Ridley Hall, Cambridge

Then and Now: The Schoolmen and Fair Trade by Joan Lockwood O'Donovan

Without necessarily realising it, the current campaign for trade justice is reviving a classical and medieval tradition. It is reintroducing the exercise of moral judgment to exchanges of trade, echoing the concerns of the Schoolmen who wrote about the just price. Joan O'Donovan offers a historical perspective.

The importance of the contemporary campaign for justice in international trade can be put very simply: it is attempting to restore certain ethical parameters that have been largely lost in free-market capitalism. ‘Justice' in international trade requires not only that trading results in more equal benefit between richer and poorer, more powerful and the weaker parties, but also that all parties fulfil their moral obligations to trade justly. For the richer and more powerful parties, this means acting with restraint. It means not using their superior bargaining power to exploit the weaker parties for their own profit, heedless of the latter's economic welfare.

The contemporary campaign for justice in international trade believes that there can be no justice in trade without the exercise of moral judgement by the traders involved. In particular it insists that decisions by the economically powerful to sacrifice some potential profit for the benefit of the economically weak are not taken solely, or even primarily, on prudential or ‘technical' grounds, but on moral grounds, involving a judgement about what it is right to do. The powerful thereby give expression to the universal community of moral right to which they and the weaker parties equally belong.

The contemporary campaign for trading justice is well aware that this universal community of economic right is not a simple but a complex matter. Trading justly in commodities or manufactures cannot be addressed in isolation from justice in international capital investment, employment relations, lending, or currency exchange. Each of these kinds of economic transactions have distinct ethical dimensions, all of which reflect the interpenetration of economic relationships with other forms of human relationship. This is nowhere more obvious than in the repercussions of injustice in one kind of transaction on other kinds. Unjust terms of trade, loans, corporate investment and employment conditions are all interconnected for poor and vulnerable people, caught in a web of moral failure and the needs of an economic system. Entangled with all these injustices is the depletion of natural resources and infliction of irrecoverable environmental damage that result both from moral vice and economic duress.

Fair trade organisations have invested time, effort and money in publicising and analysing the injustices in global economic relationships, but they have also provided opportunities for more just trading relationships between the economically advantaged and the disadvantaged. They have persuaded wealthy consumers in advanced capitalist economies to pay more than the market price for items sold by a select number of poor producers, and have put alternative marketing structures in place to ensure that these producers receive more for their produce than they would on the open market. At the same time, they have assisted poor producers to form co-operative enterprises to organise their labour more efficiently and improve working conditions, as well as the environmental impact. The aim is that their improved productivity and profits should strengthen, rather than undermine, the family and the local community.

The comparatively small scale of the fair trade initiatives (eg about 3% of the world coffee market is ‘fair-traded') is dwarfed by the massive scale and seemingly intractable character of trading injustice in the global market. Clearly, any sizeable redress of this injustice will require a sea change in investment, production, trading and lending policies by the world's most powerful economic corporations and institutions. Among the more insurmountable obstacles to such a sea change appears to be the sheer volume of human vice that is structurally and dynamically entrenched in the global market and its rational justification refined over several centuries. Although free-market capitalism has produced tangible wealth for some (and in particular societies, possibly for all), it has encouraged, required and theoretically rationalised conduct that is incompatible with Christian moral standards.

This article will now glance briefly at the key ideas and notable features of free-market economics during its modern development before turning to the theological foundations and guiding principles of pre-modern Christian economic morality, from which they present a striking departure.

The Rise of Liberal Economics

The idea at the foundation of modern liberal economics is that of the individual's autonomous freedom, no longer subjected to natural or divine law. From renaissance and enlightenment thought comes the idea that individuals shape and control their morality through acts of rational self-assertion which limit similar self-assertive acts by others. The primary moral reality is no longer a sharing by individuals in God-given natural and supernatural goods, and a subjection to natural and supernatural laws of love and justice, by which human passions are ordered and restrained. Rather, the primary moral reality is the natural passion and natural right of individuals to protect their lives against the innumerable threats from the human and nonhuman environments. They are directed towards acquiring those powers and material provisions that secure, prolong and materially enhance their lives.

Chief among these powers is property, understood as the natural, legal right according to which individuals can use and dispose of their possessions as they wish, and defend this control against every challenge. Second to property is scientific and technological knowledge, by which individuals harness natural processes for human use.

Of these two, property-right is the foremost economic power because, through the market mechanism, it makes possible an unarmed struggle among individuals to accumulate wealth in productive resources and consumer goods. In classical economic theory, the market is governed only by those rules necessary to protect the equal freedoms and rights of traders to maximise profits and capital: rules such as prohibit fraud, monopoly or physical coercion, and require the fulfilment of contracts. Trade complying with such rules is deemed naturally just: there are no additional moral constraints, and there are no moral limits on the acquisition of wealth.

