Interest on Loans
In pastoral practice, those who take modest interest nowadays need not feel concerned, in the light of the penitentiary instructions. The new Codex luris Canonici (Can. 1543) goes further. There we find: “In praestatione rei fungibilis non est per se illicitum de lucro legali pacisci, nisi constet ipsum esse immoderatum, aut etiam de lucro maiore, si iustus ac proportionatus titulus suffragetur.”
There were those who attributed the easing of the Church’s position to a concession to the sad state of affairs which came about with capitalism, or to the hardness of men’s hearts. The theologian would have some genuine reservations about such a position. The divine moral law remains ever the same and unchangeable; and the Church, according to Catholic teaching, is its true guardian through the ages…
What was the deepest underlying reason for the canonical ban on interest-taking?
The Church’s teaching on interest was that taking interest on loans was a basic violation of commutative justice. The kind of interest which runs contrary to the aequalitas permutationis, she perceived as contrary to the positive Divine law, and also as opposed to the natural law. Now if it is possible to demonstrate that moderate interest in modern conditions does not violate the aequalitas permutationis, then we will have proven that interest nowadays does not conflict with the Church’s ban on usury, but that it is instead in full conformity with the ecclesiastical teaching on interest. The proof will become the more convincing, however, if we can show that interest in our time, even though it is permitted, does not have its basis in the contract as such, but in extrinsic circumstances. In fact, it can rightly be present in every loan, even though it does not, in fact, derive from a circumstance that is intrinsically related to the loan contract itself.
Two facts lead to a profound difference between the medieval and subsequent economic circumstances. 1) The uncommon and more significant expansion of production and commerce, whereby enormous sums of money are absorbed by the growing enterprises. 2) The situation where everyone who has the necessary funds at his disposal could actively participate in commercial life to his own advantage.
As a consequence of all of that, money became the most sought after and cherished commodity. He who has money can do everything or, in any case, any number of things: he can start enterprises, hire workers, go into production for himself, or become a participant in any number of kinds of commercial ventures, corporations, productive partnerships, etc., all of which present opportunities for making profit.
May we perhaps already be permitted to arrive directly at the conclusion that anyone who makes a loan under such conditions provides the de btor with the possibility of making profit - a possibility which is beyond any doubt measurable in monetary terms? Thus, he would have a just claim to interest as recompense for the economic service he afforded to the creditor, which can be expressed in terms of money. However, this conclusion would be a bit premature. The mere fact that there is an opportunity of the debtor to turn a profit which can be expressed in monetary terms does not yet mean that it is also measurable in monetary terms so far as the creditor is concerned, so that he can therefore charge for it as if it were his service to the lender. The amount of the loan is, in fact, as we indicated earlier, transferred to the ownership of the debtor, so that the creditor has no claim to the profit earned with this money by the debtor. “He who has given away the garden, no longer has a right to harvest crops in it.” Thus, it would be improper if we concluded from the mere fact of a loan providing someone with the opportunity for engaging in a lucrative productive venture, etc., that it also involves some service by the creditor, although it happens because of the debtor.
Even in the medieval era there were already productive loans, so that in given situations the creditors were placed in the position where they could engage in productive activities. However, this opportunity remained confined to limited personal business circles involving a relatively small number of persons, as compared with the subsequent economic era, and it also amounted to a smaller portion of the total amount of lending activity. Thus, it was conditioned by the individual situation of such persons, and it did not take on the nature of an opportunity which prevailed generally and which applied to all lending activities. Therefore, it could not extend beyond limits set by individual use-value. Only after productive investment became the dominant use for peoples’ stock of money, specifically of sums of money that were committed to lending activity, not only in the limited circles of a few cities but in the economy overall, was there a gradual shift from purely individual use value to generalized exchange-value. Now extending a loan was no longer merely the offer of a sum of money which was to remain in the debtor’s hands for a specified period of time. Instead, there was a particular kind of credit instrument which could itself be appraised in monetary terms, and which arose not merely from individual situation of production which now prevailed on all sides, etc. This widespread situation also extended to the creditor, insofar as a kind of regular gain associated with his own performance could be designated as the result of his own activity. At the same time, it remained merely a condition for the realization of that result in each individual case where one or the other particular debtor knew how to use the money profitably, or where he was a producer who could produce successfully. With that, however, the necessary objective preconditions were fulfilled, so that the mere extension of credit generally could be designated as the cause of such a particular outcome.
