, I think, to be denied. There can be no doubt that the wholesale issue of credit by the banks to individuals, on the basis of "to him that hath shall be given" is the immediate cause of the present financial deadlock, for it is impossible in the long run to offer facilities for the increase of production without giving corresponding opportunities for the increase of consumption, without upsetting the balance between demand and supply. But while we may agree that the wholesale issue of credit is the immediate cause of the deadlock, it is clearly not the ultimate cause, as we shall find out later. But meanwhile Mr. Douglas proposes to correct this discrepancy between demand and supply by selling goods below cost, the selling price of any commodity bearing the same ratio to its actual cost as the total National Consumption of all descriptions of commodities does to the National Production of Credit, while the Government is called upon to reimburse to the producers of any commodity the difference between their total cost incurred and their total price received by means of treasury notes, such notes being debited, as now, to the National Credit Account.

Now the first and most obvious objection to this Scheme is that such a wholesale issue of paper money would depreciate the currency. But Douglasites are unwilling to admit this. They urge that the fixation of prices which finds a place in the Scheme would be a sufficient safeguard against this. And when we object that to make such a measure effective it would be necessary to fix prices simultaneously in all industries, since if the Scheme were applied gradually and prices fixed below cost in one industry and not in the others, the prices of commodities that were unfixed would rise to restore the balance, they reply that the rise of prices in non-regulated industries would rapidly force on the application of the scheme to other industries. But it won't do. All economic theories based upon the theory of enlightened selfishness promise such results. The adoption of Free Trade by this country, it used to be argued, would force its adoption on other countries, while the theory of unfettered individualism was justified on the grounds that while as producer the individual might suffer, he would nevertheless benefit by the cheapening of all he had to buy. But somehow or other all prophecies based upon theories of enlightened selfishness produce results the very contrary of what was intended. And this theory would certainly be no exception to the rule, for in these days of international markets the unit to be considered is not this country but the world. Under such circumstances the proposition is unthinkable. Those who believe in it only find it thinkable because they love to live in a world of abstractions divorced from reality. The only remedy for such mental states is to translate economic abstractions into concrete terms and to think always in the terms of actual wealth--of bread, clothes, buildings, ships, fuel, furniture, etc. Tested in this way, such abstractions as production and consumption will appear as the most ambiguous of categories that conceal essential differences. Thus they will include everything from food to armaments, things that support life and things that destroy it, and yet we are asked to believe that the economic balance of production can at any time be restored by selling goods below cost. But what if there are things which people do not want at any price--armaments for instance? How would selling below cost help the situation? The whole thing is absurd; it is an illusion that owes its origin to a fatal habit of divorcing the problem of money from the problem of things. It is the reductio ad absurdum of our financial system.

I said that the problem of credit might, apart from the economic consequences of the War and the Peace, be regarded as the immediate cause of the present deadlock, but that it was not the ultimate cause. In support of this contention I would draw attention to the fact that the present deadlock was foreseen by Marx. It finds a place in the Communist Manifesto (1847). And yet, though Marx foresaw this deadlock, there is not in the whole of his writings anything about the problems of credit and high finance (which is not surprising, for the problem is largely the creation of the Limited Liability Companies Act of 1862). On the contrary, he foresaw it as the logical outcome of the investment and reinvestment of surplus wealth for further increase (theory of surplus value). If, therefore, Marx foresaw this deadlock seventy-five years ago, long before this problem of credit had made its appearance, does it not prove that the problem is much more fundamental than the problem of credit? Nay, does not the problem of credit begin to appear as an effect, as a symptom of the disease rather than its cause, and will it not therefore be necessary to dig deeper than Mr. Douglas has done if a solution is to be found?