The competitive individualism of classical economic theory is complemented by its belief that the outworking of market forces will result in economic wealth for all. Adam Smith's ‘invisible hand' conjured common prosperity and optimal social happiness out of private avarice and self-serving, through the march of progress on several fronts: in the accumulation of capital, the division of labour, the expansion of markets and the development of scientific technologies.

The second power is scientific and technological development, which liberal economics reveals to be the powerhouse of economic growth and, consequently, the linchpin of faith in the capitalist market. More than any other factor, continuous technological progress is seen to give industrial and business enterprises the competitive edge that drives the dynamic economy. Moreover, the economic impact of scientific there are no moral limits on the acquisition of wealth Faith in Business Quarterly Journal Volume 9 No.2 Summer 2005 11 technology is not confined to the production and exchange of goods and services. The market itself has become the object of scientific investigation and manipulation, with ever more sophisticated diagnoses of market imperfections and therapeutic measures for remedying them.

However, the market has increasingly shown itself to be anything but the self-calibrating natural mechanism projected by Adam Smith and the deists. Left to itself, it has proved incapable either of sustaining free competition or full employment, technological innovation or optimal business investment, consumer demand or monetary stability. Rather, these have only been achieved by a constant stream of governmental regulative measures, fiscal and monetary policies, investment, research and welfare programmes.

Such managed market economies have, from time to time, achieved an uneasy equilibrium between what are perceived as the antagonistic interests of producers and consumers, capital and labour, creditors and debtors, but only with a unidirectional cycle of growth: growth in the volume and technological sophistication of production, in disposable income and consumer demand, in the scale of corporate enterprises and the concentration of economic power, in the consumption of natural resources, and in international trade and commerce. The contemporary scramble for global markets is intensifying, and there is acute pressures on the most technologically advanced producers to retain their competitive advantage over producers in developing economies where there is a longer term growth potential. This condemns the poorer producers to a small share of the global market and makes improbable large-scale correction of the injustices of international trade. From a Christian perspective, effective response to present economic ills and injustices depends on our repentance of past sins of economic theory and its rationalisations, and our rehabilitation of the moral goal and principles of economic conduct. Economic science will play a role in that effective response only if it admits the moral dimensions of all human science and discards the project of detaching theoretical analysis from moral judgement.

Property and Money in Medieval Thought

For the older Christian tradition, the integration of economic analysis and moral judgement was a theological enterprise drawing its foundational concepts and principles from Biblical revelation. The singular achievement of medieval economic thought was to set economic activity within a dynamic theological understanding of human community as created, fallen, redeemed and sanctified. Its overarching moral vision was of the order of loving and righteous relationships of persons to one another and to non-human creatures ordained by the Father in his creation of the world, renewed by the triumph of Christ over the forces of sin and death, and perfected by the work of the Holy Spirit in the community of believers. Its central vision, then, was of a Christ-centred human community of sharing in spiritual and material goods: a community of mutual self-giving, enjoyment and fulfilment in the use of the earth's abundance.

In dynamic tension with this vision of redeemed and perfected community was the vision of an ongoing sinful and disordered humanity. Alongside the fulfilment of rational love in common economic existence, medieval theologians placed the just exchange and distribution of material goods under the conditions of fallen nature. These are the conditions of scarce resources, arduous labour, uncertainty and risk of acquisition and possession, human avarice and the institution of property. At their best, they situated baptised believers in both communities, subjecting them to the claims of both, with the requirements of fallen human nature subjected to those of redeemed and sanctified nature. Thus Christians in their economic activities stood always under the demands of natural justice, accommodated to the conditions of human fallenness, and under Christ's counsels of evangelical love. This left little room for moral laziness, complacency and evasion of responsibility, whether individual or corporate.

Pivotal to medieval economic theory was the moral complexity of its concept of property and all the economic transactions dependent on it. Like the Church Fathers, the mainstream medieval theologians viewed property as belonging, not to the original order of God's good creation, nor to its renewal and perfecting in the body of the resurrected Christ, but to the passing condition of sinful humanity. God's original will for the human community, as shown in the postresurrection gathering of Christ's disciples (Acts 2:44-47; 4:32-37), was that its members make common use of the goods of creation to relieve material want, in the absence of any claims of ‘mine', ‘yours' or ‘ours'. The foremost paradigm of this common use was the sharing by human beings with other creatures of God's indivisible bounty of nature - air, sun, rain, sea, the seasons. Human beings' use of other naturally divisible goods should follow this example as much as possible. The medieval church regarded the communal possession and charitable distribution of material goods by the clerical and monastic estates as more closely approximating this original use than the laity's private ownership of goods.

