The Church and Economic Theory

[Warrenton]

If we wish to see economic policy based on ideals the Catholic Church teaches, it might be wise to encourage insistently Catholic persons to run for office…

This is not likely to work, because non-Catholics will not vote for insistent Catholics.

There is no jurisdiction where a “no divorce” candidate would win, for instance.

Asking how the present economic system could be overhauled is a bit like asking how the Mongol khanate could be overhauled in 1220. It can’t be overhauled because it is at its height. Changes here and there can be made that will benefit Catholics, however.

The system we have will continue running until another system brings it down. If the economic system crashes, we can sift through the wreckage, and what we rebuild will depend on what remains. If it changes incrementally, as I think it will, Catholics will do well to try to obtain as much liberty from the system as they can, primarilly through exemption from certain taxes and the freedom to pursue church-linked economic life free from interference.

 

[Abu]

jflare29
You are aware that each of these points requires adjudication? Someone must decide what a just price IS, what a family wage IS, and so on? These decisions typically come from bases in economic theory and moral/spiritual philosophical thought……I’ve never understood why anyone would expect Catholic principles to dominate political, social, or economic life, if those who’re in the positions to make decisions…aren’t Catholic.
Warrenton
Asking how the present economic system could be overhauled is a bit like asking how the Mongol khanate could be overhauled in 1220. It can’t be overhauled because it is at its height.

The present meltdown in so many nations stems from poor economic policies followed by government finagling which has resulted in the booms and busts.

There is no “just price” or “family wage” to be “fixed” by “someone” in government or any other agency.
BTW, there are many who are not Catholics who, in politics, society and economics, support sound principles – as in pro-life anti-abortion movements, anti-homosexual mania, etc.

Here, Fr Brian Harrison’s, O.S., Religious Liberty And Contraception is helpful (John XXXIII Fellowship Co-op (Australia), 1988, p 22-23), concerning “the practical order: human rights and duties.”
“But for a certain norm of action to be a matter of doctrine, it would clearly have to be proposed as a universally binding norm – one which is of certain validity always and everywhere. Thus, we could not elevate to the status of doctrine a norm which is proposed provisionally, and as a subject to possible future correction after future consideration; nor one which is a particular ad hoc decision applying to given circumstances which might turn out to be transitory; nor, finally, one which is a concrete directive designed to give practical force to a doctrine which is in itself too broad or general to have much effect without such further application or specification. (An obvious example of such a doctrine would be the teaching – both natural and revealed – that a labourer deserves a just wage.)”

Everything outside of faith and morals is meant to be learned and developed by non-Magisterial Catholics (and others) in the world of living and acting using reason, without exercising "religious authority”.

To assume that the “present economic system is at its height” is to be totally unaware of the government interference in the U.S.A. which has throttled free enterprise and resulted in the dilemma now faced.

gnjsdad
An end to the system of state sponsored usury (what we call capitalism) we live under now

This sort of prejudice, found among many, is what perverts truth and reality. The derogatory term ‘capitalism’ originated with communist Karl Marx.

What seems to be missed often is that the free enterprise system was developed by the Catholic Late Scholastics and then the Austrian school of economists. There is nothing that can compare with its economic laws – it is the economic approach that has revolutionised the standard of living of billions.
Individual morality determines how owners or managers or employees treat each other and the customers, which ethic may derive from a policy set by the firm.

It is misuse of wealth, and lack of love that matters, not the great vocation of the entrepreneur who creates wealth and jobs. Please study the parable of the talents in which Jesus lauds the servant who has multiplied talents – “For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away. And cast the unprofitable servant into the outer darkness. There will be weeping and gnashing of teeth.” (Mt 25: 14-30).

 

[Captain_America]

Abu, if you know your American economic history, you would remember all the pre-1929 banking problems and so forth.

There never has been a free market. I would be careful about valorizing such a thing; it’s been shown that markets are human constructs and there is a moral responsibility for markets to serve people, not wealth.

I’m not anticapitalist, I’m pro-human. I’ll take the man over the dollar any day.

 

[Captain_America]

gnjsdad is correct. “Wall Street v. 2008” and Greenspan’s Confessions mark the demise of utopian Friedmanism.

So, too, the nations of South America have turned away from that sweet siren call.

 

[buffalo]

How about distributism?

