The Basics of Economics

Man is a creature incapable of survival without the use of his intellect to form his environment. Other animals on this earth were gifted with substantial natural powers; they have thick fur or blubber to protect them from exposure, sharp claws or teeth to enable them to feed, swift feet to enable them to escape their predators, and superb senses to enable them to detect and explore the world around them. Man, the highest of animals, has none of these things. His skin is thin, his hair scarce, his teeth small, his claws flimsy, his feet slow, and his senses mediocre at best. God does not intend man to survive solely by use of his physical prowess; He intends him to survive wittily, by the use of his reason to aid his strength.

But man does not survive wittily in this way merely by using his intellect to take advantage of his existing environment, like a wolf with an abnormally high IQ. No; man survives wittily by changing his environment, by molding it to his will. He ought not to violate his environment, forcing it to be contrary to its nature; rather, he ought to perfect it, making it what it needs to be so as to be most useful to him.

God Himself has instructed man thus, and in no uncertain terms:

And he [God] said: Let us make man to our image and likeness: and let him have dominion over the fishes of the sea, and the fowls of the air, and the beasts, and the whole earth, and every creeping creature that moveth upon the earth. And God created man to his own image: to the image of God he created him: male and female he created them. And God blessed them, saying: Increase and multiply, and fill the earth, and subdue it, and rule over the fishes of the sea, and the fowls of the air, and all living creatures that move upon the earth. And God said: Behold I have given you every herb bearing seed upon the earth, and all trees that have in themselves seed of their own kind, to be your meat.[1]

Man is to rule and to fill creation; more, he is to subdue it, not violating its nature, but making it better serve man, its lord.

This necessity of forming nature to a condition more useful to ourselves is not merely a product of sin. After creating man and the Garden of Eden, “the Lord God took man, and put him into the paradise for pleasure, to dress it, and keep it.”[2] Thus, even in his primordial and innocent state, man could not live merely by plucking the fruits of the earth, like a beast or an insect. Even in his innocence, man was set to work, to improve the nature he was given (“to dress it”) and to preserve it in its improved state (“to keep it”). Making nature more useful to himself is in the nature of man and of nature itself; nature exists to serve us, and we exist to rule it.

This is all, of course, very general; however, traditional Catholic philosophy has become very specific about much of this thinking, and has even attached names to some of these concepts. That which has been made more useful to us, when once it was less useful, we call wealth. When one picks up a board, one is holding wealth; it is a tree which has been made more useful to man by means of man’s wits and abilities. When one eats an apple, one is making use of wealth; the nutrients of the soil have been transformed, through the deliberate cultivation of an apple tree, to a condition more useful to man than their original form. The process itself, by which nature is made more useful and valuable to man, is called the production of wealth, or sometimes the shorthand production. The farmer, in growing his apple crop, is producing wealth, as is the lumberjack and the miller who turn trees into boards.

Man achieves the process of making nature more useful to him—that is, of producing wealth—by means of his labor. Labor is simply man doing things with nature, like the rancher who herds his cattle to better pastures, or the blacksmith who renders wrought iron into a useful tool. The great Catholic economic thinker Hilaire Belloc described labor as “human energy… applicable to the material world and its forces.”[3] Labor is the means by which man fulfils his God-given task of subduing and ruling nature; as such, labor is clearly sacred, among man’s highest acts. Furthermore, it is the means by which man becomes prosperous; “it is incontestable that the wealth of nations originates from no other source than from the labor of workers.”[4]

Sometimes, however, labor exercised upon some object is not immediately expended. For example, rather than eat all the food that he produces, a farmer may choose to store some quantity of it for the next year, as a guard against poor crops. A blacksmith who produces a good, strong draw-hoe has certainly exercised his labor upon iron, but that labor will continue to assist the production of wealth for many years. In other words, the labor is stored for a time, held aside for future production, either because the labor has great longevity (as in the case of a good tool, like the draw-hoe) or because its consumption has been deferred to assist in future production (as in stores of food). This type of labor, which has been stored in some way for future use in producing wealth, we call capital.

