December 2022
Continuing our serialisation of papers delivered at the Summer
School of Catholic Studies, held at Cambridge in July-August 1935.
Church and State: 8
ECONOMICS
Both Leo XIII and Pius XI thought it necessary to insist, in their social encyclicals, on the right and duty of the Church to pronounce judgment on questions arising out of the economic activity of men, though they are careful to explain that they make no claim to decide “technical” problems of economic policy, such as the economic desirability of maintaining the gold standard or of introducing a system of protective tariffs. The proof of the Church’s right is so convincing, provided only that one accepts the position of the popes as guardians of morality, that Catholics at least should have no difficulty whatever in accepting it without hesitation.
Briefly, it is that no human activities are emancipated from the sovereignty of the moral law, since this law dictates to mankind the course of action to be followed in the attainment of the last end for which man was created. Consequently, if the Catholic Church and the popes speaking as the earthly heads of die Church are entrusted by God with the duty of declaring the moral law, applying it to particular problems and urging its faithful execution, the economic activities of mankind are, in their moral bearings, a proper subject for the Church’s authoritative guidance.
Logical as this conclusion is, it is often enough impatiently rejected, or at least ignored, not necessarily because the teaching authority of the Church is denied, or because those who deny it reject the moral law, but because the intervention of “outsiders” in the conduct of business relations is resented. It was this resentment which for long hampered the development of trade unionism in this country, and which hampers it today in the United States. Attempts to organise an industry under some sort of Central Council encounter the same obstacle. State interference with conditions of labour has had to overcome it repeatedly.
There is then no reason to be surprised at the objections raised against the Church’s attempt to Christianise the economic order, even apart from religious prejudice against Catholicism or complete indifference to religion of any kind. Obviously religious prejudice adds a new obstacle, but history shows that even in Catholic countries the world of business has never welcomed ecclesiastical intervention. The result of religious indifference is that the social teaching of the Church falls on deaf ears; yet even if those ears were opened the human tendency to resent interference would manifest itself. This tendency was very clearly shown in the early part of last century, when the doctrine of laissez-faire dominated Parliament and a section of our economists, and it appears today when, at Company meetings, the chairman asks the State not to interfere with industry, and when voices are raised in the United States in favour of “rugged individualism.”
So far I have spoken as if the resentment were entirely on the side of the employing class; but it is present too in the Labour Movement. It is true that State intervention is invoked by the Labour Movement, but it is equally true that ecclesiastical intervention is resented, save in particular instances where it supports some action taken by Labour; just as the employing class welcomes ecclesiastical support for its policy.
Nevertheless, it is becoming more and more evident that individualism as an economic policy is bankrupt. When the recent judgment of the American Supreme Court declared that the machinery of the N.R.A.(1) was unconstitutional, the opponents of President Roosevelt’s policy were far from delighted at the prospect of a return to “rugged individualism.” And in every industrialised country the regulation of business by combines, cartels and associations of one kind or another is the order of the day. Fascism equally with Communism includes in its programme a denunciation of economic individualism.
In this atmosphere, the Church’s teaching has had a better hearing than it would have had a century ago, and in certain countries we see attempts to establish a corporative social order (as distinct from the Fascist Corporate State) along the lines laid down by Pius XI, in Quadragesimo Anno. In Great Britain, it must admitted, the Church’s social doctrine is far too little known, even among Catholics; and it is far too readily assumed that she contents herself with defending private property against certain forms of Socialism and asserting the rights of the individual against the State. No doubt this is the reason for the opposition of the Labour Movement to ecclesiastical intervention, and may account for the indifference of capitalists.
In the framework of the general subject-matter of this course of lectures, I am concerned only with one aspect of the Church’s economic programme, viz., the economic functions of the State, and we shall see that it is a happy mean between individualism and collectivism, those two extremes between which social theory swings.