 

[Abu]

Captain America
Abu, if you know your American economic history, you would remember all the pre-1929 banking problems and so forth. There never has been a free market. I would be careful about valorizing such a thing; it’s been shown that markets are human constructs and there is a moral responsibility for markets to serve people, not wealth.

That is why it is vital to know the laws of economics (as against theories), the causes of the busts, and how free enterprise has been hamstrung by governments.

Socialism, Communism and the Welfare State have been exposed and condemned by the Church. Only free enterprise has been supported as being in accord with human nature.
Distributism has never had wide-spread support. One of the reasons may be that “the market economy consists of voluntary property exchanges. There is no mechanism of ‘distribution’ whatsoever.” (Thomas E Woods, The Church And The Market, Lexington Books, 2005, p 161, 201). While Distributism is unworkable as a societal norm, especially as Catholic social teaching recognises the tremendous benefits of free enterprise, condemns socialism, and proposes no “third way”, anyone is free to practise it.

That is why Dr Woods’ book above is described as “A welcome antidote to the various combinations of economic incompetence and self-righteous posturing - ‘liberation theology,’ New Deal welfarism, social democratic interventionism, distributism - that too often masquerade as the only ‘authentic’ interpretations of Catholic social teaching.” (Edward Feser, Visiting Assistant Professor of Philosophy, Loyola Marymount University).

Another review:
“The most thorough examination of Catholic Social Teaching yet available…It should be required reading for priests, bishops, and seminarians, as well as clerics of other denominations, as a remedy for the socialism that has crept into religious circles over the past century.” (Dr William R. Luckey, Chairman, Department of Economics and Political Science, Christendom College).

The application of the development of free enterprise through the great Catholic Late Scholastics saw the “estimated real income per capita in England doubled between 1760 and 1860.” (Cited in Woods, p 169, The Church And The Market, Lexington Books, 2005)

Of Centesimus Annus, George Weigel remarks “Moreover, *Centesimus Annus *jettisoned the idea of a ‘Catholic third way’ that was somehow ‘between’ or ‘beyond’ or ‘above’ capitalism and socialism — a favourite dream of Catholics ranging from G. K. Chesterton to John A. Ryan and Ivan Illich.”

Weigel asserted that “Centesimus Annus not only summarized deftly the intellectual structure of Catholic social doctrine since Leo XIII; it proposed a bold trajectory for the further development of this unique body of thought, emphasizing the priority of culture in the threefold free society (free economy, democratic polity, vibrant public moral culture).

“Those who care to support locally based and smaller-scale agriculture have already been doing so for two decades now by means of community-supported agriculture, which is booming. On a purely voluntary basis, people who wish to support local agriculture pay several hundred dollars at the beginning of the year to provide the farmer with the capital he needs; they then receive locally grown produce for the rest of the year. The organizers of this movement, rather than wasting their time and ours complaining about the need for state intervention, actually did something: they put together a voluntary program that has enjoyed considerable success across the country. Perhaps, if distributists feel as strongly about their position as they claim, this example can provide a model of how their time might be better spent.” What’s Wrong with ‘Distributism’, Thomas E. Woods, Jr., October 6, 2002, at: lewrockwell.com/woods/woods136.html ]​

 

[Captain_America]

Abu. Read mainstream history.

You’ll find the first federal regulatory agency was the ICC, organized at the behest of major railroad corporations. You will also find that state banking laws and eventually federal banking laws came about because this glorious Invisible Hand never really regulates business, but obfuscates justice.

MANY, many stockholders were swindled by “good” businessmen prior to regulation. It’s a mistake to demonize regulation of the market; much regulation HELPS MAKE THE MARKET FUNCTION.

 

[mcteague]

Abu. Read mainstream history.

You’ll find the first federal regulatory agency was the ICC, organized at the behest of major railroad corporations. You will also find that state banking laws and eventually federal banking laws came about because this glorious Invisible Hand never really regulates business, but obfuscates justice.

MANY, many stockholders were swindled by “good” businessmen prior to regulation. It’s a mistake to demonize regulation of the market; much regulation HELPS MAKE THE MARKET FUNCTION.

Please understand the the Austrian school of economics is quite a bit out of the mainstream. It would be hard to find any major economists left or right that agrees with them. They have really Not been paid much attention in 60 years
They primarily appeal to the libertarian fringe. Apart from an almost fanatical belief that there should be no Government involvement in the economy, they are largely disregarded for two reasons. They don’t believe in statistical or mathematical models. It is hard to be taken seriously in modern economics without those things
They have some appeal because they provide simplistic answers that conform to and support libertarian political goals.

