How Catholics gave us Capitalism

Conventional history tells us that the big founders of classical liberalism and free-market capitalism were the 18th century, protestant philosophers John Locke, Jean-Jacques Rousseau, and Adam Smith. But in fact, that’s far from the truth. Modern theories of Capitalism and Natural Rights predates them by two centuries; we owe our thanks to the Spanish Catholic philosophers of the School of Salamanca.

The Austro-libertarian economist and philosopher, Murray Rothbard labeled the School of Salamanca as “proto-Austrians.” It’s no surprise why many of the tenets of the school of thought today have much in common with that of modern libertarian philosophy and Austrian economics.

For starters, Adam Smith has been attributed as the father of “capitalism” and the founder of modern economics. But one theory Smith believed in which is fundamentally opposed to not just the Austrian school but most orthodox economic schools of thought is the Labor Theory of Value.

Like Marx who expanded upon this in the future, Adam Smith believed that the value of all goods and services derives from their cost of production (land, labor, and capital) as opposed to 19th century Austrian economist, Carl Menger who formulated Subject Theory of Value where value derives from the relative usefulness one finds from consuming a good or service.

Salamanca economist, Luis de Molina

But Menger was not the first to come up with this. In fact, it was three hundred years before him that it was first conceived by a Spanish Jesuit named Luis de Molina.

In his treatise, De Justitia et Jure Molina argued that goods are valued not “according to their nobility or perfection” but according “to their ability to serve human utility.” Not only that, Molina also posited that this value of utility comes from one’s own individual valuation of it.

For instance, a pearl, “which can only be used to decorate,” is more expensive than a loaf of bread, water, and many other things necessary for survival. They maybe more “noble” in his own words but as he explains, since valuation is done by individuals, “we can conclude that the just price for a pearl depends on the fact that some men wanted to grant it value as an object of decoration.”

Molina paved the way for the marginal utility and subjective value theories of the future and was thus able to solve the diamond-water paradox long before Adam Smith posed the problem.

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Archbishop Diego de Covarrubias

Diego was one of the earliest proponents of private property, arguing that people had the right to own property and exclusive right to the benefit from that property; but in line with what Locke would later say, the community would also benefit albeit indirectly.

One of many controversies of his time was whether plants that produce medicines ought to belong to the person whose property grew the plants or to that of the community. The communalists argued that the medicine is not a result of any human labor so it is, therefore, immoral for the property owner to have an exclusive right to it.

But Covarrubias countered that everything that grows on the plot of land should belong to the owner of the land and that includes withholding anything no matter how dire from the market or otherwise it would be a violation of natural law.

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Francisco Suarez

Jesuit priest, Francisco Suarez conceived a theory of popular sovereignty long before Rousseau. The Spaniard argued that humans have a social nature endowed by God that gives men the potential to make laws. Therefore, when a political society is formed, the authority of the state does not derive from the divine like monarchists who defended the divine right of kings contended, but instead by those involved in the political process by the people involved who bestow legislative power to a ruler.

Because this power is given, it can also be taken away. And if any government is imposed on the people without their consent, they have right to remove the leader by any means possible.


For more on the School of Salamanca read here and here

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