The real possibility of making a profit was created by the mere availability of larger amounts of money capital. That availability was accomplished or provided directly by the act of providing credit on the part of creditors. Thus, the creditor also provided the possibility of making profit, which was associated per se with that availability in these new circumstances according to the ancient principle: “Causa causae est causa causati.”
So now, if the objective bases for recognizing that enlarged measurable importance of lending activities are once present, then the recognition of the special measurable importance of lending activity could not be long in coming, in the judgment and in the estimation of the human beings engaged in economic activity. Interest was now included among the services which deserved just remuneration.
This approach, which we first developed and presented in the Innsbruck Zeitschrift fur katholische Theologie, came to be called the “Theory of Economic Performance or Service.” We accept the designation and recognize accordingly - salvo meliore iudicio - interest in this modern era as the recompense for a service whose value is measurable, i.e., in terms of the opportunity to make a profit by being provided with a sum of money.
What advantages does this theory offer us?
It resolves, in a simple manner, the apparent contradiction between ancient church law and present-day ecclesiastical practice. Interest required merely by the fact of a loan being extended was regarded a usury because it involved a violation of commutative justice. In modern economic conditions interest, of course, appears as reimbursement for a particular kind of service whose value can be calculated in monetary terms; and it is a service which can be identified with the loan on the basis of those extrinsic economic conditions.
(Pesch, LDN, 5.2, 4, 1, 5)
Note: Fr. Pesch goes on to state that his theory of economic performanc or service rendered can be reconciled with the theory of interesse provided that the juridical formulation take into account a general or prevailing market price and not simply refer to individual use-values. The theory of interesse is founded on the extrinsic title lucrum cessans or the "surrender of a chance to make a profit in an individual and particular circumstance." The difference is that in current circumstances the "surrender of opportunity" is considered to apply generally and not only in isolated situations. Now Fr. Pesch's theory formulates the title as remuneration for providing the debtor with a service or "opportunity to make a profit" precisely because this opportunity is has become measurable in terms of a generalized exchange-value rather than individual use-value of a "loss" or "surrender" implied by lucrum cessans. Incidentally, modern financial theory would not differentiate, in terms of measurable value, the "opportunity to make a profit" with the concept of "opportunity cost."
Markets & Pricing
In summary, we may say the following: the just price will be determined, as a rule, by general consensus wherever there is no legally established price. In order that a general consensus may establish itself in the most concrete and objective terms, it is advisable to set up organizations within which producers, merchants, and buyers can express their views. In normal situations, the general consensus will provide an acceptably accurate approximation to the just price, so long as there is a proper kind of give and take between producers on the one hand and consumers on the other, leading to an appropriate adaptation of supply to demand, which is in keeping with the need to provide for people's wants. One may assume that if these prerequisites are fulfilled, that the market price generally fulfills the requirements of justice. However, where that prerequisite is lacking, where powerful forces and interests simply dominate the market in a one-sided manner, or where other unusual situations occur which stand in the way of normal price formation, that presumption ceases to apply. Taken by itself, therefore, the fact that a price is actually asked and paid on the market does not yet add up to justice in pricing.
During and after the War normal price determination in Germany was not operational. Misinformation on both sides made it impossible to achieve any decent balance in the competition between buyers and sellers. The competitive ability of sellers suffered from the acute scarcity of goods which increased day-by-day.
(Pesch, LDN, 5.1, 1, 5, 5)
The ambivalent expression, capitalism, made all the more murky by socialist invective, is dealt with by stripping it of the baggage added by its use as a Marxist category. For Pesch, the essence of capitalism lay in the metaphysical perversion, where "capital", a material factor of production and an instrumental cause of national wealth, assumed primacy over man, the worker, who stands at the center in the solidaristic system of human work. Thus, in historical capitalism, those who owned capital and their administrators took charge of the system and operated it in their own exclusive profit-making interests. Since economists in our time prefer in increasing numbers to juxtapose the "market economy" to socialism, it is worth noting that Pesch allowed that the market economy does not rule out the possibility of providing for peoples' wants in an orderly manner. In other words, rid of the "capitalistic spirit", that ontological perversions of right order in economic life, a market economy could be established which is in reasonable harmony with right order. Perhaps significantly, the notion of a "socially guided market economy" as proposed by the German economist Arthur Spienthoff (d. 1957) is mentioned by Pesch in this section. The contemporary German economy, a quarter of a century after Pesch died, began to be identified as the "social market economy".
