economic history and economic ethics

8/13/2019 Economic History and Economic Ethics

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THE EVOLUTIONOF SOCIALETHICSUsing EconomicHistoryto UnderstandEconomicEthicsAlbinoBarrera

ABSTRACTIn the developmentof Roman Catholic social thoughtfrom the teachingsofthe scholastics to the modern socialencyclicals, changes in normativeeco-nomics reflect the transformation of an economic terrain from its feudalroots to the modern industrial economy.The preeminenceaccordedby themodern market to the allocative over the distributive function of pricebroke the convenientconvergenceof commutative and distributivejusticein scholasticjust price theory.Furthermore,the loss of custom, law, andusage in definingthe boundaries of economicbehavior led to a depersonal-ization of economicrelationshipsthat had previously providedeffectivein-formal means of protectingindividualwell-being.Hence, recent economicethics has had to look for nonprice,nonmarketmechanisms for distribu-tive justice. This is reflected,forexample,in the shift in attitude from themedieval antipathy toward unions to the contemporarydefense of orga-nized labor on moralgrounds.KEYWORDS:atholicsocial thought,economicethics,economichistory, ustprice, scholastic economics

MUCHHAS BEEN WRITTENON THE CONTRIBUTION F SCHOLASTICISMo thedevelopmentof economicthought, both in its normative and analyticalaspects. However,there is little in the literature that examines the evo-lution of economicethics from the scholastic doctorsto the modernCath-olic social documents (from Rerum novarum in 1891 to Centesimusannus in 1991). This article is a contribution toward filling this gap. Inparticular,I seek to identify some of the shifts that have occurred n nor-mative economics between these two periods,and I use economichistoryto account for these discontinuities.In this article, I will concentrate on just two of these changes:scholastic antipathy toward unionization and guilds has given way tothe contemporary Catholic defense of unions, and scholastic silence

Mythanks to the anonymousreferees for their many helpful suggestions.285

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286 Journal ofReligious Ethicsabout socialjustice contrasts vividly with a vigorous emphasis on socialjustice in contemporaryCatholic social and economic ethics.1 It is puz-zling that the advocacy of unions and the concern over unjust socialstructures did not arise earlier, given that glaring income and wealthdisparities, state encroachment on private economicfreedoms,and poorworking conditions were already prevalent and were probably evenworse during the medieval era. My thesis is that changes in normativeeconomicsreflect the shifting economicterrain as feudalism was trans-formedinto the modernindustrial economy.Economichistory can shedmuch light on the evolution of economicethics.

1. Focus on Social Justice1.1 Normative shift

The medieval doctors were interested primarily in the moral qualityof individualeconomicbehavior rather than the justness of economic n-stitutions and processes. Scholastic economic ethics focused on interper-sonal economic relations and personal moral accountability. OddLangholm,Jacob Viner,and Joseph Schumpeterhave all observed thathardly any thought was given to the interaction between individualsand economic nstitutions or to the ways either can leave a lasting markon the other. Even more rare was the topic of reforming existing socialinstitutions 2Schumpeterhas explained this by noting that the scholas-tics saw themselves as confessors and spiritual directors rather thansocial activists:

Primarily,owever, ndso far as theirpracticalask wasconcerned,t wasnot the merits or demerits of institutions that mattered to them, but the

1Otherchanges include the switch from a language of obligationsto one of rights, anincreasing appreciation or the exercise of privateinitiative for economicgain, and the re-placementof a paternalisticconceptionof the role of the state with a morecircumscribedview of the function forgovernment n economicaffairs.2Vinerwrote: "TheScholastics . . . recognized n some measure that virtue has socialimplications,but in the main they confinedtheir discussion . . . [to]questionsof commuta-tive justice arising fromtransactions between individuals in the ordinarycourse of theirworldly ife. Theysaid almost nothingabout the impactof individual behavioron social in-stitutions,or the impact of social institutions on individual behavior,or thepossibilities ofdeliberateor spontaneousremoulding of existing institutions"(Viner 1978, 50, emphasisadded).Langholmobserved that this was also true of patristic literature: "The dea thatterms of exchangeare determinedby suprapersonal orces which extenuate moralblameon the individual level was essentially foreignto ethical thinking at least until well intothe sixteenth century.The patristic focus,even in the case of issues carryingbroadsocialimplications,was onimmediatepersonalrelations" Langholm1982, 271). Forfurther dis-cussion of this focus on personalbehaviorrather than on socialinstitutions, see Langholm1992, 566;Tawney1926;Worland1967.



