Barren Metal: Capitalism as the Conflict between Labor & Usury

  1. E. Michael Jones, Barren Metal: A History of Capitalism as the Conflict between Labor and Usury (South Bend, Indiana: Fidelity Press, 2014), 1456 pp., $69, Hardcover.


Reviewed by Garrick Small


Capitalism is state sponsored usury − Heinrich Pesch

Heinrich Pesch’s association of capitalism with usury will be familiar to anyone who has read much of E. Michael Jones’ work on the history of capitalism. For most others the statement is meaningless since usury is an obscure and irrelevant concept in the world of the free market. Most people believe that usury has ceased to be a practical issue, even within the Catholic Church. In this view, likening capitalism to usury is hardly a criticism.

Michael Hoffman[1] was of the opinion that the Church leaders caved into usury as the first intrusion of modernism. John Noonan[2] argued instead that the Church actually changed its mind on usury. Michael Novak in his first life as a progressive Catholic used Noonan’s belief to argue that if the Church could change its moral law regarding usury, then it could do the same for contraception. Later, as a neo-conservative he simplified his position to the conclusion that the Church was out of its depth in several areas of the moral law and the popes could not be trusted on questions of economics.

In the three decades following the Second Vatican Council it appeared to many in the Church that sins of the flesh were no longer sins at all. The popular Catholic embrace of contraception, then abortion and homosexuality has produced an abundance of evidence that the Catholic community is now no different to the rest of society regarding the sexual revolution. In defense of their position a close inspection of the New Testament reveals relatively little attention to sins of the flesh. The best known cases in the Gospels both involved women persecuted by inflexible men and forgiven by the Redeemer Himself. The older law of stoning for adultery was replaced by forgiveness and the ‘come as you are’ theology that flourished in rebellion to Humanae Vitae.

References to avarice are not so rare in the New Testament. From St. John the Baptist excoriating exploitation in business dealings (Luke 3), to the merchants weeping over the fall of Babylon in the Revelation of St. John the Evangelist (Rev 18), the Christian Scripture is bursting with concern for economic abuse. The love of God is challenged by the love of money, and the primary question for man is where to store up treasure: on earth, or in heaven. A survey of the Gospels alone will turn up over 30 independent instances relating to the use and abuse of property rights and economic relations. And they represent only four of the twenty seven books of the New Testament.

Like sins of the flesh toward the end of the 20th century, the sins of the marketplace are no longer relevant according to the most vocal exponents of 21st century popular Catholic thought. Like Pope Paul VI preaching an old-fashioned sexual morality to a rebellious world, the pronouncements of popes on things economic are considered equally old-fashioned now and beyond their competence. The bulk of Catholic ink devoted to the morality of the market proclaims the market to be a more reliable guide than the teachings and traditions of the Church itself.

If the market is good thing, and usury is a non-existent thing, then the march of the market and finance to dominance of our world should have been marked by a history of improvement in the human condition under their rising hegemony. It is this history that Jones has attempted to explore in Barren Metal. Jones is not an economist, so mainstream economists may stop reading at this point. The facts of history are facts of history, however. If economics is as positive a “science” as it likes to claim then it should have no difficulty with history regardless with who writes it.

Jones writes history as human history. This does present a slight problem to the economist. For the economist, economics is about the doings of rational self-interested individual economic actors, i.e. homo economicus. Humans rarely fit this definition. Moreover, humans bleed, and starve and have families. They die. Jones’ history of economics looks at how economic conditions have arbitrarily caused human happiness and suffering. He also examines how non-economic factors, such as religion, alchemy, and political action have impacted on the direction of economic behaviour over the last 800 years or so. For most people, perhaps apart from economists, this makes his work extremely interesting reading.