(Rupert Ederer, Heinrich Pesch on Solidarist Economics, University Press of America, 1998, pp. 104-105)
Morality & Economic Life
Are there moral obligations in economic life? As George von Mayrsaid, the question may seem absurd, for there does not seem to beany good reason for suggesting that the laws of morality would notapply in precisely that important sector of social life which we call economic life.
Moral laws have universal validity. They establish order in all free activity among human beings. Accordingly, they are valid forthat particular sector of human activity which appertains to economic life.
Yet, it is not at all superfluous to recall this simple, self-evident truth to men's minds, since followers of a materialistic world-view and myopic admirers of present-day economic trends, in their frenzied attempts to thrust aside all obstacles which may stand in the way of the most rapid possible continuance of moralconsiderations in economic life. Even Sombart suggested that all moral impulses and emanations of a sense of justice will have to come to terms with the economic needs of a progressive social order.
According to that view, morality would ultimately not have any decisive influence on the way progress chooses to move, and itintimates that the social order is not to be rooted in the soil of morality.
We represent a different point of view. Morality is compatible withevery kind of bona fide technical and economic progress. It neitherlimits nor stands in the way of the kind of productive capacity and performance which serves to promote genuine human welfare. On the contrary, it promotes that welfare. Yet, economic relationships do not govern themselves, and they do not come to fruition merely onthe basis of purely technical and economic results. Man is not merely an appendage of the material world in which he lives. He isalso bound by moral obligations, and he must function with due regard for the people and the national community of which he, as an individual, is a part. In fact, the material welfare of nations is essentially conditioned by the practical application of the moral law and by the degree of morality that is operational in the economic life of the nation.
That is the thesis we wish to develop in the following pages; andwhen we talk about ethics, we are talking about Christian morality.
(Pesch, Ethics and the National Economy, IHS Press, 2004, p. 37-38)
Free trade, which calls for freedom above all, does not mean, as Montesquieu pointed out in his "De l'Esprit des lois", that a merchant can do whatever he pleases. Limitations on his activity are often the only means to keep trade in the proper channels. Indeed, the merchant can have his freedom curtailed in his own andin his nation's best interest. For example, there are attempts to protect national productive capacities against foreign competitionby tariffs, as there are also measures to prevent shoddy practices, unfair competition, monopolistic abuse of trusts and cartels, etc. If it is the purpose of commerce to act as go-between in dealings between consumers and producers within a particular time and place framework, and to facilitate these, then enterprise may not assert the kind of freedom which would impair those dealings and to raise prices unduly...
...Scarcely anyone would propose seriously that individual national states are, or can be, fully self-contained and autonomous. Yet, it would be unwise to minimize the degree of national autonomy and to sacrifice certain economic sectors where it would be in best interest of one country to hang on to them. Domestic production has its natural center of gravity in domestic consumption. Is each and every act of capital investment abroad in one's national interest? In other words: the national economy may not be sacrificed to the world economy in the name of free trade!
(Pesch, LDN, 2.1, 1, 5, 46)
Progress & Technology
There is, in fact, a teleology of human history, a law ofdevelopment which acquires meaning amidst humanity. It is not a law which abolishes freedom or sets aside the individuality of nations and of persons, or which leads to a universal schema of evolution, or which affects all groups of humanity to exactly the same necessity, but which operates as a higher purposeful cause over the free actions and endeavors of men - a goal willed by the Creator, at ask which He established for mankind and for the accomplishment of which he made human nature capable, and for the purpose of which He equipped it with the necessary energies, needs, motives, drives (the instinct for fulfillment, for achieving happiness). Thus, in the course of the centuries and of the millenia there has been manifested in humanity actual progress, even if some individual nation may retrogress and fall from its lofty position, or if one orthe other national development comes to an end here or there. As God created man in His Image, this natural image was only a closed bud. In the course of history it was supposed to be extended more and more, and made permanent. "The word which rang out on themorning of creation - Make the world subject to you and control it - has never been revoked," said Joachim Pecci who later became Pope Leo XIII.