It is significant that all the leading economic thinkers from the twelfth to the fourteenth centuries belonged to the two mendicant orders, the Dominicans and Franciscans, dedicated to lives of the strictest poverty and renunciation of ownership. Not surprisingly, they thought very seriously about the justifications for property, as about the temptations connected with it. Much impetus for economic analysis and moral reflection came from their pastoral role in the confessional.

Prominent among their justifications of private ownership (individual and corporate) was that it met the disciplinary needs of fallen humanity, operating to curb the unruly impulses of sinful human beings to appropriate material things in a selfish and violent manner. But the institution of property still had to serve God's original intention that the earth's abundance be shared in charity and distributed justly for the sustenance of all. All justifications of private property had to reckon with this unvarying principle, including the popular Aristotelian argument that privately owned goods are better cared for and used more efficiently and productively than commonly held ones.

Accordingly, medieval theologians recognised different types and levels of property as necessary for fulfilling the diverse tasks and responsibilities of lay and clerical vocations. It was these social tasks and responsibilities that defined appropriate wealth, not the pursuit of wealth that issued in social tasks and responsibilities. Three were regularly mentioned: providing the necessities of life for oneself and one's dependants; providing for the needy poor in society through charitable giving; and financing one's particular contribution to the common good, i.e., one's own work or profession. Even subject to these responsibilities, private property was still rife with temptations. It threatened to distract owners away from higher spiritual pursuits to preoccupation with worldly cares, and away from a dependence on God's providence to their own powers. More gravely, it threatened to enflame the sins of avarice and pride, expressed in the accumulation of possessions beyond rational need and enjoyment, for the owner's exclusive satisfaction and selfaggrandisement.

Under biblical, patristic, and Aristotelian influence, scholastic thinkers viewed the extended family or household as the basic economic unit, and justified exchange in terms of the household's inefficiency in meeting all its material needs. The ethical and analytical model of the market was that of exchange among producing households: so, e.g., a farming household barters its surplus of agricultural produce for shoes, cloth, and medical treatment, or sells its surplus and purchases these commodities and services with its income.

In terms of this model, money functions strictly as a medium of exchange: i.e., a monetary value is used only to enable exchange of items which cannot conveniently be valued in terms of those items, and as a guarantee of future purchases. Hence, the moral structure of market transactions, as Aristotle had observed, is commodity-for-money-forcommodity. On the basis of this teleology of money, commercial trading for profit appeared to be a morally problematic occupation; for the purely commercial transaction has money as its terminus rather than its middle term: money-commodity-money. Mindful of St. Paul's condemnation of the love of money as ‘the root of all kinds of evil' (1 Tim. 6: 10), the schoolmen - as the medieval theologians were called - considered money as the most seductive and corrupting form of wealth, and the love of money as the most degenerate form of avarice. Money, they reasoned, is not only more amenable to unlimited accumulation than other types of wealth, but is convertible into all other types, and so is the material equivalent of infinite human desire. Any occupation, therefore, that had the accumulation of monetary wealth as its purpose lay outside the moral boundaries of economic activity.

In an age of rapidly expanding urban production, trade and commerce, the challenge for medieval theologians, was to determine whether and how the increasingly diverse types of economic transaction could be accommodated within the moral structures of property and exchange. To meet this challenge, they appealed to the central authority of divine commandments in tandem with the principles of natural justice, giving rise to criteria of the just price in exchange, and to concepts of freedom and compulsion in the marketplace.

The Just Price

The law of God, revealed in the Old and the New Testaments, placed manifold restrictions on the conduct of trade: concerning the time, not on the Sabbath or on feast days; concerning place, not within the precincts of churches and other holy places; concerning persons, not by clergy (at least not routinely); and concerning manner, not in a spirit of avarice, but in a spirit of charity and justice. Of the merchant in his routine business dealings, Jesus' command to ‘do unto others as you would have them do unto you' (Mt. 7:12) might require an act of self-sacrificial charity or of unprofitable justice: confronted by a seller or a buyer in deep economic distress, he could be morally obliged to buy above or to sell below what would otherwise be the ‘just' price. However, our Lord's command was more generally interpreted through the prism of natural justice in exchange.

In Nichomachean Ethics, bk. 5, Aristotle described justice in economic exchange as ‘proportionate reciprocity' of benefits received, reciprocity being proportionate to the different values of the products exchanged. Aristotle's medieval interpreters attributed the value of goods in exchange, of which money was the conventional measure, to two classes of determinants: to factors of their production, including labour and expenses, and to social assessments of their ‘utility', of their ‘ability in use to supply need' (Albert the Great). The evolution of ‘just price' theory, from Albert the Great and Thomas Aquinas to Peter Olivi and John Duns Scotus, consisted largely of more systematic and detailed elaborations of both production and market determinants of value in exchange. Contrary to the tendency of modern economic theorists, the schoolmen viewed these sets of determinants, not as rival, mutually exclusive, approaches to explaining ‘price', but as complementary aspects of the ‘just price'.