Role of the State: important but subsidiary
The idea that the Church is opposed to the State as such dies hard, as hard as the idea that the Church is necessarily the ally of every Government which calls itself Catholic or protects the Catholic religion. The explanation of the latter notion is easily seen; the explanation of the former is, no doubt, to be found in the fact that in the course of history the Church has not seldom contested claims made by the State. As other lectures have now made clear, Catholic doctrine provides for the State a basis stronger than can be found in any other system of thought, whether the word State be taken to mean the organised political community or the Government.
Taking it in the second of these two senses, and using the word Government to include local as well as the central authority, the State has, according to the social encyclicals of Leo XIII and Pius XI, a most important part to play in economic life. But this part, important as it is, is not unlimited. It is defined by the function of the State, a “subsidiary function” (to use the words of Quadragesimo Anno). The State must assist its subjects in their economic activities, but it must not unnecessarily limit private initiative. When the need arises the State must give a lead to those activities; it must exercise a general supervision over them in the interests of the community; sometimes it will be its duty to stimulate them by its policy, sometimes to check them. “Dirigendo, vigilando, urgendo, condo,” says Quadragesimo Anno. What this means in the concrete we shall see in a few moments; but it is worthwhile pointing out the contradiction between this view of the functions of the State and that upheld by those who put their trust in a policy of laissez-faire.
This is not the place to enter on a long discussion of that once popular social philosophy. It is enough to say that, partly in reaction against excessive State interference in the details of manufacture and commerce, partly under the influence of the cult of “nature” in the eighteenth century, it urged that industry should be left alone to work out its own salvation, and that only in this way could general prosperity be achieved. Speaking in the House of Commons in 1796, Mr. Pitt informed his hearers that trade, industry and barter would always find their own level, and be impeded by regulations which violated their natural operation and deranged their proper effect. In 1844 the Ten Hours’ Bill was opposed in Parliament on the ground that such a limitation of hours would destroy our commercial greatness. These are but two examples of a widespread attitude to State intervention, an attitude condemned by Leo XIII and Pius XI in express terms.
Mediaeval guilds
It was certainly not the attitude of the Catholic Middle Ages. Individualism was not looked upon with favour in those days. The guild organisation existed as a check upon it, and the borough authorities exercised supervision over the trade, industry and commerce of the towns. The Crown did what it could to secure uniformity of weights and measures, and made attempts to secure a sound currency. By the “Assizes of Bread and Ale” it helped to maintain the quality and cheapness of the necessaries of life, and encouraged international trade by protecting foreign merchants; It is a matter of common knowledge that the State enforced the Church’s prohibition of usury.
We find statutes directed against forestalling and regrating, against the disturbance of bargains, against confederacies to raise the price of goods, against unreasonable gild ordinances passed with a view of securing a monopoly of trade, against paying workmen in any other than current coin. Many statutes were passed either to regulate the prices to be charged for various commodities or to ensure the honest manufacture of such commodities. ... In the Middle Ages it was thought that the law ought to intervene to secure not only a commodity honestly manufactured, but also a fair and reasonable price, an adequate amount of skill in the producer, and a fair treatment of the labourers engaged in production. ... The burden of proof in mediaeval times was upon those who denied the right of the State to interfere in such matters; in modern times it is upon those who assert such a right.[2]
Professor Holdsworth goes on to remark that the ideal aimed at by the mediaeval State was a moral ideal — honest manufacture, a just price, a fair wage, a reasonable profit. That is also an apt summary of the ideal of the Church in economic matters, and it is the duty of the State to aim at it today as it did in the Middle Ages.(Q.A., 133).(3) It is more than a coincidence that the doctrine of laissez-faire arose in a society which was pervaded by rationalism.