Thus is to say we have indicated here there is in history a kind of development, a goal for such development, and a law of development. It runs its course for humanity even if mankind does not want to bend its knee before the Creator of the world. For, God's own honor requires that the natural image of God in the foremost of Hiscreatures be realized by dominion over the world, by the unfolding of intellectual and moral capacities, so far and to the extent and level that His infinite wisdom has determined. There is nothing more foolish, therefore, than the assertion that Christianity and the Church are the foes of progress. To not want progress would beto deny God. There is but one kind of progress which the Church condemns: the kind of progress which rushes ahead like a stream that breaks through a protective dam, which has no regard for rights and justice and for authority, or for God's decrees and for the welfareof nations. God's and the Church's blessing is bestowed on the kind of striving for progress, however, which sees the highest measure of culture in the full development of the moral world order (Rumelin),a kind of progress which excludes no one - not even the poorest and humblest - from a just sharing in the goods of a higher moral, intellectual, and material culture. Hermann Schell already pointed out,
By his dominion the king makes use of all created things when he cracks the shell which covers his possessions, andwhen not satisfied merely with what he lays his eyes on and can reach out and take with his hands, he probes into nature and gathers the treasures which lie dormant there, and he uses these for the benefit of himself and of his fellow man. How wonderfully and majestically man appears when he serves lightning and lets it strike the ground harmlessly, when he harnesses electric current andmakes it serve him, sending it out across the oceans over loftymountains and across vast plains! How glorious he appears when he orders steam to carry him with great speed across water and land!
Religion, in its holiest safeguards precisely thehighest ultimate goal, the most effective motives, and the mostfertile structures for interpreting and nurturing the cultural purpose which the world is supposed to accomplish in the most comprehensive, dignified, and basically satisfactory manner. Without the religious dimension, where the work of culture isrelated to God, what will become of it, of morality, of science, of art, of the state, of industry, of technology, of man's dominion over nature and respect for it is what is true of the world overall. Both will be unable to elevate and satisfy the inner life of man. The first ordinance of God to mankind is the law of accomplishing the cultural task in the world in such a way that man may achieve his stature as being made in the image of God and being able to achieve his union with God (Gen. I:26-28). The cultural task of the world is religious if it attains to its internal and external dominion over the world. It is irreligious if it makes man internally a slave of the finite…God is the original image and the ultimate destiny, the origin and the end for the world, so that the cultural task in the world is intended to foster its continuing spritualization and transformation into God's kingdom. Inasmuch as the spirit controls the world of objects with a superior freedom, and uses it for understanding the truth, as well as for the continuing realization of the good, the world will become God's kingdom.
"What is progress and how are we to recognize it?" Rumelin asks.
There are many answers put forth. I want to give priority to the shortest of them - that of Herder. Progress lies in the direction of humanity; it lies in increasing the strength of those capacities which elevate man above the animals and make him human: the intellectual, moral, and religious instincts. It issimply expressing that thought in a different way when we refer to progress as the increasing triumph of the spirit over nature, so long as we do not mean by spirit, merely the intellect, and by nature, merely the world roundabout us.
After the Enlightenment provided all of the means to degrade man to the level of the animal, it now becomes the most exalted and noblest task of science to recall that man is the image of God, that the full development of this image is the goal and law of historical development desired by God, and that the sublime Son of God, JesusChrist, was placed at the focal point of world history to serve asthe model image and the way toward this goal.
(Pesch, LDN, 1.1, 2, 3, 6)
The subordination of the earth to man's dominion is not the result of a one-time determined effort, a brilliant master stroke, or a brief but successful victorious assault. What is involved here is agradual, continuing, tedious process of development which involves sacrifice, and where man uses his material and intellectual achievements, and above all also the forces of nature itself, to subject his natural environment to his purposes in an ever more satisfactory manner and degree.