 

[Abu]

Captain America
Read mainstream history.

As the Church disposed of the evils of Communism and Socialism as political and economic systems, She has endorsed free enterprise. [Post #19, John Paul II, *Centesimus Annus #42].

How did this arise? Real history:
St Augustine taught that wickedness was not inherent in commerce, that price was a function not simply of the seller’s costs, but also of the buyer’s wants, and it was up to the individual to live righteously. [Politics I, 1254]. Thus legitimacy was acquired by merchants, and the deep involvement of the Church in the birth of free enterprise. [Stephen P Bensch, *Historiography: Medieval European and Mediterranean Slavery 1998, p 231; Cf. The Victory of Reason, Rodney Stark, Random House, 2005, p 57,58, 254].

Long before the so-called “Protestant work ethic”, the rise of the West was due to an extraordinary faith in reason, influenced by Greek philosophy, which resulted from Catholic theology and doctrine, unlike Greek religion. Free enterprise “evolved, beginning early in the ninth century, by Catholic monks…seeking to ensure the economic security of their monastic estates.”(Stark, op. cit. p 55].

Randall Collins has noted that innovation and specialization in the monastic estates was “a version of the developed characteristics of capitalism itself… the dynamism of the medieval economy was primarily that of the Church.” [Randall Collins, *The Sociology of Philosophies: A Global Theory of Intellectual Change, 1998, Cambridge: Harvard University Press, p 47].

Dr Alejandro Chafuen: Economics “is the study of the formal applications that can be deduced from the fact that human beings act purposefully. It does not consider whether these actions are good or bad (an ethical question). Economic science is value free. It analyses cause and effect relationships that, if true, are scientific….only human acts can be judged morally.” (Christians For Freedom, Ignatius, 1986, p 33).

The application of these laws has enabled the huge increases in standards of living for all, following the Catholic insights beginning early in the ninth century, by Catholic monks seeking to ensure the economic security of their monastic estates.

 

[gnjsdad]

As the Church disposed of the evils of Communism and Socialism as political and economic systems, She has endorsed free enterprise. [Post #19, John Paul II, *Centesimus Annus

#42].

It depends on what is meant by free enterprise, so this statement needs qualification.

The Pope, in Centesimus Annus, dealt with the semantic issue surrounding the term “capitalism” in posing the question “Is Captialism the model which ought to be proposed to the countries of the Thrird World which are searching for the path to true economic and civil progress”?

*If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy”, “market economy” or simply “free economy”. *

*But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative. *

The Holy Father most certainly did not issue an unqualified endorsement of capitalism.

 

[gnjsdad]

Please understand the the Austrian school of economics is quite a bit out of the mainstream. It would be hard to find any major economists left or right that agrees with them. They have really Not been paid much attention in 60 years
They primarily appeal to the libertarian fringe. Apart from an almost fanatical belief that there should be no Government involvement in the economy, they are largely disregarded for two reasons. They don’t believe in statistical or mathematical models. It is hard to be taken seriously in modern economics without those things
They have some appeal because they provide simplistic answers that conform to and support libertarian political goals.

One of the problems with libertarians is that they are fond of making distinctions which are really quite meaningless in a plutocracy like America; like the distinction between “business = good” and “government = bad”, for example. It’s hard to tell exactly when Hank Paulsen made the transition from “good” Goldman Sachs businessman to “bad” Secretary of the Treasury in 2008. How this transition occurred they cannot explain.

The fact is that this country is run by the rich for the rich, and the economic engine it has been employing is state-sponsored usury…the contractual lending of money at interest.

This system of state-sponsored usury is the root cause of all the economic boom-bust cycles we’ve gone through. The near banking collapse of 2008 is only the latest example. And the inevitable result of such a system is over-indebtedness. Overindebtedness leads to the debt-deflation cycle.

A handy reference point is Irving Fisher’s article analyzing the underlying causes of the Great Depresion…which he reduces to 9 links of causality

The Debt Deflation Theory of Great Depressions

See Paragraph #24 in link

 

[Abu]

gnjsdad
The Holy Father most certainly did not issue an unqualified endorsement of capitalism.

Not only did the Holy Father endorse free enterprise, he recognised that it would “be more appropriate to speak of a ‘business economy’, ‘market economy’ or simply ‘free economy’ ”, rather than “capitalism”. [CA #42].