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The Evolution of Social Ethics 287merits or demerits of individual behavior within the frame of given insti-tutions and conditions. More than anything else, they were directorsof in-dividual consciences or rather, teachers of directors of individualconsciences.Theywrote formany purposesbut principallyforthe instruc-tion of confessors[Schumpeter1954, 102, emphasis added].In contrast to the scholastics'nearly exclusive focus on personal eco-nomic behavior related to the honest exchange of goods and services(just price and usury), modern Roman Catholic social documents haveexamined economicprocesses together with their auxiliary institutionsand instruments: labor-management arrangements (Rerum novarum,1891), industry-level vocational groupings (Quadragesimoanno, 1931),government import-substitution development strategies (Mater etmagistra, 1961), and international political economy (Populorumprogressio, 1967, and Sollicitudo rei socialis, 1987).The term "social us-tice" is itself of recent vintage (Pius XI 1931; see also Muench 1948,3327). Nowhere is this contrast moreapparentthan in the way these so-cial documents entreat individuals to take personal responsibility inshaping social institutions:It is up to the Christian communities to analyze with objectivitythe situ-ation which is properto their own country,to shed on it the light of theGospel'sunalterable words and to draw principles of reflection, norms ofjudgment and directives for action ... to discern the options and commit-ments which are called for in order to bring about the social, political andeconomic changes seen in many cases to be urgently needed [Paul VI1971, #4].

1.2 Economicexplanations: Thefunction of priceExchange provides an analytical lens with which to examine the evo-

lution fromscholasticeconomic ethics to the modern Catholic social doc-uments. Understanding the premises and practices surrounding thetradingofgoodsand services is a necessary starting point in the study ofeconomicethics because exchange is a major,possibly the predominant,avenue of economic interaction between people an interpersonal col-laboration that supplies abundant matter for moral deliberation. AsLangholmhas so aptly put it:[E]xchange situations involve their participants in a particular type ofmoralconflict. . . . The moralreality is the individual personencounteringhis neighbour in the context of exchange, each possessing somethingwhich the other wants, each obliged,as a mere steward under God,to con-siderhis neighbour'sneed. Focus on exchange . . . meant focus on the indi-vidual, in order to advise him on proper terms of exchange with hisneighbour [Langholm1992, 24, emphasis original].



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288 Journal of Religious EthicsThe price at which goods and services change hands serves two func-tions. First, it disseminates information that is essential for the effi-cient, least-cost allocation of scarce resources to their competing uses.This is the allocative dimension of price. Second, the price that produc-ers get in the market determines their remuneration for their labor inproducingthe goods and services that are traded. This is the distribu-tive dimension of price.This distinction provides a better understanding of how the pricemechanism of the market can be employedas a policyinstrument in re-sponse to questions of economic ethics. In particular,an economy that

has efficiencyand growth as primarygoals gives greater importancetothe allocative dimension,while a communitythat choosesequity over ef-ficiencywouldhighlight the distributive function of price.These two fac-ets of price are not necessarily mutually exclusive, but they are difficultto synchronizeas dual objectives as is evident in the delicate balancingact of the "Tigereconomies" of Taiwan, Singapore, and South Korea,whose policies have sought to promoteefficiency (growth)and equity si-multaneously. The degree to which price is freely set by the market pro-vides a glimpse into the ethical choices made by the community.1.3 Just price in thefeudal economy

In the feudal world of isolated communities, animal husbandry wasthe main economicactivity; productionwas consumed on the spot. Thelittle trade that did transpire between villages was predominantlyanexchange for consumption,that is, a transaction between the final userand the producer.3The English economic historian William Ashley hasdescribed the thirteenth century as a time when "the great majority ofarticles in the daily use of the mass of the peoplewere bought by the con-sumer fromthe actual maker"(Ashley 1925, 1:138).Defrauding buyersand profiteering from the extreme needs of others were the principalmoral concerns precipitated by the economic arrangements of that pe-riod.This is apparent in the two teachings that, together, take up mostof the attention of the scholastics and their commentators: ust priceandusury.4Justice in exchange was the focal point. Regardless of whether3 I am treating the manor as the basic productiveeconomicunit. One could,of course,viewmanorial ife as a series ofexchanges: he serfsrenderingtheir labor(workweek)andtithes to the lord of the manor in exchangefor protection.Furthermore,there were also

merchants who were engaged in the buying and selling of goods for commercialprofit.Such trades were, however,a relatively small part of the predominantlysubsistence na-ture of the medieval economy.4 Even usury itself may be considereda subset of teachings on the just price. Sincemoneywas deemed to produceno value on its own, its pricewas set at zero.The shift andnuances in the teachingsonusuryare not addressed n this article sincethese have already



