Passing on the Cost

One of the centerpieces of President Donald Trump's economic policy was the promise to enact protective tariffs on imports to dampen the influence of foreign competition on American sales. While to date the Trump administration has not released an official rate of the proposed tariff, White House Press Secretary has thrown out the tentative number of 20%, not as a concrete proposal, but as an example of what was possible. This has led to widespread speculation on how such tariffs could affect the American consumer, either beneficially or adversely. In this article, we explore one of the economic assumptions behind some of the opposition to protective tariffs, specifically with regards to the concept of "passing cost on" to the customer.

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Terms of Interest

Anyone who has spent some time researching Catholic social teaching has probably come across fierce debates on the issue of charging of interest. The Bible condemns the taking of interest on a loan as the sin of usury and states that it is a form of bondage. However, the discussion is not that simple. Is all interest usury? If so, what of the demands of justice that he who gives out his money in a loan have some sort of compensation for the risk he assumes? If not all interest is usury, at what point does it become usurious? Are there any circumstances that mitigate culpability? Is there nuance in how interest is assessed? Do the Bible and the popes who follow in the biblical tradition have the same thing in mind when they condemn "interest" as the modern practices associated with the taking of interest? Has the Church's teaching on this point remained constant, or has it developed over history?

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Authority of Rerum Novarum and Quadragesimo Anno

In my home state, there has been vigorous debate about proposals to raise the state's minimum wage. This sort of proposal of course prompted fierce online debates between various factions, some arguing for, some against the proposal. It also brought out spirited debate among faithful Catholics on the concept of a just wage, and classical issues surrounding Catholic social teaching. The particulars of the minimum wage proposal are neither here nor there; I personally see very little correlation between contemporary economic discussions and the lofty ideals of Leo XIII and Pius XI. But what was very interesting in the discussions was the different approaches Catholics took to their Catholic social teaching. Some were willing to grant it a great authority, on par to the Church's dogmatic pronouncements; others were more dismissive. I recall in the minimum wage discussion one Catholic attorney, in responding to some citations of Leo XIII, remarked that "Rerum Novarum is hardly relevant in this discussion."

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Status and Contract

In his classic 1937 work The Crisis of Civilization, Hilaire Belloc summarizes the development of Christendom and diagnoses with precision how the rejection of the Catholic Church at the time of the Protestant Revolt is responsible for the social and economic troubles of the modern world. The most pressing economic problem is that the vast majority of people are wage-earners to a small owner class who have a disproportionate control of the means of production. This situation Belloc calls 'Proletarianism.' While modern wage-earners have political rights, full economic freedom eludes them because they are too dependent upon those who pay their wages. Unlike the Communists, who assert that the evil is in private ownership of property, Belloc states the problem is not that capital is owned and utilized by so few, but that so many are proletarian wage-earners. At the end of the Middle Ages, Europe was moving towards a free peasant class of owners. By 1900, the peasant class had disappeared and was replaced by landless wage-earners, which occurred simultaneously with the rise of Capitalism. How did the free peasant of the 16th century become the urban proletarian of the 19th? Belloc says the crux of the transformation was in the shift from Status to Contract in socio-economic relationships.

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Profit as Just Recompense

"A stake will be driven between fitted stones — sin will be wedged in between buying and selling." -Sir. 27:16

Last summer I had a conversation with a Protestant friend of mine about the concept of profit. The question I posed was whether any financial arrangement was just so long as both parties agreed to it, no matter how much it was weighted in favor of one party. He answered in the affirmative - an agreement was an agreement, and so long as both parties entered it freely, there was no way it could be morally objectionable, regardless of how the agreement was weighted. While I got him to admit that in certain extreme situations agreements could become exploitative - like selling an apple to a starving man for $100 - he basically stuck to his position that any financial agreement was just by virtue of it being freely consented to by both parties. 

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Pius XII on Rural Economy

The 1940's were an interesting time in the economic development of the west. On the one hand, the end of World War II had brought us definitively into the modern era with electrification, modern communication, nascent consumerism, and of course the inauguration of nuclear energy. On the other hand, many regions of Europe and North America were primarily rural and depended upon agriculture for their economic survival. In many places, horse-power was still being used. It was a period of transition, a brief crossroads between two epochs with all the questioning and uncertainty that comes with such times. In 1946, Pius XII gave an address at the Convention of the National Confederation of Farm Owner-Operators in Rome on the importance of agricultural activity in the economy, and of the dangers facing rural life as we transition into the modern world. These observations are even more pertinent now than when the Holy Father first spoke them.

