• A limited economic role for the State,There were some serious flaws, of course. The federal government was taking a more active role in the economy, due primarily to the increased power it had gained as a result of the war. Labor agitation, while a necessary counter to the growing power of concentrated ownership of the means of production in industrial and commercial assets in the hands of a relatively small class of capitalists, was focusing not on gaining power through ownership for the working classes, but on using the coercive power of the State to enforce better conditions and higher wages. The property rights of small owners were being rapidly eroded as the State and the new capitalist class joined forces to rebuild the economy and stabilize the currency after the war.
• Free and open markets as the best means for determining just prices, just wages, and just profits,
• Recognition and protection of the rights of private property, and (the "fatal omission" of many 19th century economies)
• Widespread direct ownership of the means of production.
Perhaps most important, the widespread direct ownership achieved by means of the Homestead Act was not able to provide ownership opportunities for everyone, nor did it apply to anything other than land. This was due primarily to three factors. One, the amount of land available for homesteading was limited. Two, not everyone is cut out to be a farmer. Three, an increasing proportion of the production of marketable goods and services was coming not from agriculture (although agricultural production was phenomenal), but out of industry and commerce. The proportion of people making a living as farmers was decreasing even as farm ownership was rapidly expanding.
Thus, even though the Homestead Act was one of the greatest economic achievements in history, it came at a time when its effect was diluted by its lack of universal applicability. Ironically, the benefits of the Homestead Act would be almost completed negated in less than fifty years by the incredible expansion of industry and commerce in the United States — an expansion in which, unlike that of the agricultural sector, the great mass of people did not have any opportunity to participate.
Consequently, the doctrines of socialism began swiftly gaining ground, even in the United States. This was all the more insidious in that many adherents of what was and remains effectively socialism were honestly and sincerely convinced that what they advocated was not socialism, but a new, if extremely vague thing they called "social justice." A great deal of this confusion was caused by the virtually complete abandonment of the natural moral law based on Nature as the basis for the social order. Taking its place was either a weak and ineffectual natural law based on the Will, or one of the many theories of government that sought to remove God completely from the equation.
A great deal of the blame for the rapid growth of socialism, even when the socialism was not recognized as such, can be placed on the almost universal misunderstanding of the institutions of money, credit, and finance. Of all the misconceptions about these fundamentally simple concepts, however, two were more destructive than all the others. As we have already noted, these were (and remain) one, the idea that "money" is a purchase order issued by the State or a State-authorized individual or entity, and two, that existing accumulations of savings are necessary to finance capital formation. The first abolishes private property, while the second raises an almost insurmountable barrier against ownership of the means of production by people who are not already wealthy.
The reason for rejecting the first misconception we have already explained in Posting XIII of this series, when we demonstrated that the definition of "money" used by the British Currency School gave the State effective ownership of everything. The second, while asserted as dogmatically as the definition of money, is equally false — even though, in common with the tenets of the British Currency School, it is a cornerstone of Keynesian, as well as Monetarist and Austrian economics, and virtually everything in between.
This is because the assumption that only existing accumulations of savings can be used to finance capital formation necessarily results in the dogmatic assertion that wealth must therefore be concentrated in as few hands as possible, either in a private elite of capitalists, or in the hands of a presumably beneficent State or State-substitute. As Keynes asserted without any proof in The Economic Consequences of the Peace (1919), the book that established his reputation,
The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably. (The Economic Consequences of the Peace, 2.III)The reasoning behind this assertion is logical — once we accept the incorrect belief that only existing accumulations of savings can be used to finance capital formation. Savings in this paradigm is, as Dr. Harold Moulton pointed out in The Formation of Capital (Washington, DC: The Brookings Institution, 1935, 37-41), always defined as cutting consumption — always. This means that, in order to have sufficient savings to form new capital, we need a class of people who cannot consume all they produce, and who are forced to reinvest the excess in additional capital, thereby accelerating their accumulation of unconsumed and unconsumable wealth. As technology becomes increasingly complex and expensive relative to the earning power of the average citizen, ownership of the means of production becomes increasingly concentrated first in the hands of the rich, then the super rich, then the ultra rich.
Thus, as the 19th century entered its final quarter, increasing numbers of people, even in the United States, reacted to the obvious abuses of capitalism. More and more people began looking to the State not only as the secondary or backup guardian of a well-ordered common good, but as the primary provider and guarantor of all individual goods and personal wellbeing. This was a far cry from the attitudes and habits of Americans described by de Tocqueville and Brownson, and all in the space of less than a quarter century.
Nevertheless, the United States was, for all its faults, still seen by many people as the best hope of mankind. Nowhere was this more evident — or, to many people, more surprising — than in the writings of the popes, the heads of the Catholic Church, beginning with the pontificate of Leo XIII.
