Posts filed under ‘History’
Following Aristotle to Saint Thomas Aquinas: commerce and usury
I previously left the story with Aristotle and his admittance of domestic wealth management versus his rejection of personal enrichment per se, the modern idea of economics. (See Blackthumb’s great blog). But… what happened later? Let’s jump to the XIIIrd century…
In those days many would worry about being able to distinguish between the authentic values of God and the distorted inclinations of humans. There was an ongoing discussion about what was right or wrong, and what God wanted humans to do. Reason or faith, which to follow? Was nature a reflection of the divine reality? As in Plato, was what they could see just a shadow of a superior reality?
Averroes, an islamic spanish phylosopher, had his answer. He, who was known as the great comentator of Aristotle, asserted the separation between faith and rational knowledge. There was no incompatibility: religious knowledge and reason just followed different paths.
But averroism fell in disgrace. And with it the aristotelian point of view, heavily criticised by agustinism. The same fate had the separation between faith and reason, radically rejected and condemned by both muslims and christians. They were bad days for both reason and Aristotle.
And then there was San Tommaso d’Aquino, aka Saint Thomas Aquinas (1224-1274). Saint Thomas inherited both the aristotelian point of view and the defense of the ability of rational to operate in its own laws without leaving the frame of faith. That was because the mystery of God was incarnated in human language. Thus it was possible to derive new rules from those that existed as certain because they had been revealed by God. And as long as the previous were according to faith, the latter would be no matter how they were converted, ellaborated and transformated following the rules of rational activity.
Aquinas denied the possibility of money being productive. Following his reasoning, what had not been created by God but by humans and did not have the ability to reproduce, couldn’t be multiplied. It was an unnatural thing. That meant that what we know as interest was not justified but condemned. It was not possible to earn anything from lending money. Interest was usury. It still is, under Roman Law.
On the other hand that was totally coherent with Aristotle’s rejection of commerce. Of course that was a real problem in a society that desperately needed commerce to emerge from dark ages, that and also the ilegitimacy of accrued interest.
Fortunately there would be a way out of this, although it would still take a couple of centuries to get out of this mess. Mediterranean merchants -specially north Italians- not only would thrive on commerce -it would be the Renaissance-, but they would exchange foreign currency to be delivered at a future date.
The beginning of futures? Not yet. It would be a way to accrue interest for the lender without falling into usury and without actual trade of goods or foreign currency. They had invented the dry exchange.
Aristotle and his double vision of economy
Looking back in time, there’s a point where “economy” begins as a way of managing the wealth of the house, for that’s the meaning of “oikos” (house) and “nemein” (administration). What is not clear at all is what was being administered was “wealth” in its meaning nowadays or just a restricted concept of it.
Aristotle was born in 322BC. In an era of isolated greek cities, many of them in war. Economy was based on the production of slaves and women. The first as “properties that could talk”, the latter as beings that only had power by delegation, restricted to the care of the house and children.
In those greek cities, common good was an important concept, much more important than individual rights. The pursuing of wealth was still something not accepted by society for the real wealth was measured by the size of owned land, not by any other means. Those societies needed resources for protection and needed a way to make decisions: politics.
Politics were managed by middle class. Middle class were those with enough resources to participate in political life for free. There still was a clear separation between politics and money, and corruption was still a few decades away of being born in Athens.
But most interesting, Aristotle already described four main objectives in life:
- Pursuing honour and public recognition
- Pure contemplation of truth
- Hedonism: accumulating and tasting different pleasures
- Accumulating wealth
The fourth was the despised one. It was perceived as a threat for the city and a nonsense because it meant accumulating resources with no use for them. That meant depriving the community of those resources.
Aristotle ended up differenciating two kinds of economy:
- oikonomikos, as I first described, related to the administration of the house, the acceptable one
- chrematisike, or commerce for profit, the art of money making
The difference between the two, moral difference between what’s right and what’s wrong, has labeled Aristotle as “enemy of business”. In fact he was. He labeled the participants of this trading activity as “parasites of society” and thought of them as outsiders not rightful citizens.
Many of the christian traditions followed Aristotle’s path, specially protestantism. Normative economy was born, studying interchanges and economy from the ethics point of view. Difference between the concepts of price and value was grasped -but later forgoten for a long time-, and theories where accumulation of resources had no sense apart from a future use were created.
It’s not that Aristotle abhorred wealth. He recognised the necessity of a sensible amount of it. That’s the way for the middle class to participate in politics for free -being at the same time able to work less hours-. He understood that it was not possible to make good deeds without resources.
It wasn’t until Adam Smith that chrematisike was considered again as a useful resource for the whole of society. But that’s another story.
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