Few people — at least those of us who are not wealthy — would argue that there is something seriously wrong with the money system in the world today. Most people, however, either dismiss matters as “the way things are (and whatcha gonna do ’bout it?)” or assume it’s due to some conspiracy or other.
Admittedly, a badly structured system can certainly come across like a conspiracy. Nevertheless, the real solution to social problems — and a flawed money and credit system is a social problem — is for people to organize and act directly on the problem so that the system functions properly once more to everyone’s advantage, not just for a few. That way, even if there is a conspiracy, it wouldn’t be able to operate, and (if there never was a conspiracy), the system will work the way intended, for the benefit of everyone.
As an important advance in the institutions of the common good, the Financial Revolution enabled people to finance new capital formation without first reducing consumption and accumulating money savings. This had always been possible, but it had previously been based exclusively on the creditworthiness of an individual or small group.
What commercial/mercantile banking backed up by a central bank did was make “pure credit” part of the overall financial system. “Pure credit” is not a loan of existing savings but of money created based on the feasibility of the productive project for which financing is sought.
Thus, in theory, anyone could participate in money creation for a capital project that was expected to repay its financing. This provided the opportunity and means to advance technologically through new forms of productive capital, such as the steam engine and the power loom.
Hilaire Belloc
Most people, however, had no significant savings or accumulated wealth to collateralize money creation. Collateral is a pledge of assets by the borrower to secure the lender against loss in the event of a default. People without collateral were thereby cut off from access to credit extended through the commercial/mercantile and central banking systems. This virtually ensured that ownership of the new capital instruments would be concentrated, with most people restricted to selling their labor to generate income. (Hilaire Belloc, The Servile State. Indianapolis, Indiana: Liberty Fund, Inc., 1977, 100-101.)
From being independent small owners and laborers able to generate sufficient income for themselves and their dependents, large numbers of people were forced into a condition of dependency on private employers. (Hilaire Belloc, An Essay on the Restoration of Property. New York: Sheed and Ward, 1936, 37-59.) Toward the end of the nineteenth century the financial obligations became too great for the private sector, and the State began taking over much of the burden. (Goetz A. Briefs, The Proletariat: A Challenge to Western Civilization. New York: McGraw-Hill Book Company, 1937, 177-179.)
Result of war
By the middle of the twentieth century, the Welfare or Servile State (although not in the form Joseph Hilaire Pierre René Belloc, 1870-1953, anticipated) had in many instances displaced ownership of both labor and capital as the primary source of income for many people. As predicted (Ibid., 253-256), the cost of sustaining the social welfare system soon became too great for the tax base of virtually any country to sustain, “Since the [First World] War, featuring as one of its manifold consequences, this burden has grown beyond anything ever dreamed of.” (Ibid., 256.) This has been the case even with massive government debt and currency manipulation. (Harold G. Moulton, The Recovery Problem in the United States. Washington, DC: The Brookings Institution, 1936, 36-49.)
At the dawn of the twenty-first century, the global financial system was overburdened with non-productive government debt. Widespread national bankruptcies were avoided only by massive debt rescheduling and counterproductive austerity measures. Even so, these did not address the underlying problem: lack of opportunity and means to be productive on the part of many people and even entire nations. The hostility of governments to private sector productive activity, for example, is a mantra of capitalists the world over, but there is a great deal of truth in it.
Pope Pius VII
The Financial and Industrial Revolutions introduced fundamental changes at a previously unheard-of rate into a society still under stress because of the emergence of Europe from the Middle Ages. Based on a version of liberal democracy directly at odds with that of the American Revolution, the French Revolution undertook to address the problems of society by destroying institutions instead of reforming them.
Reform efforts following the French Revolution attempted either to restore the old order, or to improve on or extend the revolutionary model. The few exceptions, such as that of Pope Pius VII (Luigi Barnabà Chiaramonte, 1742-1823, elected 1800) that endeavored to implement a measure of American liberal democracy in the Papal States, were generally unsuccessful.
Conditions were ripe for even more revolutionary change, and the emerging socialist movement seized the opportunity. Although the term socialism did not appear until the early 1830s, what was originally called “the Democratic Religion,” “New Christianity,” “Neo-Catholicism,” and a variety of other labels described a multitude of systems all based on the theory of socialism. That is, sovereignty resides in some form of the collective, an abstraction, not in the actuality of flesh and blood individual persons.
Henri de Saint-Simon, proto socialist
This led naturally to the first principle of socialism: that the whole of society, construed as exclusively economic in nature, should be devoted to material improvement, with special emphasis on uplifting the poor, as the sole end of life. (“Saint-Simon,” Encyclopedia Britannica, 19: 14th Edition, 1956, Print.) Meeting material wants and needs, not becoming more fully human, became the purpose of existence.
Need, not exchange or reciprocity, redefined justice, disregarding the classical meaning of that virtue. Consequently, all forms of socialism end up turning most people into permanent dependents. Such dependency hinders most people from moving beyond their basic survival and security needs, and thus from becoming more fully human.
In contrast, the Catholic Church has always regarded the corporal works of mercy (feeding the hungry, giving drink to the thirsty, sheltering the homeless, visiting the sick, visiting prisoners, burying the dead, and giving alms to the poor) as coming under charity, not justice. As far as the Church is concerned, the ultimate meaning and purpose of life goes beyond simply meeting one’s material wants and needs.
Rather, satisfying one’s material wants and needs is only one essential step on the way to becoming more fully human and thus preparing oneself for a final end (one’s ultimate purpose in life), however that might be understood in a particular faith or philosophy. The specific means by which the corporal works of mercy are carried out is a matter of expedience and prudence, but they must not be coerced, as the socialists demand, or they cease to be works of mercy and cannot be considered charitable. That is, the corporal works of mercy must be carried out in a manner suitable to the case or situation (expedient) and consistent with reason and good judgment (prudent).
We see this reflected in Maslow’s “Hierarchy of Human Needs,” which puts material needs at the base of the pyramid at the lowest but most urgent level, and self-actualization at the top. In addition, we would either say that self-actualization to fulfill one’s human potential includes serving God and working with others to perfect the common good and civilization, or would add those to another level above self-actualization:
Thus, the purpose of the money and credit system — made possible for everyone with the Financial Revolution, at least potentially — (as is the case for all institutions and society itself) is to help people realize their fullest possible potential in a manner consistent with the demands of human dignity and respect for human sovereignty. Power over one’s own life is essential for realizing one’s potential, and power, as Daniel Webster noted, “naturally and necessarily follows property.” Money and credit being the principal means by which property is acquired today, access to money and credit is thus essential to meeting the demands of human dignity.
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