Rejecting collectivism
Rejecting individualism and laissez-faire, the Church equally rejects the opposite extreme of collectivism, the demand that all means of production (land, transport, factories, mines, etc.) should be nationalised, or (to use a more modern term) socialised. If that demand is s based upon a denial of the right of individuals to own land and other productive property, it is in direct conflict with the teaching of Leo XIII, Pius XI and Catholic tradition about the right of ownership. If, ignoring the question of abstract right, it is based upon an alleged social benefit, it is still rejected by Pius XI as an error of “certain socialists” (Q.A., 55). Not that Catholic social doctrine denies the right of the State ever to take over the ownership of property. On the contrary, it asserts that the State ought to be the owner of such forms of property as “carry with them a power too great to be left to private individuals without injury to the community at large” (Q.A., 114); for the possession of property may in certain cases threaten the very sovereignty of the State (Q.A., 114), to say nothing of the dangers of monopoly and the modem concentration of wealth and of the control of wealth. It is with socialisation as a panacea that the Church quarrels.
The function of the State is, as we have seen, a subsidiary one. It must not arrogate to itself functions which can be adequately performed by individuals or by groups within the State (Q,A., 79, 80), and Pius XI points out that one of the criticisms of the Italian Fascist organisation is that “the State is substituting itself in the place of private initiative, instead of limiting itself to necessary and sufficient assistance” (Q.A., 95).
It may seem paradoxical that two such divergent policies as Fascism and Socialism should concur in attributing excessive power to the State; and yet the apparent paradox is easily resolved by the consideration that for Fascists explicitly, and for Socialists at least implicitly, the State is envisaged as the organ of a party, though of course both parties claim that they are aiming at the general welfare. The very power of the modern State, arising from the perfecting of its organisation and machinery and from its unitary control of the armed forces, makes it a most desirable prize for which competing economic forces contend.
Rise of Big Business
In the Middle Ages there were plenty of dynastic wars with a throne as the prize, but their primary object was not economic. We may not have seen the last of such dynastic wars, for a proposal to restore the Hapsburgs might set Central Europe on fire; but such wars are dwarfed by the far less spectacular (because more hidden) struggle to control the State in the interests of some financial or economic group. In fact, at the present moment the political struggle between socialism and capitalism is, from this point of view, less important than the struggle for the control of the State by Big Business.
The rise of the modern corporation has brought a concentration of economic power which can compete on equal terms with the modern State-economic power versus political power, each strong in its own field. The State seeks in some aspects to regulate the corporation, while the corporation, steadily becoming more powerful, makes every effort to avoid such regulation. Where its own interests are concerned, it even attempts to dominate the State. (4)
At the present moment, President Roosevelt is engaged in an attempt to break up the holding companies in the sphere of public utilities, with a view to reducing the political influence of the great “power trusts”; not the first time a President of the United States has entered the lists against the combines, as the history of the earlier President [Theodore] Roosevelt records. In Canada last June, the Premier of Ontario published a statement in which he said:
“The plain issue is whether the country is to be governed by its elected representatives, or by the dictators in control of the machinery of money.”
The history of the attempts of Big Business to control the policy of foreign States will probably never be written in full, for obvious reasons; but one glaring example is the fight between the great oil trusts for political domination in Mexico. In Great Britain there are no sensational declarations by responsible statesmen to illustrate our theme; but it is worth noting that the recommendations of the Committee on trusts have never been put into effect, and that the Federation of British Industries is always ready to bring its powerful influence to bear on the Government.
As to its avatar, the National Confederation of Employers’ Associations, Professor Richardson writes: “It would probably be no exaggeration to say that no important measure on conditions of labour has been introduced into Parliament during recent years without powerful representations having been made to the Government by the Confederation.” [Richardson, Industrial Relations in Greed, Geneva.] No one can complain if either individuals or groups make representations to the Government on matters which affect their interests, economic or otherwise. Yet it is evident that the more powerful the group and the more urgent its representations, the greater the strength and impartiality required to judge them fairly and to resist them when necessary.
Concentration of power: three-fold struggle
Pius XI, after drawing attention to the concentration of economic and financial power today, says, with pregnant brevity, that it has led to a threefold struggle:
There is the struggle for economic supremacy itself; then the fierce battle to acquire control of the State, so that its resources and authority may be abused in economic struggles; finally, the clash between States themselves. This latter arises from two causes: because the nations apply their power and political influence to promote the economic advantages of their citizens; and because economic forces and economic domination are used to decide political controversies between nations”(Q.A., 108). The State, “instead of being intent only upon justice and the common good, has become instead a slave, bound over to the service of human passion and greed (Q.A., 109).