Technology refers, in general, to every kind of artificial intervention employed for the effective achievement of some result. Material technology would be the sum total of all know-how, techniques, approaches, which serve us in using the materials provided by our natural environment in an efficient manner. Thus we speak, for example, of a technology of firearms, of devices formeasuring, of musical instruments, etc. Economic technology is that part of such material technology, which serves the purposes of economic life, which is to say, the efficient preparation and provision of material goods for satisfying human wants. The extent that we are dealing with know-how and techniques in the abstract, we are dealing with a pure or abstract technology. We may call the sum of techniques which are actually used at some particular time concrete or applied technology (Sombart). Schmoller refers to technology as the particular methods which are used for all economic activity. In a narrower sense, "technology" is also defined as the increase in the effective power of human exertions bythe use of material tools. The history of technology provides eloquent testimony by its efficiency for the inherent nobility of human nature.
We scarcely need to draw attention to the fact that the state of technology is of decisive influence on the stage of economic efficiency, as well as the economic magnitude of any given business enterprise; and that, at the same time, the way in which the operation is structured co-determines the utilization of goods.
In the traditional juxtaposition of "economy" and "technology", economic technology appears to be included among external means which the economy uses for its purposes. In another distinction between "economy" and "technology" the expression "economy" has more to do with the quality or with a norm of economic conduct which is related to the principle of economizing. We may also consider one and the same phenomenon from the economic or from the technological point of view in such a way that either technology or economics becomes the dominant consideration. Something can be technically possible, but economically impossible, or at least not feasible. Even technology must yield to the principle of economic viability, making it subject to the economic calculus. " Without technology there is no economy; and without economy there is no successful or sound economic activity."
(Pesch, LDN, 1.1, 1, 2, 5)
It would be a mistake, however, if we were to regard the temporal welfare of the citizens as the purpose of the state without any restrictions of any kind. Instead, what is needed in this regard are certain distinctions to separate in a proper manner the area of legitimate state functions from the sphere of private activity. The direct and positive actualization of the private good of individual citizens, of and by itself, lies beyond the limits of the state's purpose. That is so because: A) each person is the master of hisown destiny. It is for that purpose that each person has receivedhis capabilities and powers, so that he can achieve his private well-being by his own activity. From the state he looks for what is needed to make up for what he lacks, but not the suppression of his own private endeavor. B) Even if it tried to do so, the state could not accomplish the staggering task of directly seeing to the well-being of each individual citizen in a satisfactory manner. C)Finally, civil liberty would be the victim, because the supervision of all of private life would have to be the inevitable consequenceof such an endeavor by the state.
Now if the state does not have the purpose overall of actualizing the welfare of individual citizens by its own positive and directaction, nevertheless, since the temporal welfare of all of its citizen members represents the goal imposed upon it by nature, the purpose of the state involves the indirect endeavor, i.e., making possible the general welfare by social means and institutions. Inother words: the purpose of the state as a political society consists in providing, preserving, and fulfilling the sum total ofthose public conditions and institutions which would provide, preserve, and enhance the potential of all members, through their combined energies so that they may freely and independently achieve their true temporal welfare according to their own particular capacities and situations, and to preserve what they have achieved in an honest manner.
(Pesch, LDN. 1.1, 3, 2, 6)
...Schmoller says: "The guild was a haven of freedom in the great battle in world history between labor and ownership, but it was thetype which served best the kind of work associated with a small amountof capital."