Eight hundred years is a lot of history, and the work runs to a little over 1,400 pages in ninety nine chapters. To review a work that length chapter by chapter might easily be a book in itself. There are a number of themes that run through the work, and they present themselves as worthy of review. These themes recur like choruses in a ballad illustrated sometimes more and sometimes less in each chapter

Usury is the central theme and is portrayed as pitted against labour as the central dynamic of capitalism. Behind usury lies the question of money. The book’s title, Barren Metal, is a reference to Aristotle’s argument against usury, based on the fact money is naturally sterile. While Aristotle used the sterility argument, it must be noted that St. Thomas Aquinas did not. Jones wisely does not immerse himself in arguments over usury, he merely acts the scribe to show that what could be usury in his stories from history just happens to result in misery for workers in those same stories.

The moment that someone, especially a non-economist and perhaps even more damningly, a non-neo-conservative, mentions the misery of workers, red lights start to flash in various quarters: the man must be a socialist. He must be at least a closet Marxist. Jones makes it worse for himself by beginning the book with a chapter on a fourteenth century worker rebellion. Before we get to the socialism of the first chapter it is important to clarify a few points regarding Jones and socialism.

Marx defended usury. Das Kapital contains a nice little argument defending the charge of pure interest on money loans. Marx’s argument does not hold metaphysical water, but he draws a strong conclusion from it. For Marx, and all the Marxists I have asked about this point, banks and interest are fine and good. It is the ownership of productive capital that is the evil. Jones fails as a Marxist on this point. By contrast, Michael Novak might be a Marxist, at least as far as his usury theory goes.

The Church has always defended the poor, especially where there is injustice involved, but it has always opposed socialism in the strongest terms. Jones is following the Church’s approach.

Unlike Marx and Novak, Jones believes usury does exist, moreover that it is the refinement of the capitalist urge. For those with a bend for theory and old fashioned moral thought you could read questions 66, 77, and 78 in the second part of the second part of St. Thomas Aquinas’ Summa Theologica. They relate to the moral principles underlying private property, justice in prices and usury, all of which are ignored by capitalist economic thought. A little reflection on these can lead to the simple insights that excessive land rents, prices distorted by power imbalances in the marketplace, and the pure riskless component of interest on money loans are all places where people obtain a return from something that they do not own. They are all species of theft. Jones does not dwell on these arguments, but he does tend to adopt their conclusions. At the very least he presents example after example of where they hold good and in doing so reveals himself to be in conformity with the longer tradition of the Church’s understanding of things economic.

Jones condemns abuse of private land property explicitly in his treatment of the Irish potato famines in Chapter 72. Amartya Sen[3] won a Nobel Prize in economics for demonstrating that all the famines which have occurred over the last century and a half were like the Irish famine. They all happened in areas that never stopped exporting food, even though huge numbers of the locals were starving to death. The Irish case was sufficient for Jones and it certainly followed Sen’s pattern.

Jones digs a little deeper into the harshness of the Irish landlords and finds that debt was really the master spring that turned an agricultural calamity into a human disaster. Some of the cogs in that machinery included the popularity of Smith’s Wealth of Nations and the ideology of the newly minted classical economics of the British Enlightenment. Sen focused on train loads of relief food that were turned back from starving regions of Bengal in the vain hope that “the market would fix it.” Jones recounts how British troops were brought to protect the loading of ships with grain to be exported away from crowds of starving Irishmen on the basis of protecting private property rights.

The Church has always believed property should be privately owned and commonly used. The English landlords ignored the second part, just as neoconservatives tend to do at the present time. The Church’s position is not socialism, which ignores the first part, and only believes in common use. Communism, which is really just capitalism, but with the state as the only property owner, uses most of the same techniques as its supposed opposite. The bad communists used propaganda to trick the community into accepting low wages while overcharging their customers. Capitalist corporations use marketing, but the essential method is the same. Communism is less efficient that capitalism, but the party still live more like capitalist power brokers than their comrades. Bad communists have worthless money, while good capitalists merely have inflation. Bad communists used to be distinguished by making women work in factories and everyone work long hours for a feeble standard of living. Good capitalists have achieved the same thing using the market.