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"Mammon of Iniquity" - The Parable of the Unjust Steward

In the teaching of our Lord Jesus Christ, the Lord was fond of using monetary examples to explain truths about the kingdom. Heaven is described as a precious pearl, or as a coin that a woman searches for diligently. The gifts and graces God bestows upon us are compared to talents of silver or gold that can be traded, invested or buried. The riches of heaven are analogically compared to earthly wealth, although of the sort that moth and rust cannot corrupt. The use of monetary examples makes sense, as common people understand the intrinsic value of wealth and can draw parallels to the value of heavenly riches without much difficulty. One of the most difficult of our Lord's "economic parables" is the story of the unjust steward, which can be found in Luke 16. The parable is difficult because it seems like our Lord is promoting dishonesty when He commends the steward for being dishonest, and when Jesus tells us to "make friends by dishonest wealth so that when it fails you will enter the heavenly kingdom." What is the true meaning of this parable, and does it say anything to us about our use of wealth or created goods?

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Government and Health Care

Nothing is more contentious these days than the subject of heath care, especially in light of the looming implementation of the disaster known as Obamacare. These days it seems that the solutions are always worse than the problems they purport to serve. But do we really have only two options here? Are we really stuck between the Scylla of massive corporate conglomerate health care and the Charybdis of a government takeover? Today, we time travel back to summer of 2009, before Obamacare had been passed, to hear Catholic blogger Ryan Grant's take on the dangers of government run healthcare as well as basic proposals for a Distributist approach to the health care question. This article originally appeared on the blog Athanasius Contra Mundum on August 11th, 2009:

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Usury and the Love of Money

A friend of mine who is adept in Catholic apologetics recently remarked to me that there is one accusation hurled at Catholics for which he had never been able to find an effective reply: namely, that the Church has changed its teaching on usury. Having since then examined this question in more depth I have found that the problem is only exasperated by the fact that those who should know how to counter this accusation almost invariably give us answers which seem designed to make us look foolish as Catholics. A very good example of such an “embarrassing argument” is given to us by Father William B. Smith in his “Questions Answered” column in the June, 2003 issue of Homiletic and Pastoral Review. In his reply to the question, “Does the Church still have a teaching on usury?”, he quotes Germain Grisez (Living Christian Life vol.2, pp.833-34):

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On Objective and Subjective Ends of Work

Many individuals, both religious and secular, have decried what has been described as the crass materialism of the modern age. This criticism of the modern west is not restricted to leftists. In 1978, famous Russian author Alexander Solzhenitsyn, certainly no friend to communism, gave a commencement speech at Harvard in which he decried the materialist culture of the west as oppressive of human dignity. The earned Solzhenitsyn the ire of the American right, who had hoped his speech would trumpet the glories of American capitalism. Instead, Solzhenitsyn warned that in the capitalist west "destructive and irresponsible freedom has been granted boundless space."

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Dulling the Blade of Disparity

Rich and poor have been with us since time immemorial, and in saying "the poor you have always" (Mark 14:7), our Lord teaches that some poverty is inevitable as long as we live in this fallen world. Thus the Church has taught that "the world will never be able to rid itself of misery, sorrow and tribulation, which are the portion even of those who seem most prosperous" [1]; total equity, perfect justice and universal prosperity and goodness are only to be found in that kingdom which is to come, and for this reason, political or economic schemes which promise universal equality and a return to Eden in this temporal world are illusory. The best that can be accomplished in this fallen world is to mitigate the extremes to which poverty and wealth can tend towards.

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Laesio Enormis

Catholic social teaching from the Middle Ages right up to the modern day has stressed the economic concept of equality in contracts, which means that privately agreed upon contracts or transactions must conform to an objective standard of justice which is independent of the arrangement agreed upon by the parties. Since the advent of the modern period, however, the cornerstone of classic liberal economics has been the absolute autonomy of parties when entering into a contract. This autonomy means that the "just price" or "just wage" in the Catholic sense of the terms does not objectively exist; what is "just" is equivalent to what is agreed upon by the parties, even if one side in the transaction enjoys benefits extremely disproportionate to the other. Catholic Tradition, however, has never sanctioned such a concept. Our Tradition affirms the existence of just prices and just wages and summons all individuals to exercise the virtue of justice in economic transactions. In this article, we will examine the medieval concept of laesio enormis and see how Christendom attempted to address the issue of inequality in commercial exchanges.

