The writings of Thomas E. Woods, Jr., remind one that truth has a chance of being heard if at least one courageous soul is expressing it. One truth he wants people to hear is that Catholics are not only at liberty to embrace the free market but, given their ethical concerns, ought to give it a bear hug.

A Traditionalist Catholic resistor to Vatican II’s "regime of novelty," Woods is the author of several books. (With the popular ascription of not only "conservative" but also "traditionalist" to the late Pontiff and to many of the Cardinals he created, a term is needed to distinguish Catholics like Woods from the usurpers. I suggest "restorationist.") Besides the book under review, he has in the past three years given us The Politically Incorrect Guide to American History, Regnery, 2004; The Church Confronts Modernity: Catholic Intellectuals and the Progressive Era, Columbia University Press, 2004; and, with Christopher A. Ferrara, The Great Facade: Vatican II and the Regime of Novelty in the Roman Catholic Church, Remnant Press, 2002. In May 2005, Regnery is scheduled to publish Woods’ How the Catholic Church Built Western Civilization.

Woods fights a two-front war against both the modernist menace within the Catholic Church and an obscurantist tendency among traditionalists. Against the latter streak Woods has now given the free market its first book-length Catholic defense. Given the suspicion that many Catholic intellectuals have harbored against capitalism over the past century, such a book has long been overdue. (By "intellectuals" I do not mean the frankly Marxist "liberation" theologians (diabologians?) whose literary droppings have soiled so much paper, but rather giants of traditional Catholicism like Belloc and Chesterton and learned exponents of mainstream Catholic Social Teaching [CST] like Monsignor John A. Ryan.)

And the appearance of The Church and the Market is as surprising as it is welcome, for I remember how Woods once curtly dismissed classical liberalism during a brief conversation I had with him after Mass one Sunday in the late ’90s. Some time afterwards, however, I began to notice the writings of a startlingly different Tom Woods on the Rockwell, Mises, and Acton web sites. An "if-you-can’t-beat-’em-join-’em" convert, Woods not only imparts with a veteran’s ease ideas he has only relatively recently mastered, but also shares a delight with their beauty. His coverage of a vast terrain (economics, history, theology, philosophy, and politics) is concise, but not breezy. As Brand Blanshard noted in his talk On Philosophical Style, good style is "so transparent a medium that one looks straight through it at the object, forgetting that it is there." The best writing draws attention to itself only after it has been read. If the reader reflects on the human source of his literary delight, he may feel a debt of gratitude such as I felt after reading each of Woods’ chapters. Woods’ firm literary hand assures the reader that he is not in over his head and delivers a work that, for all its learning, goes down smoothly.

Much as a professor of logic might dissect a newspaper editorial, Woods parades his opponents’ sentences before the reader in order to expose their fallacies with the help of Mises, Rothbard, Hayek, Hoppe, Reisman, and other seminal Austrian minds. There is no rancor; if any emotional response is due, Woods lets the reader supply it. After each lesson, however, the reader will likely wonder, as I did, "How could anyone have thought otherwise?," or "Isn’t that policy obviously tantamount to fraud?," or "How could any Catholic with the slightest knowledge of the historical record, not to mention the least sense of Original Sin, exonerate that behavior by these scoundrels?"

Aside from serving as polemic against defenders of certain aspects of CST, The Church and the Market offers one of the best introductions to Austrian economic theory available anywhere. It is especially good to see the relatively neglected writings of James A. Sadowsky figuring so prominently among the references. (One may read every essay of Sadowsky’s that Woods cites on my site.) This is not an explicitly libertarian or anarchocapitalist book, although it is implicitly so. For instance, Woods notes that unlike "any alternative, the market order does not require the use of coercion – the initiation of physical force – but amounts instead to a system of peaceful social cooperation." (205; all numbers in parentheses refer to pages of The Church and the Market) Since he does not make an exception for the means whereby social cooperators restrain, deter, and punish violent, anti-social, non-cooperators, he invites an inference to anarchism, but he does not draw it. Earlier, he claims that if "the rights of private property were respected across the board, without exception, we would have reason to expect a substantial improvement in the cultural and moral health of the American people." (198; emphasis added – A.F.) Again, "without exception" does not mean "except in order to provide police, armies, or courts," but I will not go further than he has in characterizing his thought.