Land makes several appearances through the ninety nine chapters and is lurking in the background in many others. The experience of the Scottish highlanders (Ch. 48) is largely about land. The older Catholic order, where landed lairds saw their property wealth in terms of stewardship and social responsibility, was pitted against the new Capitalist order, where the lowlanders favored the Protestant ethic of economic individualism. The Protestants had the might of the English government on their side, which at that time was controlled by the Whigs. The libertarian abhorrence for government conveniently ignores the fact that capitalism needs a supportive legislative regime. That is, it needs strong government. The paradox of strong government implementing laissez-faire principles dominated the English political scene over most of capitalism’s history. In the USA it is easy to forget that in England “liberal” means conservative.

Somehow liberals of both stripes need strong government to ensure that they are able to enjoy their favored sort of liberty. The left-winger needs a strong government to feed them, while the right winger needs a strong government to enable them to feed off the less fortunate, which is the story of the Irish potato famine.

The economic dimension of the French Revolution was also largely about land. The older feudal political structure used land as the implicit structure for both political power and economic organisation. Bringing down the government also meant stealing the feudal land. Chapter 49 relates this to the emerging bourgeois, organised under freemasonry and active in the capitalist destruction of the previous order.

There is little point in trying to pinpoint where just price appears in this volume since it is the dynamic in almost every chapter. Capitalism is the systematic avoidance of the just price. Pope Leo XIII tended to focus on just wages, which is one aspect of the just price principle. Since laborers also tend to be consumers, high prices for products is ultimately equivalent to low wages as well. Jones begins his tour through economic history with exactly this violation as the fuel behind the Ciompi rebellion of 1378. For the defenders of the free market, this book shows that the more capitalism has capitalism has favored usury over the just wage, the further prices have strayed from the optimum.

Samuelson[4] was once clear in pointing out that the price that resulted from the perfect market was equal to the normal cost of supply. Wilhelm von Kettler[5] not only agreed, but noted that this was also the just price. Does this make St. Thomas Aquinas a supporter of the free market? Not quite. The free market is not the perfect market. Obtaining perfect market prices does not require a perfect market—it only requires the moral will not to overcharge. This is what capitalism shrinks from and this is why low wages and high prices are the common lot of the common person through the age of capitalism and the pages of Barren Metal.

This simple moral fact is apparent almost everyone, but economists have been trained to reject it and pretend that this “science” of human action in the market place is more like physics or chemistry than an explication of moral principles. Its violation is almost too common through the 99 chapters of this book to make a fuss about. Squeezing the common man is something that is invisible to economic theory because homo economicus is not hurt when it is squeezed, only real people are. Classical economics is premised on the belief that labor does not mind having its price cut and the inconvenience of labourers starving to death is merely an economic correction. Malthus preached as much, and he had no shortage of followers.  Today there are no shortage of Catholics who would side with Malthus rather than the popes.

Jones focuses on real people. This is perhaps the most endearing aspect of the book. We are introduced into the worlds of real historical people. The winners, whether they are Fuggers or Churchills, are shown with all their personal foibles and frailties. The thinkers, such as Newton, John Law, or Adam Smith are shown in their contexts. They are typically hungry with a hunger for something other than money, but try to sate it with gold.

Adam Smith is portrayed as fatherless, circulating in a fatherless crowd. Somehow the fatherless streak has been important in the development of economic thought. It is really at core the seed of rebelliousness. Jones’ character studies are delicious and relevant. To learn the psychology of a man goes a long way to understanding why he thinks the way he does, especially when he rejects the obvious. This is the hallmark of good literature, to plumb the depths of the human condition and explore its manifestations in action, especially social action. Barren Metal is delightful literature.

The ninety nine chapters read like just as many novelettes, but non-fiction. Humans work in a moral environment, shaped by religious beliefs, complicated by concupiscence and the effects of original sin. Aristotle noted that money was the only thing a man desires without limit because it satisfies no natural desire. For some it makes hungry where most it satisfies. It becomes the summum bonum, the greatest good towards which all other action is ordered. The only other thing that man desires without limit is God, not because God makes man hungry, but because God delights our highest faculties and the potential for divine delight is unbounded. God completes the man through grace and man responds by desiring to conform himself more to God. By contrast, wealth appears as man’s tool, but easily becomes his master. It gives him power over others, to effectively enslave them. God is all powerful, but His power is usually expressed in freedom and making free. In these, and other respects, wealth is the earthly match to God in the eyes of man, hence the preponderance of admonitions against avarice in Holy Scripture.