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Collusion of Big Business and Big Government

A standard critique of the capitalist system going all the way back to Chesterton and Belloc is the accusation that in our current system we have neither a domination by Big Government as the conservatives are constantly drumming nor an enslavement by Big Business as the liberals fear, but rather a collusion between Big Government and big Business, a collusion that allows each to benefit the other and work for the aims of the other, something in such a direct way that the folks running government and running business are the same people. This is what Chesterton referred to as the dilemma of Hudge and Gudge in What's Wrong With the World. While most in the west take the side of Hudge against Gudge or Gudge against Hudge, the informed Distributist understands that Hudge and Gudge are two sides of the same coin, two faces of liberalism that are both moving us toward the Servile State.

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Fractional Lending and the Economy of Promises

Those who are critical of the current global-capitalist economic system, particularly those suspicious of banks, frequently center in on the principle of fractional reserve lending as central to the abuses endemic in the current financial order. The arguments against fractional reserve lending are many: it introduces instability into the financial market by floating loans conjured out of thin air and backed by nothing; it is fundamentally dishonest because it operates not unlike a ponzi scheme; that it is unjust because the lender always has a power denied the borrower (the power to create money out of nothing but promises to pay), and that it is essentially an anti-Catholic concept because it divorces the buyer and lender from trade in real, tangible goods and instead is based around the exchange of fictions created on paper that only have reality because they have the force of law. Much could be said about fractional reserve lending, and there are those who adamantly defend it as a necessity in any vibrant economy. This article will merely sketch the basics of fractional reserve lending and point out a few objections to the practice from a Catholic-Distributist standpoint.

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A People of Silver

Some time ago, a co-worker of mine went on a hunting and fishing trip to Michigan's Upper Peninsula. The Upper Peninsula is a outdoor enthusiast's dream, with hundreds of thousands of acres of forest, many of them old growth, hundreds of crystal clear rivers and streamlets that tumble down from the rocky highlands of Marquette and Keweenaw, and a general culture of self-sufficiency and rugged survivalism. The Upper Peninsula, and the Keweenaw in particular, were the sites of some of the nation's most intense lumber and mining operations in the 19th century. These industries have long since gone, and the Upper Peninsula is now a quiet, scenic getaway of waterfalls, abandoned mines...

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Colonial Economics

 I was recently flipping through a rather interesting book which contained a chronicle of all the recorded cases brought before the courts of colonial Massachusetts during the 17th century, from around 1620 to 1688. It was extraordinarily fascinating to see the type of things people were accused of back then, as well as the actions taken by the magistrates to correct them.

I was recently flipping through a rather interesting book which contained a chronicle of all the recorded cases brought before the courts of colonial Massachussetts during the 17th century, from around 1620 to 1688...

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Myth of Adam Smith

Among modern conservative apologists, the 18th century economist Adam Smith holds a unique place. He is to them what Galen was to the medieval physician: a final judge holding a mythic semi-divine authority from whom there can be no dissent or appeal. Though, as is often the case with other larger than life figures, the actual opinions of Adam Smith have been sanitized and simplified to suit the needs of a particular ideology.

Though, as is often the case with other larger than life figures, the actual opinions of Adam Smith have been sanitized and simplified to suit the needs of a particular ideology.Modern conservatives tend to present Smith as an unqualified supporter of the capitalist system in totu and a proponent of a laissez-faire system of economics that favors unfettered business. As we will show in this article, this Adam Smith, the Smith of modern conservative apologists for big business, is a myth.

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Labor Rights Reality

You have an inalienable right to join a union. Distributists believe this right should be protected unequivocally, provided the union exists for benevolent purposes. Although efforts that would prevent or discourage laborers from unionizing are not only wrong, but folly, we should not absolve unions of all criticism.

You have an inalienable right to join a union. Distributists believe this right should be protected unequivocally, provided the union exists for benevolent purposes. Although efforts that would prevent or discourage laborers from unionizing are not only wrong, but folly, we should not absolve unions of all criticism.

Unions have become an embarrassment to the American political economy because many have succumbed to corruption. Corruption can include any behavior opposed to the good purposes of a union.

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