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The Evolution of Social Ethics 289medievaljust price was defined as the usual or the joint estimate of ex-change value, its end was still, as Langholm has observed, the same:preventing the exploitation of any party to the transaction (Langholm1987, 125). Safeguarding the welfare of all parties concernedrequiredequivalence in the value of goods or services traded (Baldwin 1959, pt.4). For this reason, teachings on the just price were associated with thesatisfaction of commutativejustice, but this was only part of the story.In additionto ensuring that nobody got hurt, scholasticjust pricethe-ory had a second function:just income formation. The price at whichgoods and services were traded was the outcome of the community'scol-lective estimation. The community believed that "themaker should re-ceive what wouldfairly recompensehim for his labour"and "whatwouldpermit him to live a decent life accordingto the standard of comfortwhich public opinion recognized as appropriate to his class" (Ashley1925, 1:138;see also Baldwin 1959;Worland1967, 289 n. 10, and chap.8). Equivalence in exchange was consequently a function of the socialroles of the parties involved in the trade. While the proximate objectiveof scholastic teachings onjust pricewas to prevent fraud and the extrac-tion of undue profits from others'needs, their deeper concern was dis-tributive in nature:providing peoplewith access to the goodsor servicesessential to their social roles. The scholastics gave preeminence to thedistributive dimension of price: equity in the allotment of societal re-sources was treated derivatively as the predictableresult ofjust incomeformation achieved when people were able to secure a just price for thework effort or output they broughtto the market. This meant that com-mutative and distributive justice were simultaneously satisfied in themedieval notion of just price. After all, equivalence in the exchange ofgoods and services between peoplewas ultimately founded on what wasowed to the person by the rest of the community.Commutativejusticewas a function of distributivejustice.Let me offer a word of caution, though. The scholastic notion of justpriceis often described as the price prevailing in the market, a formula-tion that implies that market operations determined medieval pricing.If we invoke "market operations" at all in reference to the medievaleconomy,we must do so only in the most carefully qualified way,forme-dieval "markets"did not exhibit today'swide privateeconomicfreedoms.As we have seen, the scholastic "market estimate" was ultimatelyfounded on the social roles of the parties involved in the trade. Custom,law, and usage, not unfettered demand and supply,formed the basis forthe common estimation represented by the market price. Custom, law,been the subject of extensive analysis and debate in the literature. See, for example,Dempsey 1943 and Noonan 1957.



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290 Journal ofReligious Ethicsand usage were manifested in various ways, such as the pricingand uni-formproductionor sales standardsimposed by the craftguilds, the prac-tice of passing on trades and craft membershipfrom father to son, andthe "customs of the manor" that governed the terms of exchange be-tween the serfs' services and the manorial lord'sprotection(North 1981;Thrupp 1963; Vinogradoff 1957; Renard 1918). It was this reliance onpricing by convention that allowed for the convergenceof commutativeand distributivejustice in scholastic teachings onjust price.1.4 Price in the modern marketeconomyAs feudal society was transformed into a modern market economy,the economic and political spheres were separated from each other. Inthe medievalworld,economic and political powerswere exercisedby thesame institution. Thus, manorial administration was chargedwith gov-erning its self-contained economic life even as it dispensed justicewithin its own realm. The guilds in the urban areas prescribed stan-dards of production and terms of sale (including price) within theircrafts, even as they operated as avenues for the sociopoliticalparticipa-tion of their membershipin the larger community.The emergenceof an autonomous economicsphere independent of thepolitical structure unleashed private initiative that gave birth to themodernindustrial economy.This new order was characterizedby scalein operations and division of labor, in contrast to the autarky of medi-eval economicunits. Populationincrease, the growth of urbanareas, theemergence of technologies and institutions conducive to commerce,andthe shift to the factory system broke down the isolation of communitiesfrom each other and paved the way for greater economic interdepen-dence. In other words, exchanging goods or services with others was nolonger merely an option (as in the feudal manor);it became a necessity.Exchange permeated every facet of life. The breathtaking expansion inthe scale and the scopeof economicactivity in the past three centuries isreflected in the intense trading of goods and services not only forconsumption (end use), but also for production (intermediate goods,labor, capital, land, and so on) and distribution (wholesale and retailactivities).In contrast to medieval economicagents, who made simple decisionsand producedgoods for consumptionon the spot, their modern counter-parts are besieged by the perennial need for calculation as an evergreater part of economicactivity. Unlike their autarkic feudal cousins,modern economic actors have to answer the basic economic questions(what to produce,when, where, and with what) even while engaged in along requisite chain of exchanges and interaction with others. Economicdecision making has to satisfy simultaneously the demands of product,



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The Evolution of Social Ethics 291place, and time utility with minimumexpenditure.In otherwords,mod-ern economicagents have to make the right calls with respect to special-izing in the appropriate goods or services, producingthem in the exactquantities requiredwhile employing least-cost methods and inputs, andthen exchangingthem at the propertime and in the right place.The roleof timely, accurate, and useful information for such involved decisionsincreases in importance, and the need for such information can beadequately met by only one medium the market price. Only price canconveyinformationefficiently and effectivelyoverwidely dispersed geo-graphic areas to a large number of interested parties in a timely way.This is a service rendered by the modern market that no other institu-tion or mechanism can replace.Increasingly operating on the basis of exchange in all stages- fromproductionto distribution to consumption within an ever burgeoningmenu of new and ever more sophisticated goods and services, the mod-ern economicorder'smajor concern has been to ensure that scarce re-sourcesare put to the best ofthe competing possible uses. Langholmhasobservedthat, in contrast to medievaljust price,modernprice"servestoallocatejoint social resourcesoptimally" Langholm1987, 125, emphasisoriginal).This should not come as a surprise, considering that custom,law,and usage are simply unable to keep up with the dynamicand com-plex requirements of modern economicdecision making. This lays thegroundwork ora majoralterationin the function accordedto price.Thefeudal practice of setting exchange value by convention shifted to themodern reliance on the unfettered operationof demand and supply.Me-dieval pricing was set with an eye toward the equitable distributionofsocietal goods. In contrast,modernpricingis concerned with the match-ing of demand and supply that leads to the most productive dispositionof scarce resources to their best competinguses- allocative efficiencyAn incongruity should be noted in this shift in focus. As we moveaway from self-contained communities and as exchange begins to en-croachupon many aspects of social life, one would think that an evengreater emphasis would be placedon the distributive dimension of pricebecause questions of equity become more apparent and more conten-tious as markets expand. It is ironic that the allocative dimension ofprice has taken precedence over the traditional scholastic distributiveuse of price as an avenue for promoting people'swelfare.All this comes with a cost: we have lost the forms of custom, law, andusage that had been instrumental and effective in setting the bound-aries necessary to ensure just processes and outcomes in economic life.Replacingthem are suprapersonaleconomicinstitutions that are bettersuited for the pursuit of efficiencyto the exclusion of other worthwhilesocietal goals. Why,then, have normative teachings, such as those com-prised in modern Catholic social documents, acquiesced in this shift in