The Wisdom of the Church
As Fr James V Schall, S.J., in *Does Catholicism Still Exist?, *Alba House 1994, p 184-185, explains:
“Since the Catholic Church wants poverty confronted, since She wants this confrontation to be done justly and with the interest and cooperation of the workers and the poor, She has had to acknowledge, as did the socialist systems themselves, that there are certain ways that must be employed if mankind is to meet its economic problems. These ways can be known and imitated, but they must include a juridical system, profit, enterprise, knowledge, exchange, a market, voluntary organisations, a relatively independent economy, private property, and respect for work and excellence.”

That’s why we have laws to seek and punish those who steal, cheat, swindle, and worse crimes. That’s why we have the Catholic Church to guide us – She who invented charity in the West. It’s time to face reality.

No wealth can be created until it is produced – that’s why the Late Scholastic system works so well to enable everyone to produce some wealth and to do with it as they choose through free-will. Economic laws are based on the principles of human action – of cause and effect involving God-given reason.

Free enterprise doesn’t emphasise greed and self over the common good – do you know of any legitimate business that can survive without giving its customers value for money, with other similar businesses competing for the customers’ patronage? Is the State going to do a better job of allocation of scarce resources?

It is people who commit crimes and who should be punished. It is a crime to deny “the fundamental human right…. to freedom of economic initiative” which Pope John Paul II recognised in *Sollicitudo Rei Socialis *(On Social Concerns), 1987, #42.

“Society does not have to protect itself from the market, as if the development of the latter were ipso facto to entail the death of authentically human relations…Therefore it is not the instrument that must be called to account, but individuals, their moral conscience and their personal and social responsibility.” (Caritas et Veritate, Benedict XVI, 2009, #36).

 

[Abu]

gnjsdad
state-sponsored usury…the contractual lending of money at interest… usury is the root cause of all the economic boom-bust cycles.

Such myopia obscures the facts on usury:

Deuteronomy 23:20: “You may charge interest to a foreigner,” indicating that interest-taking is not presented as inherently evil or sinful. The larger ethical issue of the morality of interest-taking is not addressed in the Old Testament. Rather, interest was viewed only as a problem of social justice. The problem of commutative justice, i.e., of equivalence of value in an exchange of present for future goods, remained quite untouched (Thomas F. Divine, S.J., Interest, 10).

With free enterprise as developed by the Late Scholastics, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: “For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.”
Consequently, as loaning money did involve loss of profit to the lender and further risk of loss from delay in returning the money loaned, this did justify interest that is just and justifiable.

The Franciscan St. Bernardine of Siena (1380-1444) was perhaps the first theologian to recognize that time of use had an economic value and, at least in certain cases, might be licitly compensated. St. Antoninus (1389-1459), a Dominican of Florence, seems to have questioned whether Aristotle was correct in saying that money is naturally sterile. Money alone, he said, is sterile, but, combined with knowledge and enterprise, it is fruitful. His Summa Moralis examined commerce and banking, and prepared the way for modern notions of interest, which generally regard proper returns on loans taken with just title as fair.

Today, the term “usury” is usually reserved for taking excessive (i.e., unusually high for the economic conditions) interest on a loan because of someone’s circumstances: The greed of the lender takes unjust advantage of the weakness or ignorance of the borrower. [See *Encyclopedia of Catholic Doctrine, Our Sunday Visitor].

The problem has been the Government finagling which has created a monster of its ownmaking.

 

[gnjsdad]

Such myopia obscures the facts on usury:

It is not myopia, but fact, that usury inevitably leads to overindebtedness, and this is due to the nature of usury. Too many people with too much debt eventually causes the economy to “bust”.

Abu:

With free enterprise as developed by the Late Scholastics, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: “For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.”

Correct. That is usury.

Abu:

Consequently, as loaning money did involve loss of profit to the lender and further risk of loss from delay in returning the money loaned, this did justify interest that is just and justifiable.

That is not how it works under state sponsored usury. All of the risk is assumed by the borrower.

Abu:

The Franciscan St. Bernardine of Siena (1380-1444) was perhaps the first theologian to recognize that time of use had an economic value and, at least in certain cases, might be licitly compensated. St. Antoninus (1389-1459), a Dominican of Florence, seems to have questioned whether Aristotle was correct in saying that money is naturally sterile. Money alone, he said, is sterile, but, combined with knowledge and enterprise, it is fruitful.

