In the previous post, Thomas Aquinas, the Summa Theologica and Capitalism – Part 1, I went over Thomas Aquinas’ view of property, in this post we will talk about his views on market exchange and credit. The Capitalist concept of the free market, is that of absolute property rights. According to Capitalism one should be allowed to sell something at whatever price someone else is willing to pay, irrespective of circumstances. For example if I have ready access to water, I may not want to pay that much for a bottle of water, whereas if I’m in the desert and access to water is hard to come by, I’d be willing to pay more out of necessity and the seller would be justified in Capitalism when he maximizes the money he can get from me for the bottle of water. Supply and demand (ignoring of course things like the labour theory of value, which I believe is applicable alongside supply and demand) are what determines prices in the free market system.
In the Second Part of the Second part of the Summa Thomas Aquinas talks about buying and selling in Q77:
we may speak of buying and selling, considered as accidentally tending to the advantage of one party, and to the disadvantage of the other: for instance, when a man has great need of a certain thing, while an other man will suffer if he be without it. In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller. And thus it will be lawful to sell a thing for more than it is worth in itself, though the price paid be not more than it is worth to the owner. Yet if the one man derive a great advantage by becoming possessed of the other man’s property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer.
Here we have a principle that goes against the basic idea of supply and demand. According to Aquinas the needs of the seller are also important. In the Capitalist market system a simple willingness to sell is enough to justify any price. With Aquinas, a higher price is only justified by the needs of the seller, it is not self-justified. If the seller is not in need of what is being sold, and the buyer is, raising the price, no matter what the desperation of the buyer is, would be considered unjust. If, however the seller has a need for what is being sold, he can justify a higher price. This concept is diametrically opposed to the idea of modern Capitalism, which is to maximize individual profit in markets, which in turn creates a supply/demand dynamic which creates the market value, which is really the ultimate value in Capitalism.
I Aquinas’ system imagine what would happen to the whole system of mass production, it would lose its logic. The more you produce of something the less you require of the surplus of it, which would lessen any justification for maximizing the profit from the surplus. This all goes back to Thomas’ view of profit, which we will look at later.
The basic Capitalist concept of credit and debt is that one has a right to lend out anything for whatever price he can fetch in the market. This creates the profit incentive. If I want to start a business, I need to borrow money, and I’m going to have to promise my creditor a profit, and the more I can promise, the more likely that I will receive the money as opposed to someone else. Modern Capitalism has also become more and more reliant on Consumer credit to make up for stagnating wages, consumer credit which is only given out in order to maximize return. What is Thomas Aquinas’ view on this subject? We find it in the second part of the second part of the Summa in Q78:
It is written (Ex. 22:25): “If thou lend money to any of thy people that is poor, that dwelleth with thee, thou shalt not be hard upon them as an extortioner, nor oppress them with usuries.”
I answer that, To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.
So first Aquinas gives a scriptural justification for a ban on Usury, a pretty straight forward and clear one. Then he makes an argument based on the notions of what is justly bought and sold. A person borrowing money and paying back more (presumably over whatever the inflation rate is) is paying for something which does not exist, no commodity, good or service, has exchanged hands, only something which one might call “opportunity costs,” which isn’t actually anything. He continues the argument:
Wherefore in such like things the use of the thing must not be reckoned apart from the thing itself, and whoever is granted the use of the thing, is granted the thing itself and for this reason, to lend things of this kin is to transfer the ownership. Accordingly if a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice. In like manner he commits an injustice who lends wine or wheat, and asks for double payment, viz. one, the return of the thing in equal measure, the other, the price of the use, which is called usury.
Here he talks about what a Marxist would call “use value.” Use value is the value of a commodity based on its actual use, so for example, the use value of a hat is how nice it looks on your head, how it shades you from the sun and so on, as opposed to exchange value which is what you can get for it. Thomas thinks that the use value, is the legitimate value for which something can be sold, he gives an example of wine. If wine is sold for its use value, i.e. to drink, but also some other value, that would be considered usury and thus unjust. How does this relate to Capitalism? Well, take a look at the housing markets. Are house prices only determined by how nice the house is to live in? Not at all, there are all sorts of other factors playing into it, for example interest rates, re-sale opportunities, and all sorts of financial speculations that add exchange value on top of the use value. According to Aquinas these market based, or speculation based inflations are unjust. Let’s see the argument applied to Usury:
Now money, according to the Philosopher (Ethic. v, 5; Polit. i, 3) was invented chiefly for the purpose of exchange: and consequently the proper and principal use of money is its consumption or alienation whereby it is sunk in exchange. Hence it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury
His argument (outside of scripture), is that the utility of exchange is the use value of money, and if one is charging beyond that one is charging beyond the use value. You might say “well then what about profit?” Aquinas isn’t concerned with profit, he’s not talking about a Capitalist economy here. Remember his statements on market exchange, maximizing profits is not the purpose of the economy according to Aquinas, so exchanges on the market are not to be done in order to maximize the price you can get for something. In fact in Q58 of the second part of the second part of the Summa, he says:
As the Philosopher states (Ethic. v, 4), in matters of justice, the name of “profit” is extended to whatever is excessive, and whatever is deficient is called “loss.”