On the production or ‘cost' side, they were convinced (not least by the Bible) that labour should have its reward, and a variable reward depending on such factors as time, intensity, and quality - whether the labour was common toil or a highly skilled service. They did not think that labour ‘produced' economic value, as if God's natural gifts counted for almost nothing; but rather that labour was worthy of social and economic recognition. They saw that society benefited when the prices of commodities and services covered the costs of suppliers, and gave them and their dependants incomes sufficient to keep them practising their arts and crafts. The same applied to those who made their livelihoods from trading and commerce: the incomes of traders, bankers and money-changers should also correspond to their labour and costs. According to Peter Olivi, the merchant's profit on the retailing of purchased goods is justified by his labour (especially in transport) and industry or ‘solicitude', and by the risks and expenses that he has incurred. A just price for his merchandise should indemnify him against insupportable losses and furnish him with a modest living.

At the same time, the schoolmen recognised that in most circumstances the potential buyers of products and services were collectively the proper judges of their utility value. Thomas Aquinas was first to formulate the concept of aggregate need (i.e., demand) as a major determinant of the market price. But he and his successors recognised that aggregate demand would determine a just price only in a regular competitive market, undistorted by genuine dearth or by contrived monopolies, corners and collusions. The schoolmen universally condemned all manipulation of market conditions to yield excessive profits, and every strategy to create and exploit the economic duress of others, in trading as in usury. Free bargaining exceeded its moral limitations when it became economic compulsion: when (as Olivi observed) one party to an exchange raised or lowered prices ‘solely because of the personal impotence or necessity' of the other.

Thus, Thomas Aquinas's so-called ‘double rule of just pricing' was generally accepted: namely, that, in setting his price, each bargaining agent could take account of his own loss, but not of the greater gain accruing to the other party owing to his particular circumstances of need. While admitting some fluctuation of just price with supply and demand, the schoolmen insisted on limits, particularly in cases of extreme individual or communal duress. So, in the absence of regular competitive market conditions, a hypothetical market value should be invoked - and if necessary, externally imposed - to restrain the greed of the stronger party.

Apart from ruthless bargaining, the schoolmen analysed a raft of unjust practices that violated the freedom of one party to an exchange: every form of fraud or gross deception about merchandise, as to its substance, quantity, quality, capabilities and defects, whether perpetrated by sellers or buyers; every harmful exploitation of one party's inexperience, ignorance, impulsiveness, or simplemindedness. In short, the moral requirements of market freedom were that all parties to exchange be ruled at all times by honesty and good-will toward others and by restraint of their own acquisitive and self-aggrandising impulses. Only then would rational and just market prices be assured.

Curiously, the subject of wages was conspicuously absent from the scholastic discussion of justice and freedom in the marketplace. The most plausible explanation is that the largest classes of poor labourers in the medieval economy were not wageearners directly subject to market forces, but rather, feudal serfs or tenant farmers in the countryside, and employees of guild craftsmen in the cities. In both cases, they worked within somewhat independent and self-contained social and economic relationships, less exposed to external moral scrutiny. Nevertheless, medieval theologians addressed certain grievances of poor wage-earners en passant, attacking as unjust such practices of employers as detaining or retaining of the wages of labourers and servants, and substituting non-monetary goods in part payment of an agreed monetary wage. Later schoolmen would analyse disadvantageous wage contracts as instances of forced consent. But their most important contribution to just wage theory was their conceptualising of labour as a primary determinant of just price, wedded as it was to their conviction that human work had a claim to be rewarded superior to that of capital.

Contemporary Relevance

To conclude, the continuity between scholastic economic ethics and the contemporary movement for justice in trade lies in the latter's attempt to reconnect economic theory and practice with a much broader range of moral concepts and principles than liberal economics has customarily admitted. Its exponents have broken through the reification of large-scale economic immorality into quasiscientific laws of economic behaviour characteristic of modern economic analysis, which reinforces the flight of ordinary people from exercising moral judgement in the marketplace. To exercise moral judgement in economic transactions is to exercise inner and outer restraint on our appetites: for accumulating wealth and securing it into the future, for emancipating ourselves from the discomforts and deprivations of human life by unceasing technological innovation, and for securing a competitive advantage in economic exchange to the detriment of our needy neighbour.

True, there can be no facile application of the ruling concepts and principles of scholastic economics in modern conditions, owing in part to structural changes in the market, in part to analytical shortcomings in scholastic thought. However, the new opportunities for moral economic judgement opened up by contemporary fair trade initiatives are proof that a fruitful conversation with Christian economic agents of an earlier age are still to be had.