You’re confusing categories here. Money is sterile. Usury involves only the lending money at interest. Money, when combined with knowledge and enterprise (IOW human work) can indeed become something else (IOW wealth) and so it is no longer just money. The generation and distribution of wealth is a totally different area of concern.

Abu:

The problem has been the Government finagling which has created a monster of its ownmaking.

If by “Government finagling” you mean government efforts to promote usurious lending practices, or government indifference to such practices, then yes, I agree.

 

[Abu]

gnjsdad
Usury involves only the lending money at interest…state sponsored usury (what we call capitalism)

False. As explained it is the act of lending money at an exorbitant rate of interest, and free enterprise has nothing to do with usury.

Too many people with too much debt eventually causes the economy to “bust”… If by “Government finagling” you mean government efforts to promote usurious lending practices….

Government finagling has distorted the free market through the central bank, the federal Reserve System, by intervening to push interest rates lower than the market rates, which cheap credit encouragers excessive leverage, speculation and indebtedness which fuels the boom-bust cycle.

There is no “just price” or “family wage” to be “fixed” by “someone” in government or any other agency. The role of the State is to enact and supervise laws to ensure competition and eliminate cartels and monopolies, seek and punish those who steal, cheat, swindle, and worse crimes.

 

[Abu]

So what did the Catholic Late Scholastics actually develop?
Catholics should know that the free enterprise system was developed by the Catholic Late Scholastics of many religious orders, although many were Jesuits. It is quite unreasonable to be discussing economic systems without knowing the facts. How could the **economic system **of free enterprise be “evil” when it has enabled billions to be rescued from eking out an existence as was the norm before its development? What this great system needs, as in everything in life, is **moral people **to be engaged in it. The vocations of the entrepreneur, manager, and staff in a business are fabulous. As St Escriva of Opus Dei has taught: “work is a prayer”!

There is a solid basis of economic Catholic thought from the fourteenth century. In the fifteenth century the Late Scholastics who were Thomists (followers of St Thomas) “writing and teaching at the University of Salamanca in Spain, sought to explain the full range of human action and social; organization.” They “observed the existence of economic law, inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value…” For these reasons Joseph Schumpeter applauded them as the first real economists. (Thomas E Woods Jr, The Church And The Market, Lexington Books, 2005, p 8).

The free-market is most closely exemplified by the Austrian School of Economics hugely indebted to Ludwig von Mises, who proposed the Austrian theory of the business cycle in 1914, which was further developed by F. A. Hayek, for which Hayek won the Nobel Prize in Economics in 1974. Dr Alejandro Chafuen in Faith and Liberty: The Economic Thought of the Late Scholastics (Lexington Books, 2003) “makes an overwhelming case that the late scholastic theologians should be considered proto-Austrians in their economic views, from prices and wages to subjective value and monetary theory.” (Woods, p 218).

The economies of the West, led by the U.S.A., are widely considered to be “market” economies, but they are not the free enterprise economies arising from the Late Scholastics and the Austrian school of economics because these Western markets are deluged and deluded by interventionism. Intervention in the market, rather than the market economy itself, was the driving factor behind the meltdown. Central Banking and a federal reserve bank are not creations of free enterprise and their destructive behaviour is not the market’s fault! So blame the meddling central and reserve banks.

Most Americans (and most people) know nothing about Hayek’s theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the quacks who blame the market for problems caused by the manipulation of money and credit. The artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end “in a crisis and a slump, and…worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of ‘capitalism.’ ” [Dr Thomas E Woods, *Meltdown (A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse), Regnery Publishing, 2009, p 9]. The truth is that intervention in the market, rather than the market economy itself, was the driving factor behind the busts in the U.S.A.

For the free market to work, there needs to be a moral society, backed up by revealed religion, and a system of just law, respected by the people and enforced justly by the courts. Economists have created a whole body of literature on the effect of institutions on economic life. If there is a problem with how the market operates, the first place to look is the society and the government. Obviously Pope John Paul II realized this. Now if only other Catholics would be as informed.
[See http://www.drwilliamluckey.com/index.cfm/Church-Teaching-on-Economics]

What will help is to learn sound economics and the sound teaching of the Church on free enterprise. Economic laws are based on the principles of human action – of cause and effect involving God-given reason and will, requiring scientific research and study, but are unlike the laws of physics which do not rely on reason and will for effect. So constants do not apply to economic laws as they do for physics. Economics is predictive and comparative, not absolute as in physics.
[Dr Thomas E Woods, *The Church And The Market, Lexington Books, 2005, p 31].