Finally, before one can produce wealth with labor and capital, one must have something to which the labor, with the assistance of the capital, can be applied. A farmer may work all he likes, but without land he will grow no food. A lumberjack can swing his axe until his arms wear out, but without trees he’ll produce no timber. Throughout the course of this essay we have referred to this simply as nature; as in, man makes nature more useful to him (that is, produces wealth) by the application of labor. Traditionally, however, nature in this equation has been termed land. Land is the ultimate source of all wealth, as all things upon which man exercises his dominion proceed, either directly or indirectly, from it. Therefore, nature is fittingly referred to as “land” when discussing the production of wealth.

Therefore, there are three main factors in man’s dominion as given by God: land, labor, and capital. The land is the clay which man has been designed to mold; labor is the means by which man molds it; and capital is past labor which sustains and assists man while he exercises his current labor. These two, land and capital, have a great deal in common which they do not share with labor. For example, often man exercises his labor upon the results of other labor; that is, upon capital, as when a miller turns timber into boards. Therefore, we can see that land and capital are, in a certain sense, types of the same thing; that is, they are both objects to which man applies his labor, the means by which labor makes things more useful to man. Thus, when we speak of the means of production, we are speaking of land and capital combined, the two things which man, by his labor, can make more useful to himself. Labor, on the other hand, is different; it is the action of man itself, and thus is sacred in a way that even land and capital cannot be.

To sum up: man’s dominion over nature is given by God, a dominion which requires him to perfect nature by making it more useful to man, thus producing wealth. Man does this by applying his labor to land, which includes the fruits of the land. Often man stores his labor for future use, either in the form of tools, which are not quickly consumed, or in the form of stores to sustain future production. This stored-up labor is called capital. Man can apply his labor to capital as well as to land; thus, land and capital together are called the means of production.

Thus, we have a basic outline of the economy of man; that is, of how man uses the resources God gave him to produce the wealth that he requires for his flourishing. It does not, however, take an astute reader to notice that our current system seems quite far removed from this description. This situation is not merely the inevitable consequence of our complex society; it is rather a positive rejection of the true nature of man’s dominion over creation, and a deliberate distancing of man from the creation which he rules. This rejection and distancing prevents man from truly flourishing. We will now proceed to an examination of our current system and how it is built upon a rejection of the principles we’ve just reviewed, and see what negative results that has had for our society.

Our Current System

We have just examined an economic system which is based on the application of labor upon land and capital in order to produce wealth. Implicit in that discussion was the fact of consumption of wealth; that is, that the wealth which is produced in this way is produced for the use of man, and that that use often results in the wealth being consumed. (Sometimes, of course, it does not, as in the use of tools.) However, this consumption of wealth clearly cannot occur without that wealth first being produced; therefore, it is clear that the human economy is based fundamentally upon production rather than upon consumption; that is, that it is based primarily upon the fields, the forests, the factories, and the mines rather than upon the supermarkets, the home improvement superstores, the retail malls, and the jewelers’ shops within them.

In other words, the whole purpose of this is to produce wealth; that is, to take nature and make it more, rather than less, useful for man.

Our current system, however, turns this framework on its head. Rather than attempting to produce more wealth, our system attempts to produce more capital; hence, it is referred to as capitalism. This emphasis on capital and not upon wealth makes it focus on consumption rather than production, also earning it the name of consumerism. Our system arrived at these strange conclusions primarily through confusing wealth and capital, which (as we have seen) are two very different concepts. The main culprit of this confusion is money, a topic which we shall soon examine.


Notes

[1] Genesis 1:26–29.

[2] Genesis 2:15.

[3] Hilaire Belloc, The Servile State 46 (The Liberty Fund 1977).

[4] Leo XIII, Rerum Novarum, no. 51.

 

Tags: , , , , ,