But while Marx saw that the investment and reinvestment of surplus wealth for further increase would in the long run produce an economic deadlock, he did not regard this practice as the ultimate cause, for he saw that behind the problem of finance was the problem of machinery. He saw that the capitalists were not masters of their own house, inasmuch as they were at the mercy of their machines. The progress of invention was driving capitalism along the road it was travelling, and would in the end spell its destruction. So far I can go with him. But beyond this point we part company, for there was something he did not see. He did not see that the process of industrial development that he traced was not only destructive of capitalism, but of the very fabric of society, while in the long run the unrestricted use of machinery and capitalist development would bring into existence a civilization so complex that the human mind would be unable to comprehend all its multitudinous interconnections. And because of this, because modern civilization makes demands on our alertness and many-sidedness with which our wits and sympathies cannot cope, it tends to degenerate into anarchy. This consideration, apart from any other, should be sufficient to convince us that there is no solution of our problems apart from a return to simpler conditions of life, such as would reduce the complexity of our relationships to terms commensurate with the human understanding.

Looking at the problem from this point of view, our industrial system no longer appears as the foundation upon which a more highly developed civilization can be superimposed, but as a blind alley, from which we must retrace our steps or perish. But how may this be done? This is the sphinx riddle that confronts us, and it is by no means easy to answer. Perhaps it cannot be answered completely by any individual. But of this much we can be certain; that any change in the direction of our activities must be preceded by a change in the heart and mind of the people. That such a change is actually taking place I think is undoubted. But it has not yet proceeded sufficiently far to become practical. The popular mind is thoroughly disillusionized over the idea of progress, but it is still largely under the spell of machinery, and not until that spell is broken will our minds be sufficiently liberated to think and act clearly. The first step, therefore, is to break this spell by means of propaganda. If we could do this, we should be able to see clearer, for the popularization and acceptance of an idea will, if there is any truth in it, tend to create the circumstances necessary to its transformation into the terms of practical politics.

It is a philosophical truth that no synthesis is ever complete, since in every synthesis there is always something left over that becomes the starting-point of the next synthesis. To translate this idea into the terms of the social problem, we may say that the army of unemployed is the something left over from the industrial synthesis, and therefore in our efforts to reconstruct society we must begin with it. Marx recognized this, and he proposed to use them for the purpose of overthrowing the capitalist system by a proletarian revolution. But recognizing, as we do, that our industrial system is in a state of disintegration, the problem that presents itself to us is not how the industrial and capitalist system can be captured or overthrown, but how a new civilization can be built out of its ruins, and therefore we shall attempt to deal with the unemployed as individual men rather than in the mass. Accepting the position that our industrial system is doomed, we should set to work to turn them into agriculturists and handicraftsmen. There should be no more difficulty about this, if it were undertaken in a public way, than there was about turning civilians into soldiers during the war. It is entirely a question of will and determination. Hitherto our efforts to do anything with the unemployed have been the last word in futility, but that is because the only idea behind the various schemes for dealing with them has been to make work, to mark time, as it were, until trade revived. Such an aim inspires nobody. The unemployed themselves are conscious of the futility of the work on which they are employed, and this sense of futility is demoralizing in the last degree. But if the fact that our industrial system is doomed was frankly faced, and men were given a craft or agricultural training to enable them to take their place in the new social order, their work would come to have meaning for them, and this would make all the difference in the world, for men can only do their best when they are dominated by a real motive.