In the same paragraph he attributes this degradation of the State to “the intermingling and scandalous confusing of the functions and duties of civil authority and of the economic organisation,” another expression of the Catholic view that the State should as far as possible take no direct share in economic life, so that it may more efficiently discharge its duty of “directing, watching, stimulating, restraining”(Q.A., 80).
The Catholic view of the constructive task of the State is already implicit in the Church’s rejection of laissez-faire and collectivism. In a general formula, it is, as we have seen, that the State is charged with the care of the welfare of the community, but that its function is purely subsidiary. The community is not to be regarded as a minor, and the State as its guardian. The State must intervene to provide, in the temporal order, those means to welfare which individuals and groups require, but cannot provide for themselves. The formula is general, and we must now proceed to consider some applications contained in papal teaching on economic relations.
Restoring the organic constitution of society
The most urgent duty of the State today is to promote the restoration of an organic constitution to society. That organic constitution has been broken up and to some extent destroyed by the policy of individualism. “On account of the evil of individualism, things have come to such a pass that the highly developed social life which once flourished in a variety of institutions organically linked with each other has been damaged and all but ruined, leaving thus virtually only individuals and the State, to the no small detriment of the State itself. Social life has entirely lost its organic form.” (Q.A., 78). “The aim of social policy must be the re-establishment of vocational groups.” (Q.A., 82.)
Mediaeval thought proceeded from the idea of a single Whole. Therefore an organic construction of society was as familiar to it as a mechanical and atomistic construction was originally alien.(5)
It is, of course, true that man is a social animal, whether he lives in the Middle Ages or in modern times; and that therefore he tends by his very nature to form associations for various purposes with his fellows. In the economic world, we are quite familiar today with employers’ associations, trade unions, friendly societies, and so on. In the Middle Ages, there were the merchant gilds, and the craft gilds. And at both periods we find the organised groups known as counties and boroughs. Without entering on a long discussion of the changes that have taken place in the law relating to corporations, it is true to say that the economic groups of mediaeval times had a more recognised place in the social constitution than those of today. The city or borough was then as it is now a self-governing entity, but its members were further organised into gilds which came under the supervision of the borough authorities, though possessing powers of self-government. The gilds were not founded by the borough, still less by the State; they were called into existence by the social nature of men plus similarity of economic occupation.
“Dr. Gierke has taught us that in the mediaeval State groups came into existence of themselves, without any creation or ‘fiction’ of the State, and that they acted by themselves, with little if any control from the State.”(6)The gild was a semi-public body, with a recognised role in the social economy; the modern association of employers in this country is a private body, with no legal power to enforce its regulations; registered trade unions now possess a certain status in the eyes of the law, but Parliament “has not constructed any positive system in which they can function constructively.”(7)
The formation of trade unions and of employers’ associations is strongly encouraged by the social encyclicals, though they have the disadvantage that they follow the line of cleavage between the employing class and the workers, thus tending to emphasise the apparent opposition of interest between the two groups and to be organisations of class-struggle rather than of class-harmony. An initial step towards overcoming this disadvantage is the formation of joint councils representing employers and employed to consider and attempt to settle industrial disputes. Such councils, before being recommended by our Whitley Committee, were suggested in the Letter of Cardinal Gasparri to the Union Economique Sociale in 1915, and again by the Sacred Congregation of the Council in a letter to the Bishop of Lille in 1929.(8)
A corporative social order, not a Corporate State
But this is not enough to restore the organic constitution of society on which Pius XI so strongly insists (Q.A., 69, 75, 78, 83, 90, 137). He urges employers’ associations and trade unions “to prepare the way for the realisation of those higher corporations or vocational groups which we have mentioned above” (Q.A.,87).