The Church and the Market has seven chapters, each on a different matter of controversy, including the last, which is an irenic, Augustinian plea for charity in the conduct of controversy. Woods’ primary aim, however, is to discredit the imputation of theological dissent to the Catholic defender of Austrian economics. Economics is simply not a matter of possible theological assent or dissent. It makes no sense, he argues, "to speak of ‘dissent’ from teaching one believes to be based on factual error on a matter on which the Church has been promised no divine protection from error."

We are not dealing here with the pertinacious denial of a solemn dogma believed by the Church for two thousand years, which the conscience is absolutely bound to accept, but rather with a good-faith effort on the part of loyal Catholics to amend certain economic positions and prudential judgments which, though advanced in the name of helping the poor or rectifying alleged injustice, must have the opposite effect. (214; emphasis added)

Catholics have the right to engage in "selective appropriation of the best of secular thought whenever it contain[s] an insight that might be of benefit to the Church." (7) In conscience, Woods argues, I cannot be obliged to support (say) trade unions if I believe their overall effect is to impoverish workers. Such technical matters, which govern the adjustment of means to ends, are "very far from Church competence." Principles set only ends, not means; economics concerns only aspects of the means by which men attempt to realize their plans; and there is a lawful diversity of opinion with respect to means. Even popes recognized that they could overstep the boundaries of their office if they suggested otherwise. But if, as Pius XI recognized, economics has "an internal coherence of its own," how is a Catholic to receive papal statements that suggest that Catholic doctrine overrides that coherence?

(In popular Catholic apologetics, one often meets the charming conjecture, followed by the predictable refutation, of the Pope who would give odds on the Super Bowl or the World Series. The apologist assures his audience that papal infallibility does not extend to that. Nevertheless, I fear what a CST defender would say were seven consecutive Popes to ignore his Office’s limitations in this way. I can also imagine a world in which seven consecutive Popes unburdened themselves of their opinions of, say, the kind of architecture or music that promotes the common good and which, therefore, every Catholic must take to heart. Such a world would need its Tom Woods.)

"Over and against our critics," Woods confesses, "I am convinced that a profound philosophical commonality exists between Catholicism and the brilliant edifice of truth to be found within the Austrian school of economics." (216) Indeed, what "is especially interesting," however, is that "some of the Church’s own theologians" "anticipated the best of modern economics." (7) For a Catholic, Woods argues, the world is intelligible because it is the product of infinite intelligence. From this it follows that we have a duty to unearth and explore that intelligibility. Following St. Thomas Aquinas, Woods affirms a category of knowledge "attainable by reason alone," and into it he firmly places economics and its laws. (34)

The Austrian school classifies economics as a division of praxeology, the logic of human choice and action. We may derive its structure by reflecting on the concept of purposive behavior by agents who are certain they are going to die but uncertain as to when. For them, therefore, time is a scarce resource. The logic of human action provides the same backbone to social theory as sentential logic does to reasoned inquiry in general. The first rule of any good theorizing might therefore be: commit no fallacy. The absence of fallacy is no proof against errors of fact, but its presence will impair one’s grasp of fact.

Woods critically examines an alternative, popular misconception of economics as a tool of the politically willful. That view, unfortunately, has informed the thinking of many educated and influential people, some of them Catholics, a few of them popes. CST’s defenders, Woods argues, reveal "profound confusion regarding the very nature of economics, not to mention the nature and scope of the Church’s Magisterium." (214) They are misinformed about the relevant facts (which popes as such have no special competency to establish). The thought that economic reality sets limits to their will is offensive to them, as it is to many other sorts of people. Although no Catholic in his right mind would say, "You can erect any edifice your heart desires, no matter how high, or what shape, or out of whatever material, so long as you are motivated by charity," the resistance of many Catholics to the logic of markets is no less foolish. Unfortunately, they do not keep that foolishness to themselves, but rather seek to impose it on others. No Catholic can be indifferent to the charge that many CST-inspired policies must harm their intended beneficiaries (e.g., the poor, the laborer, and the family provider), but that is the charge Woods levels against CST’s advocates.

