Thursday, November 14, 2013

"Distributive Justice"?, XVII: The Enemy Within


We have been examining what both G. K. Chesterton and Fulton J. Sheen characterized as the great conflict of the modern age: the abandonment of sound reason, and its replacement with false faith.  As Chesterton said in his introduction to Sheen’s first book, God and Intelligence,

“The blasphemy is not ours [i.e., that of the Catholic Church].  It is enough for us that our enemies have retreated from the territory of reason, on which they once claimed so many victories; and have fallen back upon the borderlands of myth and mysticism, like so many other barbarians with whom civilization is at war.” (Chesterton, “Introduction,” God and Intelligence, op. cit., 11.)

The question at this point is how the Catholic Church, the institution that both Chesterton and Sheen characterized as the last defender of reason, seemingly abandoned its position and divided into warring camps, “brother against brother.”  Understanding of Catholic social teaching has become so confused and contradictory that in some circles even to mention it, especially the virtue of social justice, is tantamount to cursing, while in others it is a subject fit only for ridicule.  As Pius XI noted,

[T]hose who would seem to hold in little esteem this Papal Encyclical [i.e., Rerum Novarum] and its commemoration either blaspheme what they know not, or understand nothing of what they are only superficially acquainted with, or if they do understand convict themselves formally of injustice and ingratitude.

“Yet since in the course of these same years, certain doubts have arisen concerning either the correct meaning of some parts of Leo's Encyclical or conclusions to be deduced therefrom, which doubts in turn have even among Catholics given rise to controversies that are not always peaceful.”  (Pius XI, Quadragesimo Anno, §§ 39-40.)

I need to make one thing absolutely crystal clear at this point.  While CESJ is not a Catholic institution, neither I as an individual nor CESJ as an institution believe that there is anything contrary to reason in Catholic social teaching.  As an institutional position, we at the all-volunteer, interfaith CESJ (while we remain open to correction on our understanding of these matters by competent ecclesiastical authority of the Catholic Church) hold that Catholic social teaching is the clearest and most consistent body of social thought that exists in the world today.

We do not see the problem as being with Catholic social teaching.  Rather, the problem is with individuals and groups who have divided Catholics and others by interpreting, twisting, and adapting Catholic social teaching to fit an agenda or some assumption, prejudgment, or misconception.  That is why we need to investigate the source of this error, and trace its development, even if only briefly.  It is critical to understanding why I do not think that Chesterton’s cause for canonization is going to gain any traction for quite a while.

As we saw in previous postings in this series, the Civil War wrought a sea change in American society.  There were many aspects of this, but we are particularly interested in one: the shift in understanding of rights as being inherent in people as an aspect of human nature itself, to being a grant from God or the State subsequent to the existence of people as human beings.

From a natural law perspective, prior to the war a system was in place that recognized natural rights for some, while denying them to others.  In the South, the denial was obvious: chattel slavery denied that some people had any rights at all.  In the North matters were less apparent.  Nevertheless, a growing number of propertyless workers were nominally free, but had few effective rights that necessarily accompany the human condition.

Thus, Orestes Brownson characterized the American Civil War as a struggle between the agrarian capitalism of the South supported by chattel slavery, and the industrial and commercial capitalism of the North supported by wage slavery.  The war had been caused in part by the conviction of Southern slave owners (validated — or so it seemed — by David Christy’s argument in Cotton is King, 1855) that their economic survival, even that of the entire United States and the British Empire, depended absolutely upon the slave cultivation of American agricultural products, principally cotton.

The Northern victory ensured that the agrarian capitalism of the South was broken — for a time.  The Homestead Act decentralized some land ownership, and made the shift from cotton to wheat much more feasible than it otherwise would have been.  The “Mills of Manchester” that had seemed an insatiable customer for American cotton had found other sources of supply during the war; fortunes were now being made in Egypt and India on the backs of semi-slave labor, legal slavery having been abolished in the British Empire in 1833.  America shifted from being Europe’s source of fiber, to its breadbasket.

Unfortunately, trapped within the limited past savings paradigm, the conviction that the only way to finance new capital formation is to cut consumption and accumulate money savings meant that only the rich had ready access to financial capital and capital credit on easy terms.  This was both through government subsidy and discounting bills at the state banks and the new National Banks, the quasi-central banking system that also served as commercial banks.

The irony is that commercial banking was invented as a way of being able to finance economic growth without first having to cut consumption.  Instead of using existing accumulations of savings resulting from previous cuts in consumption, commercial banking allows people to turn the present value of future increases in production into money.

This money can be used to finance new capital formation.  When the new capital becomes productive and generates a profit, a portion of the profits can be used to repay the credit extended by the commercial bank, and cancelled.

During the Civil War, the issue of paper currency backed only by government debt (the United States Notes, or “Greenbacks”) caused inflation, and a loss of parity with the gold currency.  Following the war, to restore parity of the paper currency with gold, the government began “deflating” the currency, that is, decreasing the amount to increase its value so that it would once again pass at par with gold.

This caused great hardship among the homesteaders and small businessmen who relied on existing pools of savings to finance development.  The large commercial and industrial interests (most especially the railroads), on the other hand, experienced unparalleled growth.  Being rich, they had collateral, and could create money at will for rapid expansion.

This caused a disconnect between productive power and consumption power — and a growing demand for reform of the financial system as the panics and depressions had increasingly serious effects.  Socialism, especially after the Supreme Court redefined the natural law (particularly private property) in its opinion in the Slaughterhouse Cases, began to look very attractive to people.

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