By such means a new society could be built within the existing one, and as our industrial civilization falls to pieces, this new society would gradually take its place. There should be no difficulty about this, if the principle were frankly recognized that at every stage in its development the new society should be protected. The foundations of such a new society would rest, as all stable societies rest, upon agriculture, and to effect such a revival as we anticipate, agriculture would need to be protected from any foreign competition, and prices and wages would have to be fixed. There would, moreover, have to be a complete overhauling of our land system, the reform of which, it is to be presumed, will become practical politics as the situation tends to become desperate. Upon this base of agriculture the new industries in which the subdivision of labour was abolished and machinery controlled would rest. Such industries would need, in the first instance, to be protected against the competition of industries in which the existing abuses were retained, which could be done by putting a tax upon machinery and the subdivision of labour. After a time, as this new society began to develop an organized life of its own, it would no longer stand in need of protection from outside industries, for the saving of cost that would be effected by the elimination of cross-distribution and of overhead charges would more than compensate for the increased cost of its production. Still, prices and wages should remain fixed, and every industry be under the regulation of Guilds to prevent capitalism growing up again within the new society, which it certainly would if freedom of bargaining were permitted. There would be no practical difficulty about reconstruction upon such lines, once the idea was popularly understood. It is impossible to graft the principles we stand for on to modern society if taken separately. But handled together, as part of a large and comprehensive scheme, and nursed in the early stages, there is no reason why they should not be acted upon. We may not be able to return to simpler conditions of society individually, but there is no reason why we should not do so collectively.

Meanwhile external conditions are co-operating to force upon us an agricultural policy. The conclusion becomes irresistible that the days of our industrial supremacy are over. It was an accidental and temporary and not a permanent circumstance that gave colour to the theory, so popular in the first half of the last century, that we were destined to become the workshop of the world. This economic myth owed its origin to the fact that this country was the first to embark upon an industrial career in the modern sense. We had certain natural advantages, an abundance of mineral wealth, and an unrivalled geographical position, which naturally constituted us a centre for trade and commerce, while securing us from the fear of invasion. But the great fact, compared with which all others pale into insignificance, was that we were the first to use steam-power and machinery. It was this fact that enabled our goods to penetrate into every part of our world, which built up huge credits in every country abroad, and led to the enormous expansion of our mercantile marine, while constituting us the merchants and bankers of the world.

But it is apparent that this virtual monopoly could not last indefinitely. It could last no longer than we retained our monopoly of machinery, since, other things being equal, it would always be cheaper to produce goods near the markets and where raw material is found than at a distance from them, and therefore it has happened that one by one other nations adopted machine production and our monopoly came to be challenged. Before the war we were holding our own with difficulty. Lancashire was losing her cotton markets, because of the competition of America, India, Japan and Brazil. Australia had begun to produce her own woollen goods, while in many markets, for all kinds of goods, we suffered from the competition of Germany, Japan and America. But it was the war that completed the change for us by transforming the world conditions. It shattered the fabric of our commerce, industry and finance. Deprived of their accustomed supplies from us, many of our former customers were driven to begin producing all kinds of things for themselves, and as these new manufactures are carried on near to where the raw materials are found or produced, it is manifest that these markets must gradually slip from our hands. We cannot hope in the future to export such large quantities of manufactured goods to Australia, Canada, South America and elsewhere as hitherto, while the tendency is for other nations to carry their own goods in their own ships. Meanwhile, in order to finance the war, we were compelled to dispose of most of our foreign investments. Thus, in one way or other, there is not the money coming into this country that there was before the war, and our industries will not be able to provide work for such numbers as hitherto. Not being able to sell goods to the food-producing nations, we shall soon be without the money to pay for the food we must import to keep our population alive--a fact that is brought home to us by the constant falling of the rate of exchange with food-producing nations.

That is the immediate practical problem that confronts us to-day. If anything could demonstrate the folly of a nation allowing itself to become dependent upon other nations for its supply of food, and building up national industries which were dependent upon foreign supplies of raw material, the situation in which we find ourselves to-day should do so. We have allowed ourselves to drift into an impossible situation, and things must steadily go from bad to worse until agriculture is revived, for as the countries upon which we have been accustomed to rely for a supply of food are beginning to produce their own industrial wares, it follows that our exports to them will tend to become a steadily diminishing quantity, and therefore the only way to meet the situation is for us to take measures to produce as much food as possible for ourselves by the revival of agriculture.

Whether or not sufficient food can be produced in these islands to satisfy our requirements is a debatable question. But supposing it cannot, then it follows that if our foreign trade shrinks to the point at which we cannot sell sufficient goods to food-producing nations to buy the food required to support our surplus population, there can be no remedy apart from emigration, for no tinkering with the machinery of distribution can distribute more food than we can grow and import.