Woods isolates the scientific task, uncoupling it from the appreciation of those ends which science may help one achieve, and then shows why this view of science is consonant with Catholicism. Economic law cannot contradict moral law: "The moral law tells us what we ought to do. Economic law, on the other hand, is purely descriptive and necessarily amoral, having nothing to do with morality one way or the other." (29–30) He quotes Sadowsky: "Economics indicates the probable effects of certain policies, while ethics determines what one should do." (38 n. 6) (This is Woods’ translation from the Spanish-language interview of Sadowsky, conducted in English by Lucia Santa Cruz; published in the Chilean newspaper El Mercurio, November 22, 1987; later reprinted in Cristianismo, Sociedad Libre y Opcion Por Los Pobres, Eliodoro Matte Larrain, ed., Santiago, Chile: Centro de Estudios Publicos, 1988.  My deficient grasp of Spanish did not impede my stubborn, and ill-fated, attempt to render into English the whole valuable conversation. I have waited 18 years in vain to find someone fluently bilingual who would execute what, no doubt, would be for him or her an easy task.  If there is any reader willing and able to undertake it, he or she is invited to contact me at anarchristian@juno.com.) Economics is as wertfrei or value-free as metaphysics, and in that very freedom lies its utility for moral reasoning, which does explicitly advert to ends.

Woods accurately summarizes Austrian methodology and, in my opinion, successfully defends its compatibility with Catholic dogma. His treatment of their interface, however, reminded me of some outstanding philosophical issues whose exploration was not to Woods' immediate purpose and so falls outside of the scope of any fair review of his book. I have therefore reserved treatment of those issues to a future essay.

Woods then shows us what economics teaches about prices, and therefore about wages as the price of labor. State-enforced efforts to raise real wages (i.e., to increase their purchasing power) directly through legislation or indirectly through sanctioning coercive unionism are ill-fated. They are doomed because a price is a rate of exchange between goods, and what determines that rate is the supply and demand for that good. Period. A change in either its supply or demand will therefore affect the rate of exchange. With each additional unit of that good, the demand for it falls. This is not a psychological observation that happens to hold most of the time, but an unfalsifiable implication of human action. The actor will use the first unit to satisfy his or her most urgent wants, and the second unit the next most urgent, and so on. There are no precautions one can take to prevent a good’s marginal utility, so described, from decreasing.

Woods reminds the reader that supply and demand determine price even when what is demanded and supplied is labor. The price of any kind of labor is the value of its contribution to the production process, discounted by the going rate of interest. Laborers are paid in advance of the sale of the fruits of that process with money that would have earned a rate of interest had its owners deployed it otherwise. Wages are therefore discounted by that percentage. (Employers might never use such a formula, but if their own estimates vary from what that formula yields, they soon learn, the hard way, whether they have discounted too much or too little.)

"The question," Woods insists, "is not whether some employer for some limited time might possess the means to exercise charity" by raising wages. "The question is whether wages as a whole can be permanently increased through mere good will, voluntary or otherwise, rather than through increases in productivity made possible by increased capital investment." (68) That is, through an increase in the value of what labor offers in exchange for wages. This is virtually a point of logic. Encyclicals cannot effect that increase. Moral exhortation cannot. A collective decision by employers to raise nominal wages cannot. Only capital investment can. (See also Woods’ talk, "Catholic Social Teaching and Economic Law: An Unresolved Tension," Proceedings of the Austrian Scholars Conference 8, "Liberty, Tradition, and Faith" panel, chaired by Woods, March 15–16, 2002.) Therefore, Woods argues:

. . . the attempt to elevate such principles as the "just wage" to the level of binding doctrine [for Catholics] is . . . fraught with error. To maintain that private property is just . . . requires nothing more than simple reflection on the teaching of Christ, the Fathers, and natural law itself. The same cannot be said for exhortations to employers that they pay a "just wage," for embedded within such counsel is a set of unproven assumptions about how economic relationships work, and the belief that all that stands between the world today and the great society of tomorrow is wise legislation, rather than the capital investment which is alone capable of increasing the overall stock of wealth." (79–80)

Woods turns his attention to the nature of money and banking. Mises once quipped that the governmentally protected banking cartel takes a perfectly good commodity and ruins it by engraving pictures and numbers on it. The serious point behind the joke is that, unlike gold or silver, central bank notes have no utility apart from their use as money. Money arose on free markets when one commodity began to facilitate the exchange of otherwise incommensurable commodities, thereby permitting progress beyond the stage of barter. The commodities that best served that function had attributes like durability, divisibility, and portability. Precious metals like gold and silver had all of them.

While an increase in the production of other commodities may engender a social benefit, none accrues to an increase in the supply of money. Any supply of it suffices as a means of exchange. Therefore an increase in its supply will only tend to decrease the purchasing power of each unit of money. There is, however, "money to be made" in the legally sanctioned counterfeiting of central bank notes. When depositors originally paid banks a fee to warehouse their money, they had a moral right to receive any or all of it back on demand. Citing Rothbard’s discussion, Woods points out that this warehousing service was bailment. That is, the depositor was not understood to have "lent" money to the bank, but rather to have paid the bank to store it. When it dawned on bankers that they could lend at interest fictitious multiples of deposits, they set up that fraudulent operation (known as "fractional reserve banking") as soon as they could provide legal protection for this racket.

Aiding and abetting this fraud was the word merchant who redefined bailment as debt. As Woods notes, the effect of this verbal engineering has been to ethically upgrade the banker who cannot redeem your note from the thief that he is to merely an "insolvent." He didn’t really steal your money, you see. Rather, you lent money to him and, unfortunately, he cannot repay. Since the Great Gold Robbery of 1933, Federal Reserve Notes are redeemable, not for gold, but for the banking cartel’s diktat that they are "legal tender for all debts public and private." We live in a world of "fiat" currencies that, as Woods puts it, have been created "out of thin air," i.e., ex nihilo, if you will. (The allusion to Genesis 1 suggests the apotheosis of the State. "Let there be money!" And there was money.) Inflation follows fiat currency as the night the day. What encyclical condemns this racket?

The great bugbear of CST, once upon a time at least, was "usury," the charging of interest on a loan. Now since the borrower clearly values the money he receives at present more than he does future money (with which he presumably intends to repay the loan), what obligates the lender to equate those two amounts? That is, just how does being a lender make one’s greater valuation of an amount of money an example of exploitation? Woods shows that a sainted theologian who condemned "usury" (because it allegedly amounts to "charging twice for the same good") also approved of profit-sharing by investors in business ventures. Economic analysis, however, reveals no essential difference between these two acts of risking money in the expectation of future reward.

If a great saint’s apparent contradictions can addle a Catholic’s pate, how much more can magisterial backtracking? To put it bluntly: did the magisterium err when it first condemned usury? On this point, Woods cites Patrick O’Neal:

When better theory became available (along with the lessons of practical experience), the Church could change its position because the fundamental form of her judgment was: ‘If W is the economic function involved in the charging of interest, then the charging of interest is immoral, because economic activities must adhere to rule X (or rules X, Y, & Z). Changes under these circumstances do not threaten the claims of the magisterium of the Church in any way. The discovery that the charging of interest does not (necessarily) involve exploitation, but represents instead legitimate payment for the time-value of the money and for the risk factors endured by the lender, denies the antecedent of the hypothetical. (121–122)

This kind of reasoning gives apologetics a bad name. After all, for an orthodox Catholic, nothing may count as "threatening the claims of the magisterium." Unfortunately, O’Neal’s proposed "solution" only raises a thornier question: Was the Church protected from error in her moral denunciation of usury, but not in her identification of the behavior that counts as usury? Are we to conclude that, yes, usury is a sin, but there are no instances of it; or at least, one of the behaviors we had traditionally regarded as an instance of it, wasn’t? Moral competency, however, includes the ability to identify relevant particulars. I’m sure there’s some distinction I’m failing to make.

