By the time Pope Leo XIII issued Rerum Novarum advocating private property in capital for everyone (§ 46), “private property” had come to mean different things for the rich, and for the non-rich in America. This was largely due to two circumstances.
The most serious of these circumstances was the shift away from the natural law as the basis for understanding the Constitution of the United States. The U.S. Supreme Court had employed this shift in rendering its opinion in Scott v. Sandford in 1857. This was the notorious Dred Scott case that overturned the Missouri Compromise of 1820 and set the stage for the Civil War.
The Court’s opinion in Scott effectively announced that the Court, not nature, had the power to decide which human beings are persons, setting the stage for Roe v. Wade. While the 14th Amendment overturned Scott, the Court’s opinion in the Slaughterhouse Cases in 1873 nullified the 14th Amendment, effectively vesting the Supreme Court with supreme power over the natural law. The source of rights shifted from human nature to the State.
The other circumstance was almost as serious. The reform of the financial system that resulted in the National Banking Act of 1863 restricted the non-rich to the existing (and diminishing) pool of past savings to finance new capital formation and economic development, while the rich could create their own money for the same purpose by issuing bills of exchange. The National Banks and state banks functioned as banks of deposit for the non-rich, severely restricting participation in the economic common good, while they served as banks of issue for the rich, giving them a virtual monopoly over the ownership of new capital other than homestead land and small ancillary businesses.
As a result of the opinion in the Slaughterhouse Cases, the careful distinction in natural law theory between absolute title (dominion or proprietas) and limited exercise or use (usufruct) was discarded in favor of competing theories. Before the Civil War, the economic struggle had been between the industrial and commercial capitalism of the North, and the agrarian capitalism of the South. Afterwards, the struggle shifted to capitalism v. socialism.
Both capitalism and socialism fog the distinction between title and use. The theory of capitalism asserts that both title and use are absolute. “Ownership” implies not merely inalienability or absoluteness of title, but absolute or unlimited exercise or use.
Capitalist theory, of course, is contrary to the natural law, at least in part. Under natural law, title is held absolutely, just as is the case with any other natural right, such as life and liberty. No one may rightfully be deprived of life, liberty, or property without just cause and without due process. Capitalist theory and the natural law are in agreement on this point. This is the chief reason why capitalism is “only” criticized, where socialism is (as we shall see) condemned outright.
The exercise of property, as well as life and liberty, however, is in natural law theory circumscribed by the limitations imposed by human positive law, a necessary adjunct to natural law. The chief problem with capitalism in this regard is that capitalist theory extends the absolute character of title under natural law, to the necessarily limited exercise or use under human positive law. This appears to be due to the modern (and modernist) confusion between the Intellect and the Will.
Confusing Intellect, a matter relating to reason, lex ratio, and Will, a matter relating to faith, lex voluntas, is a serious matter indeed. Failure to distinguish between the Intellect as the basis for the natural law, and the Will as the basis for human positive law as it applies to believers in a particular system destroys the basis of law as a coherent system.
This is because what we discern through the use of our reason as right and wrong based on human nature (in Jewish, Christian, and Islamic belief a reflection of God’s Nature), is not the same thing as God’s expressed Will in a particular matter. The validity, interpretation, and application of something that we believe expresses God’s Will (or something that we have put in the place of God, such as the State, Hobbes’s “Mortall God”) is based on opinion, not knowledge.
This is disastrous, for while opinion based on faith or even whim may be true, it may just as easily be false. Knowledge, however, is always true. This is because knowledge is subject to validation or verification by empirical evidence or logical argument.
This is where the theory of capitalism goes wrong. Capitalist theory asserts — correctly — that title, the right to be an owner (the right to property), is absolute. The validity of this claim is, however, based not on reason, but on faith, that is, opinion. It is therefore not necessarily true as it would be had it been proved by reason.
The fact that the theory of capitalism is correct in asserting the absolute character of title is therefore only by chance. It is not based on empirical evidence or logical argument. It is, rather, based on the ability of those with property — and thus power — to impose their will (consisting of the belief, not argument or evidence, that title is absolute) on those without property, and who are therefore powerless to resist.
Capitalist theory is, in this instance, right for the wrong reason. In the next posting in this series, we will see where the theory of capitalism is wrong for the same reason.