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292 Journal of Religious Ethicspractice?There was no choice: accommodations had to be made to therealities of a radically transformedeconomy imbued with a breathtak-ing dynamism that producesmoregood,on the whole, than harm.1.5 Fitting moralprecepts to social context

Even if the authors of modern Catholic social documents had wantedto cling to the scholastic use of price for distributive (rather thanallocative) ends, there is no way to reverse, much less to stop, the pro-cess that has been unleashed by the Industrial Revolution. The empiri-cal evidence from the past two centuries attests to the tremendousimprovement n the human conditionbroughtaboutby the modern mar-ket economy.Even after taking the human cost of modernization nto ac-count, the industrial orderhas, on the whole, led to striking advances inthe standards of living, whether measured by economic or social indica-tors. Not only has the Malthusian specterbeen dissipated,but there haseven been a sustained increase in per capita income;the economy cansupport more people, and richer people at that 5In unleashing privateenergies by providing the necessary economicincentives, the economyhas benefited enormouslyfromtechnological advances and new organi-zational techniques that have, in turn, continuously raised people'sstandards of living. Even in the face of the extreme povertythat still ex-ists today, the literature cannot ignore the signal accomplishments inimprovingeconomic ife in the past two centuries, most especially in theperiodsince WorldWar II (see, for example, WorldBank 1991).Whichfunction of price should take precedence its allocative or dis-tributive role?At the heart of this choice between the workings of de-mand and supply and the continued reliance on custom, law, and usageis the classic tradeoffbetween growthand equity.Shouldwe concentrateour efforts on rightly dividing the pie, or should we rather expend ourenergies on making the pie grow bigger?The opportunitycost of adher-ing to the scholastic preference for the distributive over the allocativefacet of price would simply be too great; it would be counterproductive,indeed inappropriate, given the changed historical circumstances.6Notonly have we seen the gains that industry can bring in its wake, but wehave also witnessed the market proveitself as an incomparablyeffectivevehicle for attaining allocative efficiency.

5To avoidfalling for the fallacyof division,one must qualifythis generalizationby ac-knowledging hat aggregatedstatistics do not always present the complete picture.Partsof sub-SaharanAfrica,for example,have descended into even deeper povertyin the pasttwo decades(WorldBank 1991).6 See Barone 1935, von Mises 1935, and Lange 1936-37 for theoreticalargumentsonthe necessity of the allocativefunction of priceeven in a commandeconomy.



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The Evolution of Social Ethics 293The problemof enforcement constitutes a secondpracticalreason foraccommodating this shift in the function of price. Even though therewere difficulties with maintaining distributive justice in the medievalmarketplace, in practice people generally observed the doctrine of justprice. It is not easy to regulate price setting because private transac-tions can be neither fully nor constantly monitored. This difficultyis es-pecially pronounced in the isolated communities and fragmentedmarkets of the medieval economy. Langholm observedthat "inthe un-ruly societies of the Middle Ages exchangers were mostly left to theirown devices, and moralists had to rely on precepts aboutjust pricingen-

forceableonly in the internal forum" 1982, 278).In spite of the inherent difficultyof ensuring compliancewith moralteachings about private economic life, medieval ecclesial institutionsprovidedsurprisinglyeffectiveenforcement mechanisms for the scholas-tic just price. In his expositionon the economicdoctrines of the scholas-tics, Viner has observed that not only was the Roman CatholicChurchable to assert its right to be involved in secular affairs with moral rami-fications, but it also had within its means a vast array of formal and in-formal enforcement mechanisms for these moral teachings: the pulpit;the large number of clerics discharging various civil functions; papalgovernance of its states, ecclesial principalities, and estates; the juris-diction of ecclesial courts over many conflicts of an economicnature;7and sanctions of a social and spiritual nature that rangedfrom economicboycottsto excommunicationand exclusion from the sacraments. Andifthese were not enough, there was (because of the private nature ofeconomictransactions) recourse to yet another enforcementmechanism,this one in the internal forum: the confessionalor deathbed absolution,where restitution could be made a condition for pardon (Viner 1978,46-47).The depth and pervasiveness of clerical influence is revealed inAshley'sobservation:Theyenforcedhem[thecriterion f ust priceandtheprohibition gainstchargingnterest] rom hepulpit,n theconfessional,nthe ecclesiasticalcourts; ndweshallfindthatbythe timethattheperiodbeginsoflegisla-tiveactivityon the partof the secularpower,hese two rules hadbeensoimpressedonthe consciences f men that Parliament,municipality,ndgildendeavouredf their ownmotion o secureobedienceothem[Ashley1925,1:132].