Thus it comes about that the trend of events is forcing upon us the Medieval policy which sought to make each country as self-contained as possible. Though at the moment the loss of our markets is an inconvenience which it is impossible to exaggerate and adds to our perplexity, yet I am persuaded that in the long run it will prove to be a blessing, for so long as our industries were dependent upon foreign markets it was impossible to initiate really drastic reform, for under such circumstances the factors that really governed the problem were outside of our control. The modification of a tariff, or a war, the discovery of some new raw material or some other such event in some remote corner of the world, would dislocate the labour of millions at home, while all the time our fortunes remained in the hands of capitalist adventurers, for they alone could find markets for our surplus produce. To break with this tradition has hitherto been the great obstacle in the path of reform, for it was hopeless to attempt to bring order into an economic system that ramified out into every quarter of the globe. But the obstacle that refused to yield to reason is being removed by the force of circumstances, and a situation is being created in which the social problem may be solved if we have the will and the energy. For with a revived agriculture, with the people back again on the land, a foundation will be laid which will enable a social fabric to be rebuilt that will be permanent and stable.

If it be laid down as a maxim that the first principle of a normal civilization is that it be as self-contained as possible, the second undoubtedly is that it should in no sense be living on capital, but arrange its production in such a way as largely to reproduce itself. Before the age of machines, the inroads made by man on irreplaceable material were moderate and offered no menace to posterity, the store of mineral wealth in the world remained almost intact. But our industrial methods of production use up material at an alarming pace. The machine has an insatiable appetite for fuel and minerals of all kinds, the supply of which is limited. The easily accessible sources of supply of raw materials are becoming exhausted, and the necessity of getting hold of new sources of supply was one of the causes of the war. These considerations, together with the steady and progressive decline in the quality of production, the decay of technical skill, the atrophy of the individual and the social and economic chaos that has followed everywhere in the wake of the machine, lead us inevitably to the conclusion that reaction must come, for it is simply impossible for civilization to continue on the road it is travelling. Such a reaction, by leading to the revival of pre-mechanical standards of thought and industry, will remove the greatest obstacle of all to the solution of our problems.

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The Seven Principles of the New Radicalism

by 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 kingdom of God and His justice, and all these things shall be given you besides" (Mt. 6:33).

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 USSR showed that the political opposition between the two systems counted for less than the common bond of godlessness and in-humanity linking their moral codes.

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 Corporative State.

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 Britain, the monetary criterion will lead to dependence on imported food in order to enable foreign countries to pay interest on capital invested in them or to pay for manufactured exports.

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 Leisure State, which is put forward as an escape from the spiritual evils of mass-consumption and mass-production. The advocates of this ideal urge that the productivity of machines should be used, not so much to multiply commodities indefinitely as to make the necessary commodities quickly, leaving everybody ample leisure. They are often willing to admit that the perfecting of a man's personality depends (once necessities are assured) on his own creative activity rather than on external things. But they claim that, when short spells of machine-minding have become the only necessary work, the men and women who have taken their turn at these will then turn spontaneously to the creative crafts of the pre-machine age.

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 Leisure State would soon be indistinguishable from the Police State, and the leisure would be only an escape from one form of servitude to another.

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.



Taken from The Catholic Mind, Vo1. XXXIX, Nov. 8, 1941, No. 933. Reprinted from The Dublin Review (July, 1941). Introduction written by Mr. Christopher McCann of Angelus Press.

The Servile State (see Introduction above) is available from Angelus Press. Price: $10.00. Explains that capitalism (liberalism applied to economics) is inherently unstable and that the two "remedies" proposed by the world (Marxist collectivism and the Servile State) are worse than the disease! Shows how capitalism tends towards its twin brother Marxism because both undermine the Catholic ideal of a broad distribution of property. The real solution: Distributism (Catholicism applied to economics).

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