In his first "encyclical," as certain teaching documents issued by the popes are called, Inscrutabili ("On the Evils Afflicting Modern Society"), issued a short time after his election in 1878, Leo XIII blamed the terrible social and economic conditions on the virtual complete abandonment of the natural moral law as the guiding principle of government. As he explained,
Now, the source of these evils lies chiefly, We are convinced, in this, that the holy and venerable authority of the Church, which in God's name rules mankind, upholding and defending all lawful authority, has been despised and set aside. The enemies of public order, being fully aware of this, have thought nothing better suited to destroy the foundations of society than to make an unflagging attack upon the Church of God, to bring her into discredit and odium by spreading infamous calumnies, and accusing her of being opposed to genuine progress. They labor to weaken her influence and power by wounds daily inflicted, and to overthrow the authority of the Bishop of Rome, in whom the abiding and unchangeable principles of right and good find their earthly guardian and champion. (Inscrutabili, § 3.)In Catholic belief, the pope has been granted a special gift to discern and teach the natural moral law "infallibly." This does not mean that no one else can discern the truths of the natural moral law — it is, paradoxically enough, an infallible teaching of the Catholic Church that the natural moral law can be known in its fullness by all human beings through the use of reason unaided by faith. The "fullness of truth" that the Catholic Church claims refers to matters of faith, not of morals exclusively — as is logical, if we think about it. After all, why would any organized religion claim to teach a revelation from God that it did not also claim was completely or fully true?
No, Leo XIII is clearly referring not to matters of faith, but of morals, the natural moral law, and the undermining of the natural law in part by attacking the institution that believes itself to be the chief teacher and defender of the natural moral law. Nor do we have to be Catholic or even Christian to appreciate the seriousness of the attack on the teaching authority of the Catholic Church. Matters of faith are, as far as the civil order is concerned, a matter of opinion. As de Tocqueville pointed out, as long as the purely religious teachings — matters of faith — of a sect or religion do no harm to the common good and are consistent with the natural moral law, then the State has as much business interfering in the internal affairs of that religion as that religion has interfering in civil matters — that is, none at all.
The case is different with the precepts of the natural moral law. While taught in large measure by organized religion, the natural moral law is, as we have seen, the basis of a just social order. Prior to the shift away from the Aristotelian/Thomist understanding of the natural law that occurred in the 16th century, the precepts of the law were universally accepted in the west, and (in different forms) in the east as well, as C. S. Lewis demonstrated in The Abolition of Man (1943). Applications of the precepts of the natural law may vary, even widely at times, as people adapt the broad outline of the law to meet their particular needs, wants, social conditions, and so on. The basic precepts, however, remain unchanged. As Heinrich Rommen explains, using the institution of private property as an example,
Only the legal institutions of private property and inheritance are of natural law. That is to say, the natural law requires only that there be private ownership and the right of inheritance. It does not demand the property and inheritance institutions of feudalism, or of liberalist capitalism, or of a system in which private, corporate, and public forms of ownership exist side by side. These are positive-law determinations which spring from the diversity of peoples and which change with the socioeconomic evolution. (The Natural Law, 209)To counter the anti-human effects of undermining the moral authority of the Catholic Church, Leo XIII advocated restoring the teaching of the natural law in the schools, especially to young children:
The more the enemies of religion exert themselves to offer the uninformed, especially the young, such instruction as darkens the mind and corrupts morals, the more actively should we endeavor that not only a suitable and solid method of education may flourish, but above all that this education be wholly in harmony with the Catholic faith in its literature and system of training, and chiefly in philosophy, upon which the foundation of other sciences in great measure depends. Philosophy seeks not the overthrow of divine revelation, but delights rather to prepare its way, and defend it against assailants, both by example and in written works. (Inscrutabili § 13)Having identified the underlying cause of the evils of modern society, in Quod Apostolici Muneris (1878), his second encyclical, Leo XIII singled out specific evils — "Socialism, Communism, Nihilism" — as needing special attention. Nor should it come as a surprise, once we understand the reasons for this concern. As Leo XIII stated,
The natural union of man and woman, which is held sacred even among barbarous nations, they hold in scorn; and its bond, whereby family life is chiefly maintained, they slacken, or else yield up to the sway of lust. In short, spurred on by greedy hankering after things present, which is the root of all evils, which some coveting have erred from the faith (1 Tim. vi 10), they attack the right of property, sanctioned by the law of nature, and with signal depravity, while pretending to feel solicitous about the needs, and anxious to satisfy the requirements of all, they strain every effort to seize upon and hold in common all that has been individually acquired by title of lawful inheritance, through intellectual or manual labor, or economy in living. (Quod Apostolici Muneris § 3)The balance of the encyclical is concerned with demolishing all the excuses used by socialists, communists, and nihilists to abolish private property, either by redefining it or by outright confiscation. There is an astonishingly brief exhortation to the rich to alleviate the distress of the poor by distributing alms out of their superabundance (§ 11), but also a reminder that it is God's part, not man's, to punish greed and the refusal to distribute superfluous wealth.
Leo XIII's third encyclical, Æterni Patris ("On the Study of Scholastic Philosophy"), 1879, was a strong reminder (just in case anyone still had any doubts) that the natural moral law as defined by Aquinas — that is, the natural moral law based on the Intellect (Nature), not the Will — is the only sound basis for a just social order.
The problem was that people still didn't appear to be "getting it." Clearly something had to be done. That "something" is what we will look at in the next posting in this series.