Given the myriad channels through which religious teachings influ-enced, indeed molded,societal values and practices,there was no urgent7For a sampleof such cases and an extensive bibliographyon the role of such courtsineconomic ife, see Viner 1978, 46.



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294 Journal ofReligious Ethicsneed to reformunjust economic structures. The RomanCatholic Churchwas efficacious in influencing individual economicbehavior because itwas very much a part of the social structure. It wielded effective moralsuasion in both internal and external fora and couldconsequentlymoni-tor social life from the corridorsof power.In contrast, the loss of traditional ecclesial enforcementmechanismsin the modernperiodnecessitates a moreformal, separate, and vocal ar-ticulation of the theological vision of the right orderin social structures.Religionnowplays its role ofguardian-protectorof individualwell-beingfrom a much more circumscribedposition in society.These limitationsare particularly acute in economic ethics because the premier institu-tion ofmodern economic ife- the market is principallyconcernedwithoptimality and efficiencyrather than equity.In summary,medieval thought and practicegave preeminenceto thedistributive over the allocative function of exchange value. This can bededuced from numerous scholastic references to just income formationfounded on social roles, from the weight of scholars'conclusions that me-dieval just price was based on the cost of productionrather than onproduct utility (see Baldwin 1959), from the premodern practice ofsetting prices by convention, and from the simple observation thatallocative efficiency is a modern concern. The scholastic notion of justpricewas a convenient vehicle forsatisfying simultaneouslythe require-ments of commutative and distributivejustice. However,as the feudaleconomy gave way to the modernindustrial economy, here was a rever-sal in the importanceof the allocative and distributive dimensions;theformer overshadowedthe latter. This broke the convenient confluence ofcommutative and distributive justice that was achieved in medievalpricing. Thus, unlike scholastic economic thought, modern ethicalreflection has had to look for nonprice, nonmarket mechanisms forsecuring distributive justice and has focused on the justness of socialstructures. This search has led to numerous teachings on alternativeworkarrangements.

2. FromAntipathy to Advocacy:Unions2.1 Normative shift

Scholars agree that medieval ethicists were not enthusiastic aboutunions, guilds, or other alternative work arrangements. On the few oc-casions these were mentioned at all, the treatment was either one ofcensure or wary accommodation.As Raymondde Roover has observed:

[T]heDoctorsrarelymention the guilds and then only to reprovethem fortheir monopolisticpractices. I do not find evidence in their treatises thatthey favored the guild system, which is so often pictured as an ideal



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The Evolution of Social Ethics 295organizationfor Christiansocietyor is recommendedas a panacea againstthe evils of modern industrialism [Roover 1955, 186; see also Roover1974b;Friedman 1980, 238-39].This aversion was born out of a long-standing condemnationof mo-nopolies(and,by extension, of oligopolisticand monopsonistic practices)that dates from Greek and Roman economicthought.8This is not to saythat there were few instances of abused workers at that time. Therewere abuses, and the scholastics were clearly aware of them (Kirshner1974, 26; Roover 1974b, 340). Nevertheless, even in cases where therewas a clearneed for workerprotection, formingworkerassociations as adefensive measure was not encouraged.Instead, the scholastics soughtto redress these injustices by appealing to the moral sensibilities ofemployers.Employerswere warnedby Bernardineagainst exploitingworkersby pay-ing them less than the going rate; conversely, workers were warnedagainst organizingin orderto seek benefits and higher wages. . . . [T]heworker was so often eager for a jobthat he would accepta starvationwage(Hungerlohn)just barely adequate to support himself and his family.Antonine [St. Antoninus] pleadedwith employersto pay a fair wage, buthe was adamantly opposed, as were all the Schoolmen,to unionization[Kirshner1974, 26].Even guilds themselves threatened to blacklist any workers and arti-ficers under their jurisdiction who attempted to organize labor unions.9There was a suspicion, if not outright disapproval,of anything that ap-proached "rings"or "conspiracies"that could disadvantage buyers,whom the scholastics viewed as the more vulnerable party in the medi-eval marketplace regardless of whether the transactions occurredinproductor labor markets. As we will see, this lack of differentiation canbe explainedby the direct links between the labor and the productmar-kets in the medieval world.In contrastto the scholastic aversion toward organizedlabor,modernRoman Catholic social documents not only have consistently champi-oned the cause of unions but also have proposed alternative workarrangements. This 180-degree turn is most vividly illustrated by the1931 papal encyclical Quadragesimoanno, in which Pope Pius XI calledfor a reconstituted social order that would borrowsome features frommedieval guilds (Pius XI 1931, #88-98). How do we account forthis shiftfrom antipathy to advocacy? The intervening change in economic8Julius Krishnersuggests that the scholastics'wariness ofmonopolieswas carried or-wardall the way to AdamSmiththroughthe influence of Samuel von PufendorfandHugoGrotius(Kirshner1974, 21-22).9 Sometimes the punishmentwas even death (Roover1974a, 284-85).