 

[allyl]

This is a very interesting thread, I’d love to hear people’s opinions as I’m pursuing an undergrad degree in social and historical sciences.

 

[Abu]

allyl
This maybe of interest at:
catholicity.com/mccloskey/westernciv.html
A Book Review by Father John McCloskey of How the Catholic Church Built Western Civilization by Thomas E. Woods Jr. - published by Regnery Publishing, 2005

The following also may be of interest:
drwilliamluckey.com/
mises.org/daily/4310
thomasewoods.com/articles/
mises.org/articles.aspx

 

[Captain_America]

Abu, I can tell that you’re very excited by the ideas of libertarianism. I HAVE read the authors you cite.

In reality, it’s utopianism. The free market has never existed. Largely this is practical; the free market creates inequalites and even inefficiencies. As we see time and again, private enterprise LOVES monopolies; can you recall Adam Smith’s famous quote about the result of businessmen getting together and talking?

(hint: remember ADM price fixing?)

The recent Wall Street-generated depression shows this clearly, The “invisible hand” was not neutrally and objectively monitoring the street and protecting investors: instead it stuffed bucks into its pockets right and left, while doling out favorable securities grades. Look into S&P, Fitch, Moody, etc. By economic history, certainly recent history proves the failure of libertarianism.

The failure of so-called “free” markets is also seen in the manipulations and deceptions of 19th century banking and stock issuance. These are practical things; people get hurt from them.

Balance is a good thing when constructing a personal view of economics, so read history as well as theory. (I wouldn’t pay much attention to Keynes; drop ideological thinkers from your list).

 

[Abu]

Captain America
The free market has never existed….The recent Wall Street-generated depression shows this clearly,

Read my lips – “The economies of the West, led by the U.S.A., are widely considered to be “market” economies, but they are not the free enterprise economies arising from the Late Scholastics and the Austrian school of economics because these Western markets are deluged and deluded by interventionism.” (Post # 36).

What the recent meltdown and previous busts show is not “Wall Street-generated” – a simplistic fallacy, but the tragedies of the manipulative government interventions.
The economic laws developed by the Catholic Late Scholastics are observable results, the inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value. If there is a problem with how the market operates, the first place to look is the society and the government.

This evidence shows, for the vicious 1920’s crash:
After inflating the money supply during and after World War I, the U.S. Federal Reserve began raising the discount rate (to the banks) and the economy slowed. By the middle of 1920 production had slumped, falling by 21% over the following 12 months – conditions were worse than after the first year in the yet to come Great Depression of 1930. The federal government and federal Reserve refrained from using any Keynesian macroeconomic tools – public works spending, government deficits, inflationary monetary policy – resulting in a drastic cleaning up of credit weakness, a drastic reduction in the costs of production and the free play of private enterprise, through keeping spending and taxation low and reducing the public debt.

“Harding’s handling of the Depression of 1920-21 is the primary reason why he is universally denigrated by devotees of Big Government. Upon taking office, Harding inherited an economy that was reeling from dislocations caused by World War I. In a few months, wholesale prices collapsed by more than 40 percent. Production plunged over 20 percent. Unemployment zoomed from under 3 percent to over 11 percent. 1920-21 saw the most rapid, severe economic downturn our country has ever experienced.” In We Could Use a Man Like Warren Harding Again, adjunct faculty member, economist, and contributing scholar with The Center for Vision & Values at Grove City College – Dr. Mark W. Hendrickson – points out that President Harding’s “response was to restrain government and let the free market make the necessary adjustments. He didn’t ‘do nothing,’ as President Obama implied when touting his ‘stimulus’ plan; rather, he cut taxes and slashed federal spending 10-20 percent per year. Prices were allowed to fall, supply and demand readjusted, and by 1922 the depression was over. During the next few years, unemployment dove while production soared 60 percent. Harding presided over one of the greatest economic success stories in American history.”
[By Dr. Mark W. Hendrickson, August 12, 2009

We Could Use a Man Like Warren Harding Again

The popular 1970s television series “All in the Family” had a cute theme-song sung by Archie and Edith at the beginning of every episode. One lyric was: “Mister, we could use a man like Herbert Hoover again.” Well, the show … Continue reading

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