The re-establishment of vocational groups, to which the Pope had already referred and which has long been a prominent feature in the programme of Catholic social reformers on the Continent, is so important an element in Quadragesimo Anno that the sections which deal with it (Q.A., 75-90) bear as their sub-title words which correspond to the first half of the general title of the encyclical itself. The encyclical is stated to be “On Reconstructing the Social Order and Perfecting it conformably to the Precepts of the Gospel”; the sections which treat of vocational groups are entitled: “The Reconstruction of the Social Order.” There can be no doubt that Pius XI is urging the establishment of institutions corresponding to the gilds of the Middle Ages. He is making his own the words of Leo XIII in an address to one of the great French pilgrimages of working-men (1889):
We urge the revival, at least in substance and in such forms as the new conditions of the times permit, of those corporations of arts and crafts which, in times past, provided for the material and religious needs of the workers.
The mediaeval gilds contained both masters and journeymen, thus serving to bind the two classes together in the pursuit of their common interests. The gild authorities regulated their craft under the supervision of the borough. The gild aided its members in their necessities. The unity of the gild was founded upon the unity of the craft in which the gild brethren were engaged. As this paper is concerned with the economic functions of the State, a fuller discussion of how the essentials of gild organisation could be realised in a modern form would be out of place here. But it is worth noting that such a revival in no way involves a Fascist State. It would create a corporative social order, not a Corporate State. It would destroy neither employers’ associations nor trade unions; it would bring them together into a larger whole, which might well be called (as the guild was called) a corporation, though the name is immaterial. Such a corporation would not be a mere organ of the State, as under Fascism; it would have wide powers of self-government, though of course subject to the ultimate sovereignty of the State. The pope does not say that the State is to establish vocational groups (or corporations), but that their re-establishment is to be the aim of its policy. In other words, the State should be ready to co-operate with the efforts of its citizens to set up such groups.(9)
Observance of the moral law
Pius XI is, of course, well aware that mere institutional reform is insufficient; a sounder morality is also required (Q.A., 77). For lack of this, the mediaeval corporations failed to adapt themselves to the conditions of changing times (Q.A., 97). Christian rationalisation has two aspects; one institutional, the other moral (Q.A., 136). It is for the State to insist on the observance of the moral law; had it not neglected to do so, we should not have to record the abuses which have disfigured and still disfigure the world’s economic activities (Q.A., 133).
It is the duty of the State to see that social justice is not violated (Q.A., 88). This involves a strict control by the State over the workings of free competition, so that it may not result in social injustice, and over those who hold economic and financial power, so that they may not abuse it (Q.A., 110). This does not mean that the State is to attempt to suppress all profits (Q.A., 136), but only such profits as are made at the expense of justice. For instance, there should be regulation of speculation; of joint-stock companies; and of commercial publicity, so far as necessary to protect consumers (Q.A., 132).
Similarly, the State must not stand aloof from the fixation of wages. These are to be fixed primarily by negotiation between employers and employed (subject to a moral minimum), as Leo XIII taught in Rerum Novarum, but the State is to assist them to overcome all obstacles in the way of fixing wages that are fair to all parties concerned, including the community at large (Q.A., 73).
In fulfilling this duty, the State will at the same time help towards that better distribution of property which is so necessary (Q.A., 58, 60), and Leo XIII had already stated that “the law should favour ownership, and its policy should be to induce as many as possible of the people to become owners” (Rerum Novarum). “But how can he ever save money, except from his wages and the practice of thrift, who has nothing but his labour by which to obtain food and the necessaries of life?” asks Pius XI (Q.A., 63) as he enters on a discussion of just wages. Leo XIII urges the advantages of establishing small land-owners, and Pius XI applies his words particularly to agricultural wage-earners (Q.A., 59). Here again there is room for “appropriate and efficacious measures” on the part of the State.