A look back at the time of the guilds prevents us not only from underestimating the religious influence on economic life, but also from overestimating it. Urban economic policies and the guild structure were filled with the Christian spirit during the Middle Ages. The sense of community, civil and occupational solidarity, came into practical application during the time of the guilds. The quest for gain found its limits in the notion of being provided for according to one's station in life. But as indicated, we should not overlook the fact that there were also some entirely different natural and historical factors at work in the structuring of the economy. As the isolation of the cities in the medieval economy was later broken by surplus population growth, and as the space needed for expanded commercial activity was acquired, and as technology developed and new lucrative opportunities presented themselves when overseas discoveries were made, the economy was gradually brought out of its medieval isolation and restrictions into the early capitalistic era even beforeProtestantism and its aftermath made their influence felt. It is misleading to link the "Catholic spirit" to the medieval economy, and to represent it as being other-worldly, ascetic, dominated by the "monkish" idea of self-sufficiency, while contrasting it with calvinism which supposedly "canonizes the here and now" as being the father of triumphant capitalism (M. Weber). Catholicism offers the world no economic system; and it is not tied to any particular economic structure; nor does it bind one to some particular economic system. Its spirit, which involves its ethical imperitives, its exalted concept of personality and labor, its support for the social concept of vocation and for the social virtues of justice and charity can and ought to find application in every economic system and structure. And to the degree that these find application, the negative aspects of the prevailing economic system will more or less retreat to the background, while its restructuring and further development in the direction of fulfilling the economic task -providing for the material welfare of the entire nation - will be influenced in a positive manner. However, it is up to the people who must promote Christianity and see to it that it has that kind of influence in economic life. That is why the proper program for ourtime is not a return to the medieval guilds, but a return to the eternal laws of Christianity, to the Christian spirit which operated so beneficially during the Catholic Middle Ages because it was left to operate without hindrance. Therefore, what is needed is Christianization of the economy through the Christianization of people, by propogating and reaffirming Christian convictions and the Christian will, in the face of whatever difficulties stand vigorously opposed to Christianity in the prevailing economic system, especiallytoday!
(Pesch, LDN, 3, pp. 544-547)
The constructive principle of society leads us to a recognition of a number of laws of the economic order which pertain to the relationships of the member societies to the society as a whole. Here it is a question, as in the case of the social order in general of the rights of member societies toward society as a whole and the rights of society as a whole toward its member societies. Since member societies are societies in the true sense of the word, having their own purpose, there follows first of all that all the legal conditions peculiar to each social organization will in their case exist and be effective, valid by themselves, and independent of a superior social authority investing them with their original, and therefore social, rights of individuals. A member society must above all take care that it does attain its particular, special purpose and must regulate the affairs determined by this special purpose. This is the natural right of self-government which is an attribute of the member societies for the sake of realizing their special purpose and the fulfillment of their own vital tasks. (PRINCIPLE OF AUTONOMY)
This autonomy, however, cannot be absolute, but is subordinate to the moral end, therefore, to the whole social order. According the law of unity and authority within society, it follows that the supreme authority, which must care for the common good of the entire society, must also possess the right to supervise the activity ofthe member societies, to regulate the indispensable contributions ofthe member societies toward the society as a whole and to intervene against violations of the public welfare committed by member societies. (PRINCIPLE OF INTERVENTION)
It holds true, however, that the supreme administrative power may intervene directly only in emergency cases in the internal affairs of these self-governing member societies, while as a rule it should operate by means of the administrative power inherent in the member societies themselves. "The activity of the supreme administrator will be the more effective and the more beneficial the more it affects the individual by means of subordinate authorities."(Taparelli.) The order of social authorities itself is in conjunction with the order of special objectives within the general social objective, the good to be realized by member societies within the framework of public welfare will be the greater, the more they participate in the social authority. As a result, we have a subordination and superordination of the multifarious authorities insociety which we designate as the PRINCIPLE OF HEIRARCHY.
In all these laws, one and the supreme end finds expression invarious respects; namely, that the social order does secure for individuals as well as member groups that free play which they need in order to fulfill their natural tasks, and that the entire society as a whole, superior and overlapping as it is, can devote itself to those tasks only which the individuals or the subordinate member groups cannot administer by their own power. Consequently, the law prevails that each and every social activity is by its nature and concept subsidiary. (PRINCIPLE OF SUBSIDIARITY)
(Nell-Breuning, Reorganization of Social Economy, Bruce, 1936, p. 206)
Economics in Relation to other Sciences
AUTHORITY OF THE CHURCH IN SOCIAL AND ECONOMIC MATTERS
…Since social and economic matters are in close and obvious relation to the moral law, the conclusion follows that economic and socialquestions do fall under papal jurisdiction. Thereby the Pope has stated clearly that only the moral phase of society and economics is the Church's concern, and that over this phase alone he demands the right of supreme judgment.