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296 Journal ofReligious Ethicsarrangements dislodgedthe formal and informal safeguards for workerwelfare that were embedded in the medieval economic order. In themodern economy, these lost protective structures have had to be re-placed by nonmarket mechanisms.2.2 Economicexplanations:Labor and production

Several factors account for this shift in attitudes toward organizedlabor. First, economic theory prior to the Industrial Revolution gavevery little thought to production (Langholm 1987, 117; Schumpeter1954, 101). Little was said about work arrangements and other labor is-sues. This lack of interest was understandable since production up tothat point had been primarilyhome based and therefore traditionallyorganized and managed according to household customs. Economicthought and ethics concentratedprimarilyon exchange (and mostly onexchange for consumption)as this was the principal avenue for moralconflicts in economic life.

Second,in the little exchangeforproductionthat did occur, here wasadequate labor protection through the guilds, the scholastic concept ofjust price, and the more informal channels of moral suasion that mini-mized the abusive treatment of workers. There was thus no need to dealwith work arrangements as a separate issue.The transition from a feudal to a modern market economy changedthese social conditions to such a degree that questions pertaining to pro-ductionmanagement and organizationhad to be directlyand separatelyaddressed. Traditional means of safeguarding worker or producerwell-beingwere lost and had to be replaced.The specializationand divi-sion of labor due to industrialization led to an expansion of exchangeforproduction(intermediate goods and services) and widened the distancebetween economic agents, with the consequent loss of informal con-straints (religious, familial, and communalties) that had previouslysetboundaries for private economic behavior.2.3 Loss of formal safeguards

The convergenceof commutative and distributivejustice in the scho-lastic teachings concerning just price meant that justice was simulta-neously achievedin both the productand the input markets throughthesame instrument (the price).After all, the just price paid in the medi-eval productmarket was based on the common estimation of the incomeneeded by the producer(an agent in the labor market) to live up to hersocial role in the community.The shift toward allocative efficiencyin themodernmarket economy broke this automatic link between factor andproductmarket pricing. As the economy's objective shifted away from



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The Evolution of Social Ethics 297equity to efficiency,laborers had to fend for themselves and win a livingwage for themselves (separate from the product market). Achieving aliving wage for workers while satisfying the requirementsofgrowthandefficiencyis a rare accomplishmentin the moderneconomy.Unlike me-dieval workers,modern laborers cannot dependon the workingsofprod-uct market pricingalone to assure them a living wage.In contrast to modern Catholic social ethicists, the scholastic doctorswere not compelledby economicconditions to support the cause of un-ions or alternative work arrangements.After all, in spite of the moral-ists' misgivings about the legitimate role of organizedlaborin the socialorder,guilds did, in fact, relieve the scholastics of the need to addressworkersafeguards. They did quite well in fending for their membership.Organized in terms of skills, crafts, and trades (analogous to mod-ern-daylaborunions), these guilds were effective in protectingthe com-mon interests and promotingthe economicwell-being of their members(as were unions in the middle third of this century). Furthermore,theyserved as self-help, mutual aid associations and as channels forsociopolitical participationand public service within the larger commu-nity (which are other ideal functions of unions). Finally,guild memberswere working for themselves (thereby addressing some of the modernproposals for co-management,co-ownership,and profit sharing in workarrangements).Guilds, even as they were viewed with great suspicion,paradoxically provided many of the features greatly sought today by so-cial reformers. The demise of guilds as part of the evolution into themodern economy created a gap in worker safeguards that modern eco-nomic ethics must fill. In discussing the value, the functions, and therights of unions,Rerum novarum and Quadragesimoanno articulatedadesire to gain back some of the positive attributes of medieval work or-ganizations that had been lost with the change from feudalism to thefactory system.2.4 Loss of informalsafeguards

Despite the modern reliance on demand and supply (instead of cus-tom, law, and usage), it is still possible to achieve the objectiveof scho-lastic just price theory (equitableincome distribution)without recourseto formal methods ofoverridingthe market. Mutual goodwillon the partof economicagents couldlead to an adequate income for everyone.Afterall, the marketpriceis merely indicative,not imperative;one can chooseto pay more forgoodsand services out of one's sense offairness, honor,orcharity.Unfortunately,the nature and dynamics of exchange in the moderneconomyworkagainst salvaging even these informal channels. The spe-cialization and division of labor that are part of industrial organization