This theological perspective is not developed by Jones, but rather sits implicitly. Most of his character portraits illustrate man’s thirst for God in the negative. They show the corruption that flows from a Godless life. Isaac Newton was an alchemist, he dabbled in turning base metal into gold as a metaphor for turning man into a god. Jones strays into the curious story of the way Newton’s physics could only be accepted by his peers because they also were secretly alchemists, whereas the common Protestant would reject them because they looked too Catholic. Robert Hugh Benson foresaw that in the end times the West would polarize into Catholics and freemasons and this polarization is somehow evident in the men who made up the history of economics.

The sociologist Tönnies[6] divided human societies in to Gesellschaft associations of individuals and Gemeinschaft communities of genuinely social persons. Economics is about individuals and self-interest, like the lodge. The Catholic Church is about communities of persons related through the logic of love and ultimately modelled on the example of the Most Holy Trinity. There can be a Gemeinschaft economics, and it is found in the home, but it needs the will to choose the good of the other in the marketplace when exported to society as a whole. Gesellschaft economics is the economics of the fatherless individuals like Isaac Newton, Adam Smith, and David Hume. It is what is taught as economics both on the Right and Left. If the Gemeinschaft religion is Catholicism, then the Gesellschaft religion must be Freemasonry.

Chapter forty nine describes “The Creation of the Grand Lodge.” Many join the Lodge to help their business prospects, but Jones looks the larger scale relationships between the lodge and economics, especially in his chapter on the Masonic suppression of the Jesuit Reductions in Paraguay. Since the death of Pope Pius XII the Church has been rather quiet regarding Freemasonry, but prior to that there was a constant stream of the strongest condemnations against what it meant to Christians and society. Outside of this chapter the significance of the lodge can also be found behind many of the prominent characters Jones examines. The interested reader might like to examine the freemasonic connections of many of the others that Jones presents merely for their economic exploits, especially those from Britain and the US.

While it would be rash to link capitalism with freemasonry, the individualism in both gives them considerable common ground. Edward Cahill[7] believed Freemasonry was closely linked to communism, which many would consider sufficient evident to break any link with capitalism. On the other hand Chesterton[8] considered both socialism and capitalism to the co-conspirators against the common man, so perhaps the tension is only apparent. Robert Hugh Benson may have been right after all. Jones does not indulge speculations regarding the machinations of freemasonry, but merely presents some of the better documented facts.

Regardless of their associations with secret societies, the moral framework of Jones’ protagonists have considerable similarities. The notion of solidarity is noticeably absent. Also absent is any appreciation of the long term. Lord Keynes was not alone when he remarked that “in the long term, we are all dead.” It is almost a hallmark of capitalist thinking to exploit the present and store up calamities into the future. It is impossible to point to the best instance of this in Barren Metal because almost every event chronicled has this feature.

The speculative bubbles are examples of the short term profit taking at the expense of necessary future calamity. Jones deals with the Mississippi Bubble in Chapter 46, and is rather explicit in claiming that the inflationary schemes which create speculative bubbles all share this same feature. All are predicated on short term profit at the expense of future calamity. The mechanics of the business cycle also relies on short term greed ignoring longer term realities. Many readers will recall the belief of a dozen years ago that the good times would never end and everyone could be rich by borrowing and speculating. That story received widespread currency a year or two before the financial collapse of 2008.

Nowhere is this more evident than in the matter of currency debasement. In the old days of precious metal money that meant debasement by alloying coins with junk metals instead of gold or silver. The age of capitalism can hardly be blamed for inventing debasement of money. The Romans suffered under debasement of their coins and it was a cause of Diocletian’s abdication. The problem of money has been present since ancient times, but today it is a puzzle that remains unsolved.