With that in mind let’s return to the subject of Usury. The objector argues, probably as many modern Christian apologists of Capitalism would, that the law only applies to Jews, Aquinas replies:
The Jews were forbidden to take usury from their brethren, i.e. from other Jews. By this we are given to understand that to take usury from any man is evil simply, because we ought to treat every man as our neighbor and brother, especially in the state of the Gospel, whereto all are called. Hence it is said without any distinction in Ps. 14:5: “He that hath not put out his money to usury,” and (Ezech. 18:8): “Who hath not taken usury [*Vulg.: ‘If a man . . . hath not lent upon money, nor taken any increase . . . he is just.’].” They were permitted, however, to take usury from foreigners, not as though it were lawful, but in order to avoid a greater evil, lest, to wit, through avarice to which they were prone according to Is. 56:11, they should take usury from the Jews who were worshippers of God.
It’s very clear logic here, before the Jews didn’t take usury from each other because they were alone the people of God, but also so as to avoid to be exploited by those outside Israel who were not subject to the law. He cites Isaiah 56:11 which describes Israel’s enemies as Dogs who
have a mighty appetite;
they never have enough.
The shepherds also have no understanding;
they have all turned to their own way,
to their own gain, one and all.
Sounds a lot like modern Capitalism doesn’t it? Anyway Aquinas then argues that with the Gospel we are to treat everyone as our neighbour and brother, and all are under Christ, not just the Jews, thus the logic of banning usury is universal, as Christianity is universal. Thomas Aquinas is well aware that it is not that simple, and he deals with some of the complexities. Let’s continue in his argument on Usury:
He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk and is bound to pay it all back: wherefore the lender must not exact more. On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society, does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money.
Now this might be seen as a defence of a kind of Capitalism, however the principles remains, no one is to profit from each other, neither the lender nor the merchant/craftsman borrower. The profit is to be shared. This is different from a modern bank which will demand an interest rate not dependant on the profit. It’s also different from a Capitalist business where all the profit goes to the owner of capital in exchange for a wage for the worker, what Thomas is talking about is profit sharing. Thomas Aquinas then goes on to talk about what we might today call financial instruments:
If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury: because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. In like manner if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is a sin of usury; because again this anticipated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.
So many of the financial instruments used today by financial firms to manipulate prices, and profit from speculation and market fluctuations would be considered unjust by Thomas Aquinas. Imagine if this kind of thinking was in place before the housing market crash of 2007, surely things would have been different.
We now have some principles on which to go by when we think about what Thomas Aquinas would think about modern Capitalism. We have his idea of property, that common property is the state of nature, and that it should be private contingent on the common good and common agreement and that once privatized its status as private is contingent on the needs of others. We have his idea of commerce, which is that it should not be based on maximizing profit, but should rather be fair and non-exploitative and based on the principle of use value. We have his anti-usury principles which states that one should not profit from the lending of money.
Capitalism is diametrically opposed to Thomas Aquinas’ concept of justice. Capitalism assumes private property as an axiom, a state of nature, making it contingent on nothing. Capitalism demands maximization of profits and puts people on each other’s throats fighting over a share of those profits through competition. Capitalism excludes people from access to what they need unless they compete and/or exploit others. Capitalism is completely based on Usury, the financial sector is the largest sector in Capitalism. The rulers of capitalism, the self-proclaimed “masters of the universe,” are the financiers and bank executives who build empires on usury. The entire modern economy is one based on debt, leveraging debt, credit, and maximising usury and profit. Its apologists defend Capitalism by pretending that Capitalism is simply the state of nature, but as Thomas Aquinas points out, not even private property is “natural,” much less, exploitation, usury and profiteering. For Thomas Aquinas the purpose of law is the common good, perhaps that’s something that we moderns could pay more attention too. I’ll end with a quote from the first part of the second part of the Summa Q90:
Consequently the law must needs regard principally the relationship to happiness. Moreover, since every part is ordained to the whole, as imperfect to perfect; and since one man is a part of the perfect community, the law must needs regard properly the relationship to universal happiness.