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298 Journal of Religious Ethicshave put an ever greater distance between the producer and the enduser. Unlike economic agents in the preindustrial economy, the con-sumer and the manufacturerin the modern era are separatedfrom eachother by multiple tiers of transactions with intermediate producersanddistributors.The medieval proximity of the end user to the producerworked to-ward internalizing compliancewith the principle ofjust price.10Wherebuyers and sellers dealt with their own neighborsor friends or relatives,the commercial transaction was merely a small (and most likely rela-tively insignificant) part of a much largermultidimensionalrelationshipbetween peoplewho depended on each other for supporton many otherfronts. Mutual dependencein the medieval town most likely engendereda strong moral incentive to pay a fair price out of a sense of empathy orin order to avoid fracturing relationships or maybe just to save face.These incentives lent weight and efficacyto custom, law, and usage evenwhen formalenforcement mechanisms were inadequate or absent. Peo-ple knew what was expectedof them and what to expect of others.11Thisnatural check has been lost in a moderneconomywhere exchange(espe-cially of commodities)has become not only impersonal but also purelycommercial.In the current global economy'scornucopiaof goods, mostconsumers cannot empathize with, and hardly ever even think about,the remote ThirdWorldworker(s)who producedthe shoes or the clothesthey wear.Pope Paul VI expressed the crux of the matter well in askingFirst Worldconsumers whether they would be "readyto pay a higherprice for imported goods so that the producer may be more justly re-warded"(1967, #47). Formal nonmarket mechanisms of price supporthave become necessary in the face of anonymous exchanges in moderneconomic life.12The medieval treatment of employees, more as members of the mas-ter's extended household than as strangers,13was a second valuableinformal channel of moral suasion that was lost with the shift ofeconomic production from country cottages to urban factories. The

10RecallAshley'sobservation that the bulk of exchangeswere between the consumerandthe actual producer Ashley 1925, 1:138).11This is not to claim that self-imposedrestraints were always operativein the medi-eval economy.Numerousexamples of local government regulationof prices, especially ofnecessities, suggest a problemof profiteering. Voluntary compliance obviously operatedbetter in closelyknit smallercommunities where economicactors could not disappear ntothe anonymityof the largerurbancommunities.12Forexample,we have agriculturalsubsidies and internationalcommodity tabiliza-tion funds for somekey ThirdWorldexports.13This, of course,was by no means always the case forthe period.In fact, the increas-ingly severe subjectionof workers ultimately led to the decay and demise of the guilds(Renard1918, 109-10).



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The Evolution of Social Ethics 299medieval extended household was the basic unit of production,even inthe protoindustrializationthat preceded the modern economy. Home-based productionmeant the unity of the household and the workplace.Whetherin rural cottage industries or in the town'sguild system, it wascommon for master, apprentices, and journeymen to live in the samehousehold, which doubledas the workplace.The move to factory-basedproductionspelled the demise of this household-workplacenexus; it alsomeant that workers set up their own independent households (Rosen-berg and Birdzell 1986, 152-53). The familiarity and the ties that camewith living under the same roof were lost. This distancing of workersfromemployers accelerated the depersonalizationof labor market rela-tions. The association between workers and employersbecame a purelybusiness transaction, thereby diminishing the chances of a more pater-nalistic solicitude on the part of employersfor their workers.The loss of this informal channel of concern and appeal was madeworse by the discipline that the modern market imposed on theemployer:the necessity of rationalizing productionfor efficiency a dis-ciplinethat made the worker'sposition even more uncertain and vulner-able. In medieval agrarian life, where land and labor were the two keyfactors of production,the role of labor was secure; its contribution wasreadily apparent. The treatment of workers may not have been alwaysfair when it came to dividingthe producebetween rent (landowner)andwages (workers),but all parties recognizedthat the land's bounty wasclearly a function of labor. This changed.In the moderneconomy, he factors ofproductionare land, labor,andcapital. Labormay not always be perceivedto be the most productiveorcrucialfactor. This role has often been ascribed to capital, with unfavor-able consequences in the short term for the share of labor in social out-put. The standing of workers has becomemore precariousin proportionto their diminished powerin an economywhere labor now faces competi-tion fromcapital for the role of the most significant factorof production.In fact, capital has been pivotal in raising the productivityof workersinthe moderneconomy.While there may be competition in the short termwhen it comes to the division ofoutput, in the long run, capital is benefi-cial in improvingstandards of living. This is the key to explaining theindustrial economy'sability to supportmorepeopleand at a higher stan-dardof living.2.5 Moralconsequences

The changed structure of economic life requires greater vigilancein ensuring gainful employment and decent working conditions forworkers within the unfettered, impersonal operations of the industrialeconomy.