In this age of global financial uncertainty there is a strong movement back to gold as “real” money.  The economists of the so-called Austrian School tend to favour gold. It has a certain philosophical strength in that it can be shown that exchange is closely linked to the value of labor, so a substance that represents labour is “naturally valuable.” The question of how far one can take the “labor theory of value” is examined in Barren Metal, both through various case studies and a discussion of its development as theory. The labor theory was almost universally accepted until the 19th century, after which it fell out of favor, largely because it failed to justify land rent, pure entrepreneurial profit and usury. That is, it does not sit well in an economic world that ignores the moral directions found in Questions 66, 77 and 78 of the second part of the second part of St. Thomas Aquinas’ Summa Theologica.

In earlier times the systematic rejection of these moral limits to profits in the marketplace was not as developed, and it was relatively easy for people to see these connections. Today we are immersed in a different economic approach, one that Scott Meikle[9] claims has lost the ability to communicate with the likes of Aristotle. That should not be a surprise, since Aristotle was comfortable with common sense metaphysics, but the Enlightenment has based its thought explicitly on a rejection of metaphysics. Jones takes a middle approach. He recognises more value in the labor theory than most people today, but eventually rejects it, at least in its Marxian formulation, because it cannot arrive at a price based on the amount of labor in a product. Marx failed to understand labor because he failed to see the role which God’s labor plays in creation or nature.  A man could invest enormous amounts of labor to produce wine in Iceland, but his wine would not come close in value to wine produced in Portugal, with only a fraction of the effort. Readers may draw their own conclusions. Either way, the matter is not as cut and dried as mainstream economics would have its students believe, and Barren Metal goes a good distance toward reviving interest in this forgotten question.

The Austrian school fondness for gold is partly based on their attempt to reintroduce some metaphysics into economic thought. Like other aspect of their attempt it is only partial, but it is sufficient to make a strong case for metalism. Regardless of the metaphysics of labour theory of value and natural money, the evidence shows it to be a fickle choice for a medium of exchange. Barren Metal contains a good set of case studies for Austrian gold bugs. The problem with gold money is that once it gets the State’s stamp of approval on it the average person loses interest in whether it is really gold. Isaac Newton the alchemist was selected to be the master of the mint, which makes for an extremely interesting story. Jones makes a story of it and includes interesting explorations into the linkages with physics. There are other cases as well, all ending with debasement, and the kind of results that have turned too many to socialism.

As well as debasement of metal coins, there is also the far easier debasement of paper money based on precious metal. Notionally paper money came into existence as a paper receipt for a quantity of gold being held either by some organisation capable of holding it securely (a goldsmith, a bank or the government). Issuing more ‘receipts’ via loans than represented the actual value being held is an old trick and an easy form of debasement. So easy, in fact that Barren Metal contains several historical examples. In addition, Jones notes that the supply of gold does not necessarily meet a community’s need for currency, a problem he investigated in Scotland in particular. Others have noted a variety of historical mismatches between demand for currency and supply in gold money economies, but the point is clear.

The choices for money are usually limited to three possibilities, metal-backed, debt-backed and fiat. Metal backed money is very clearly ruled out in Barren Metal and the evidence and logic is hard to argue. Fiat currency is simply money printed into existence, usually by the government, and meaningful merely by its acceptance by the community. Lincoln printed fiat money known as Greenbacks to help finance his war. It worked well because his government had the self-restraint to print only a prudent amount, proportioned to the size of the economy and capacity of the government. Getting the dose right is the key. Generally, most students of economics today are fiercely dismissive of fiat money, largely because governments usually fall prey to a strain of public avarice and overprint. The result is essentially debasement.

Debt based money has come to dominate western economies. Its critics see it as fiat money only more costly. Governments can borrow as much as they want which means the volume of money does not necessarily match the need for money in the economy. Every dollar borrowed into existence is a dollar on which interest must be paid, which is the sinister side of debt-based money because that interest looks very much like usury at a national level. Left unregulated, debt based money tends to grow, causing inflation, which is merely debasement by another name, and greater national debt—hardly sensible, but now the dominant form of money. With debt-based money (and the usury that goes with it) as the norm, it is easy to understand the gold bugs’ enthusiasm for something more solid, but throughout history, and especially in the United States after the Civil War, the medicine of “sound money” has proven more harmful than the disease of inflation.