Protection of the poor
Pius XI, in one of his longest quotations from Rerum Novarum, reiterates the teaching of Leo XIII that, while the State is in duty bound to safeguard the interests of all classes in the community, the poor have a special claim on its protection, standing as they do more in need of its help than the richer classes do (Q.A., 25).
Leo XIII strongly approved of factory legislation;[ cf., Q.A., No. 28.] and, while protesting against encroachments by the State on the province of the family, charged the State with the task of coming to the aid of families which had no resources of their own. In Casti Connubii, the encyclical on Christian marriage, Pius XI enumerates some of the economic evils which befall poor families (insufficient housing, unemployment of the bread-winner, excessive cost of primary necessities, mothers forced to go out to work, lack of proper provision for maternity cases), and reminds Governments that they are bound, in virtue of their charge, to remove these evils, either by legislation or financial assistance.
International co-operation
Finally, there is the question of international economic co-operation by means of “pacts and institutions,” which Pius XI recommends in Quadragesimo Anno, No. 89. This provides plenty of scope for action by the State in the economic field.
Conclusion
Summarily, then, the social encyclicals urge a reconstruction of the economic regime on corporative lines, corresponding to the mediaeval social structure, not to Fascism. Individualist laissez-faire is rejected as emphatically as collectivism; Plenty of room is to be left for the initiative of individuals and groups, and neither competition nor combination are to be excluded, though they are to be regulated in the interests of social justice and the common good by the State. The technical details of such regulation are a matter of prudent statesmanship, not of ecclesiastical direction; subject always to the moral duty of the State to give particular protection to such classes as are least able to protect themselves from exploitation.
It is absolutely essential to a successful economic policy that the State consider its function in the economic field as a subsidiary one, though it is not the less important for that. The State must occupy itself with directing the economic activities of its subjects, i.e., giving a lead when necessary, co-ordinating the various branches of industry and the interests of those engaged in each particular branch, working towards a better distribution of property, and combatting agricultural proletarianism as energetically as industrial proletarianism. It must not omit the supervision of economic life, or rely on the fallacy that the economic machine works best when left alone. In so far as necessary, it must stimulate economic progress, and be prompt in checking economic abuses. It must be watchful in enforcing the moral law in the field of economics as elsewhere.
And to perform these functions efficiently and impartially the State must guard itself, and be guarded by the citizens, from the undue influence of economic dictators, anxious to sway its policy in their own interests irrespective of the common good. Thus and thus only can we hope that at last the economic order will secure “for all and each all those goods which the wealth and resources of nature, technique, and the social organisation of economic affairs can give” (Q.A., 75).
FOOTNOTES:
(1) National Recovery Administration: established by Roosevelt in 1933 to eliminate "cut throat competition" by bringing industry, labour, and government together to create codes of "fair practices." - Ed., CO.
(2) Holdsworth. A History of English Law (3rd. ed.), vol. ii, pp. 467, 468. (Methuen.)
(3) The numbers following references to Quadragosimo Anno correspond to the paragraph numbers in the edition of the encyclical published by the Catholic Social Guild.
(4) Berle and Means, The Modern Corporation and Private Property, p. 357. (The Macmillan Company, 1933.)
(5) Gierke, Political Theories of the Middle Age, tr. by Maitland, p. 22. (Cambridge University Press, 1900.)
(6) Barker, Introduction to The Social and Political Ideas of some great Mediaeval Thinkers; edited by F. J. C. Hearnshaw, p. 27. (Harrap, 1923.)
(7) Milne-Bailey, Trade Unions and the State. (Allen and Unwin, 1934.)
(8) English translation published by the Catholic Social Guild, Trade Unions and Employers' Associations.
(9) For an account of recent attempts at realising the corporative idea in one form or another, see Muller, La Politique Corporative, Editions Rex, Brussels, 1935. Useful suggestions for its application; in Great Britain are to be found in Reconstruction, by H. Macmillan (Macmillan and Co., 1933), and in The Framework of an Ordered Society, by Sir Arthur Salter. (Cambridge University Press, 1933.)