WHAT THE RELATION BETWEEN RELIGIOUS MORALITY AND ECONOMICS IS NOT
Social and economic matters, therefore, involve moral questions; this statement must be more closely defined in two respects. In the first place, we emphasize that the Pope designates society and economics as a matter concerning morality and not religion as is occasionally believed - two different concepts. True, social life and the work of one's economic vocation are related to man's religious life; he can and must keep religion in touch with his vocational activities. This, however, does not make society and economics religious matters, or part of the religious sphere of life. On the contrary, as spheres of human culture, as related series of human actions, they constitute spheres of moral life. We should like to see such expressions, as, for instance, "the social question is not a material but a religious question," disappear; even though they are well meant we could dispense with them. As part of social life, the social question, to be sure, means considerably more than a material concern, in spite of its economic character. Nevertheless it is not basically a religious, but fundamentally and wholly a moral question which receives from religion certain support, indeed, cannot be satisfactorily changed without this support, but remains at the same time un-changed in character, and does not become a religious question. So much to clarity the matter in on respect.
THE ORDINATE AUTONOMY OF THE VARIOUS SCIENCES
On the other hand, the Pope's statement clearly means the recognition of what we may call the autonomy or self-sufficiency of the principles proper to each department of culture. This autonomy and the special laws based thereon has been subject to severe criticism. This is the reason why the Pope is anxious to determine the import of his declaration in this respect. He defines the meaning of his statements himself, rather than leave it to an interpreter.
ECONOMIC SCIENCE AND MORAL SCIENCE HAVE EACH THEIR OWN INTRINSIC PRINCIPLES
What is the meaning here of autonomy or self-sufficiency inprinciple? Obviously it means that the various cultural spheres stand, so to speak, on their own feet, are based on their own intrinsic nature, and follow the laws emanating from this foundation. Nothing else can be the meaning of these words. Just this is expressed by the Latin original of the encyclical, assigning such foundation of self-possessed true nature, and own natural laws, to these spheres of interest, in our instance, especially economics. The Latin word designating both foundation of true nature, and natural law is "principium". The Pope says that "economic science and moral discipline are guided each by its own principles in its own sphere" (in suo quaeque ambitu suisutuntur principiis). This is a classical formulation for our "proper autonomy". By the way, this expression is not new, but has been used by the Vatican Council to explain the relation between reason and faith, both of which possess their own proper intrinsic principles according to the doctrine of the Church. The fact that we find here the same terminology that had been used by the VaticanCouncil in explaining intrinsic nature, helps us greatly to express the Pope's thoughts clearly and beyond doubt; here we profit from the intellectual labor of the theologians in stating the relation between reason and faith in the sense of the Vatican Council.
ORDINATE AUTONOMY IS NOT ABSOLUTE BUT RELATIVE
Despite this autonomy, which the Pope retains, he declares that "itis false that the two orders are so distinct and alien that the former in no way depends on the other" (42). The meaning of autonomy, after all, is not what it has been interpreted to be; namely, complete unrestraint and unqualified freedom. In order to prevent such misunderstanding, Catholic authors have frequently, by way of precaution, spoken of "relative" autonomy, in order thus to exclude absolute autonomy. There may be question whether, objectively considered, such a cautious distinction was necessary; however, in consideration of misunderstandings and even malicious misrepresentations that have actually occurred, perhaps it was advisable to exercise such extreme precaution. The Pope expressed the same thought in different words: Following its own laws, "guided by its own principles" not absolutely, but relatively, "in its own sphere," as it has always been understood in Catholic circles. Life's actual material spheres have their own foundations and principles of being; these laws, however, do not exclude the validity of the general moral law governing the particular material sphere; rather they presuppose this validity.
THE SCIENTIFIC CONCEPT OF ECONOMIC LAW
This of course, is true, without further comment, also of the principles of "economics", in other words, economic laws. However,there is no little confusion regarding these economic laws, for which Liberalism and its classical economics must be blamed. Because of this confusion of ideas which blocks the path to clarity, the Pope is confronted with the task of clearing and correcting the scientific concept of economic laws; not in order to assume a professorship of economic science and to give a lecture course, but to secure the necessary foundation upon which to build his ideas.