Jones considers other forms of money as well, including my favorite, the French assignat, which is a currency based on land value owned by the government which came into being during the French Revolution. If gold money is embodied labour and naturally money, then land is also naturally money because in one form or another almost everything of value in the economy is the result of complex combinations of labour on the raw materials of the earth and the use of land-based space. The value of products is therefore a mixture of the value of labour and the value of land/space resources that have contributed to its delivery to its end consumer. Land is static in a physical sense, but land values rise in proportion to the economic activity that is carried on in their vicinity. If the government owns tracts of land and rents them to private individuals and businesses it has no involvement in those businesses but it does have the right to charge them rent. This makes land naturally valuable. If the government issues money based on the value of its land assets that money is backed by a physical bounded asset that has natural value every bit as valid as labour value. As the economy grows, land values grow, hence the volume of money grows, which naturally matches the needs for currency. To top it off, unlike debt money that costs the community in interest each year, land backed money earns rent from its tenants, so it lowers taxes without getting its nose into the business of its tenants.

Somehow the French worked this out and during their revolution they stole land and issued money against it as assignats. Despite all the nice theoretical reasons above the assignat was a failure. Was it because land based money is flawed? No. It was merely because the revolutionaries did not have the self-restraint to limit their printing of assignats to the value of the land. It became debased by run-away inflation.

Increasing the money supply is not totally a bad thing. In the short term it brings prosperity and political optimism. It makes fortunes. Unfortunately when it is out of step with the physical economy, the scale of the actual capacity of the community to produce useful and needed products, its long-term effect is disaster. As the disaster approaches it can be delayed by more of the inflationary poison, but that only intensifies the eventual collapse. Jones provides many case studies of this process in a variety of different packages, but the ultimate pattern is similar.

Behind all of them are various mechanisms of usury, appearing to get something for nothing. That is either theft or illusion. Most of the illusions are really thefts from the future and the victims are more often those that cannot afford the folly. This is the essential logic of capitalism. It is state sponsored usury. The state over the last century has been vigorously abetted by an educational system that has permitted a system of thought to develop that purports to explain the mechanics of the economy but is only a clever illusion to hide the moral dimensions of its essential flaws.[10] Jones examines Keynes, and a selection of recent theories and cases. Keynes understood the shortcomings of the gold standard and accurately predicted its demise. He knew that an economy needed to be managed, but as a self-proclaimed “immoralist,” he denied economics its necessary foundation in the moral law. The resulting collapse of Keynesianism in the 1970s allowed the economic dog to return to the vomit of laissez-faire capitalism under the leadership of Milton Friedman, Paul Volcker, Margaret Thatcher, and Ronald Reagan. Keynes, the man, lived his quip “in the long run we are all dead” and did not care to plumb the long-term consequences of what appeared to work so well in the short term. Keynes’s dictum could be not only his own epitaph, but the epitaph for capitalism as well.

The men behind capitalism may have been powerful, and usually rich, for at least a time, but they are not the type of person you would want your daughter to marry. By and large, they are all bad men. The most effective have been the bankers and, with the magic of usury, the bankers have been creeping forward as a class, always a little wealthier than before, sometimes slowly, sometimes violently. Usury creeps. If one small class of humanity has constantly crept larger and larger on the sin of usury, it can only lead to one conclusion. Jones does not go there, he is too much of an optimist. If you want to examine that possibility you would do well to read a book published in 1947 by the sociologist Karl Zimmerman.[11] It is not about economics, it is about Family and Civilization and is still in print. While Jones has shown in Barren Metal that usury is the dynamic of capitalism, Zimmerman can be used to conclude that it is likely to be the sin at the end of history, or at least the end of the history of the West.

Garrick Small teaches economics at the University of Queensland in Australia.

This review was published in the September 2014 issue of Culture Wars.

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