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300 Journal of Religious EthicsThe atomization of economic agents in the industrial era and themodernpursuit of private economicgain have made it difficult for indi-viduals to retrieve and internalize an ethos that valued relationships ineconomic behavior. When interactions between economic agents havebecomeanonymous, institutionalized, and impersonal, economicagentscan easily be treated as means (as factors of production,to be morepre-cise) rather than as ends or as the subjects of work (John Paul II 1981).Consequently,modern Roman Catholic social documents have had tocall repeatedly for a wide array of nonmarket measures to amelioratethe plight of workers: minimum wage legislation, a living wage, govern-

ment assistance, unionization and mutual self-help associations, indus-try-level vocational groupings of employers and workers as partners indecision making, and alternative work arrangements such as profitsharing, co-ownership,and co-management of the means of production.Economic ethicists have had to find substitutes for the safeguards thathad been providedpreviously by formal and informal mechanisms of themedieval economic order.One final observation must be made. Scholastic and modern RomanCatholic economic ethicists argue against similar opponents and thushave similar starting points. The medieval doctors argued against theRoman canonists who claimed that any pricethat resulted froma freelynegotiated contract was morally and legally legitimate (Baldwin 1959).Modern ethical reflection has faced a similar adversary: aissez faire ad-herents view the mutual and voluntary nature of labor market exchangeas sufficient groundsfor assuming the moralvalidity of the outcomes ofthese transactions. In both cases, we find the implicit assumption thatno exploitation can occurin markets because people will not enter intoany exchange at all if they do not reap benefits from such trading. Con-sequently, a completed market transaction is prima facie evidence ofmutual advantages for all parties concerned. The moderneconomyaddsa further argument in supportof this position: the enormous benefits ofallocative efficiency from free market operations cannot be ignored. Inboth the dispute between scholastics and Roman canonists and the dis-agreement between Catholic social teachings and laissez faire econo-mists, the point of contention is the relative importancethat should beaccordedto the social goods arising from an unfettered market com-paredto the larger socialgoals that can be realizedonly by curtailing itsoperations.For the scholastics, the transaction was morally valid only whenthere was equivalence in exchange (commutativejustice), when no onewas exploited,andwhen all affectedparties received their due accordingto their social roles (distributivejustice). The satisfaction of these condi-tions (that is, the payment of a just price)took precedenceoverthe free-dom of contract. In the modern Catholic social documents, market



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The Evolution of Social Ethics 301outcomes and processes are subjectedto scrutiny and overriddenwhen-ever the economic structures undergirdingthe economyfall short of thestandards ofjustice.

3. Summaryand ConclusionsViner has described the state of Catholic economicethics at the timeof the Industrial Revolution as "largelyfrozen in its medieval shell"; nhis view, economicmorality had changedlittle fromthe end of scholasti-cism to 1891 (Viner 1978, 49).14The 1891 encyclical letter, Rerum

novarum, and the legacy of social documents it spawned, articulated anew vision of ajust Christiansociety attuned to the realities of the mod-ern economy.In fact, Langholm's description of the efforts of scholasticdoctorsmay also be a fitting characterization of modern Catholic socialdocuments:"By a common denominator we may perhaps describe theeconomic doctrinesof the medieval theologians as a set of compromises,codes of economic conduct which must be operational while abandoningas little as possible of the Christian vision of society" (Langholm 1992,565). This article has examined some of these adaptations, togetherwith some of the causes that may have given rise to them.The transformationof feudalism into the modern industrial economywas both a cause and an effect of the process by which custom, law, andusage relinquished to suprapersonal economic institutions the role ofsetting prices. The convergenceof commutative and distributivejusticein the scholastic formulation of just price was, in effect, broken. In thecircumstances of industrial modernity,distributive justice has had tofind an avenue of its own outside of market processes. This search fornonmarket, nonprice mechanisms to safeguard distributive justice isone difference between the scholastic economic teachings and theeconomic ethics advanced in modern Catholic social documents. In

addition,medieval ecclesial enforcement mechanisms have had to be re-placed by regulative strategies that ensure the justness of modern eco-nomic structures. Whilejust price and usury were the leading concernsof scholastic normative economics, recent ethical thought has focusedprimarilyon the morality of social processes and outcomes in the face ofthe Smithian "invisible hand."Economichistory cannotbe taken out of its larger epochalcontext. Inparticular,one must note that the Enlightenment's"turnto the subject"fostered the modern confidence in the autonomy and power of humanreason and radically changed attitudes regarding the mutability ofsocial institutions. Consequently, the changes in economic terrain14According o Schumpeter, cholasticeconomicsspannedthe periodfromthe ninth tothe seventeenth century, he eve ofthe Industrial Revolution Schumpeter1954, 73-106).



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302 Journal ofReligious Ethicsexamined in the precedingsections cannot be viewed as the sole factorsbehindthe observedchanges in economicethics, norwere they necessar-ily the most decisive factors.However,the analysis offeredhere does ex-plain why the scholastic formulation of just price is untenable in theindustrial era at the same time that it builds a case for believing thatthere are economic reasons for contemporaryethicists to be genuinelyconcerned about the ability of modern socioeconomic nstitutions to ful-fill the requirementsof distributivejustice. Economichistory and theorycan be employed fruitfully to enhance our understanding of the specificmechanisms by which ethical reflection evolves in its continuingaccom-modation of the rapid changes in economic life.

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