CONFLICT BETWEEN TURE SCIENCES IMPOSSIBLE
What does the Pope say about economic laws? First of all, it is far from him to deny the existence and bearing of these laws, as is occasionally done, too, in overgreat zeal. On the contrary, thePope accepts as a matter of course these economic laws in the above-mentioned meaning of principles of economics. He states that the economic laws are "derived from the nature of earthly goods and from the qualities of the human body and soul" (42). If this is true, then it follows that these laws are beyond arbitrary human action. Man cannot change either the "nature" of material goods, or his own psychophysical "nature." But what is the content of these natural laws? The Pope states that "they determine what aims are unattainable or attainable in economic matters and what means are thereby necessary" (42). Expressed in everyday language, somewhat unscientific but generally understandable, it means that economic laws declare what will work and what will not. From this it follows directly that a contradiction between economic and moral laws can never be…
(Nell-Breuning, Reorganization of Social Economy, Bruce, 1936, pp. 80-84)
After mentioning what had been done by the Church Teaching - Popes and Bishops - The Encyclical praises in the third place the co-operation of the Church's other members in supporting and propagating the doctrine. The Pope points out that numerous scholarly priests and laymen, under the direction and guidance ofthe Church Teaching, have begun an enormous scientific work. This is nothing less than the proper development of social and economic doctrine in the light of social principles. What, according to thePope, has been the result of these scientific endeavors? It is significant that the Pope speaks of efforts to develop social and economic science, yet mentions only the creation of a Catholic social science as the result. He does not speak of a Catholic economic science - obviously not because the efforts of priests and laymen were successful only in the realm of social science, and not in that of economic science. Rather, the reason is that we are quite justified in speaking of Catholic social science, while the concept of a Catholic economic science cannot be realized. Our hightest authority, Heinrich Pesch, always refused to write a book on Catholic economic science though he knew well that, as a social philosopher, he built on Catholic principles and constructed a "Catholic" social doctrine based upon Catholic tradition and philosophy. In any event, the characteristically delicate distinction made here by the pope is a timely warning to refrain from well-intentioned but ill-advised attempts to remodel economics "from the Catholic viewpoint." Suffice it at this point to have said that much; we will come back in the introduction to the Encyclical's second principal division to it and to the involved question of the independence of sociology and economics.
(Nell-Breuning, Reorganization of Social Economy, Bruce, 1936, pp. 35-36)
Legal Forms of Business
Another element of danger, peculiar to modern economics, the Pope indicates lies in the legal forms according to which economic life today is in large part conducted. Those forms are meant which have been jokingly labeled by the expression that "Every man is hisown 'limited liability corporation.'" The Supreme Court for Financeof the Reich speaks of it as "interposing a juridical person between man and his business." By this interposition, real man, with a sensitive conscience, is one step removed from economic contacts. He is not responsible for his transactions, for the contracts which he concludes, or the credit which he engages, but [it] is responsible, a legal creation, often kept small by design, and raised to the status of juridical personality. There are always two effects. First legally, liability is restricted. Instead of responsibility with all my possessions and earning capacity, that is , with my whole personality, I have responsibility only to the extent that I have invested in [this] juridical person. Morally, the effect is that the responsibility rests much lighter on my shoulders. One person does not meet another with his full commercial and personal honor. The real person disappears behind the firm name and there is no need for gambling with one's own reputation. The French societe anonyme is a very happy and trenchant expression for the essence of such corporations. Legal limitation of liability, restricting material consequences that might involve bankruptcy, as well as the plunge into anonymity are both evidently well calculated to dull the sense of responsibility. This unquestionably constitutes a source of extraordinary danger. Consequently some have even gone so far as to with to abolishlimited liability entirely, without a full realization of the consequences. That from now on everyone would have to stand behind his own business commitments, probably could not be enforced. Morelikely, in place of the present procedure, we would be confronted by and even more dangerous and ignoble system of dummies. This same condition is also responsible for th e fact that savings of the stockholders are frequently not managed with the conscientiousness that is due them as trust funds. Because there is no personal bond between the management and the stockholder, because the great majority of small stockholders is unknown to the management; because stocks change hands in such a way that the management need not be notified - there is absent that responsibility which is always present when people deal face to face. Here too, in addition to measures leading to desirable and necessary securities reform, radical suggestions have been made which to some extent overstep the mark and exceed the limits of the possible. Any attempt to realize them would probably lead also to results far from desirous, very likely to even greater immorality and corruption.
(Nell-Breuning, Reorganization of Social Economy, Bruce, 1936, p. 322)