Economic fallacies and follies in the international arena is Woods’ next target.

[The] specific application of Catholic social principles, which is a debatable matter of rational judgment based on circumstances and contingent factors rather than a matter of strict Catholic doctrine, can never bind the Catholic conscience – especially . . . when a trained economist knows very well what their outcome will be. (137)

One such economist was Lord Peter Bauer. His specialty was the economics of development, and his ground-breaking studies were available to Paul VI just as that Pontiff was calling for massive increases in "foreign aid." The latter is the racket by which wealth is mulcted from the taxpayers of one state for the benefit of the apparatchiks of another, any alleviation of the plight of the poor being purely coincidental. What is not coincidental is the adverse impact of such "aid" on the accumulation of capital that alone could benefit the recipient country’s poor. Bauer’s studies might have dampened Paul VI’s enthusiasm for the racket, but only if he had read them. As Woods notes, Leo XIII wrote of a "realm of fact" wherein secular matters were to be decided. Bauer offered a scholarly tour of that realm, but Paul VI declined to take it, just as he ignored certain strictures on the exercise of his authority.

As in the case of the welfare state, virtue is assumed to lie, not in the result, but in the good intentions and process. Are you transferring billions of dollars with the intention of alleviating the misery of the poor? Then you have merited the praise appropriately bestowed on one who has actually alleviated it, even if you worsened their condition and left them less able to improve it. Forty years and $2 trillion worth of "aid" later, things are pretty much the same, for after the tribal syndicates that pass for Africa’s post-colonial "governments" have financed their drunken orgies, very little remains to quell a baby’s hunger pangs. Again, where is the Catholic outcry?

Woods then traces the etiology of various economic diseases that ravage civil society and its fundamental unit, the family. The Catholic Church is second to none not only in its defense of the family, but also in the defense of what has eroded familial and intergenerational bonds: the welfare state. The free market, which is Pareto-optimal for all, making the rich richer while making the poor richer, too, has always been and always will be the "preferential option for the poor." The willful blindness of many Catholic intellectuals to this reality and the anti-family consequences of "progressive" economic policies is a mystery as well as a tragedy. It deserved a more ruthless diagnosis than Woods was apparently willing to make, at least in this book.

I invite the reader to guess who wrote the following:

[I]t is a necessary inference that there will be under capitalism a conscious, direct, and planned exploitation of the majority (the free citizens who do not own) by the minority who are owners . . . . If you left men completely free under a capitalist system, there would be so heavy a mortality from starvation as would dry up the sources of labor in a very short time. . . . The main body of citizens, the Proletariat, are not sufficiently clothed, housed and fed, and even their insufficient supply is unstable. They live in perpetual anxiety. (165–66)

The author of this astoundingly ignorant passage is none other than Hilaire Belloc, who was, among other things, a prolific writer on historical subjects. Since it has been firmly established that capitalist-owned factories in the towns saved the peasants from starvation, why do Catholics still repeat socialist propaganda? We know where the specter of mass starvation roams, and it is not the lands that are "completely free under a capitalist system." (205) (Woods observes that anti-market critics shift ground when cornered: once you’ve shown them that capitalism lifts up rather than grinds down the poor, they retort with "there’s more to life than material things," the very material things of which the capitalists allegedly deprive them. Anti-market types simply move on and concede nothing.) One may choose the hell of North Korean–like autarky for oneself, Woods argues, but not impose it on others. He urges this in a chapter, alone worth the price of the book, in which he buries Belloc’s "distributism."

Distributism is a morally licit option, Woods grants, but only for people who don’t mind a lower standard of living. The distributist’s way of honoring private property is a bad joke: A should have property, even if that means forcibly expropriating some of B’s. Woods notes that while there may be a political function called "distribution" (or "redistribution"), there is no economic one: unowned factors of production do not lie about awaiting distribution. On free markets, such factors are either produced or exchanged. Distributism is a riot of statism, anti-savings propaganda, and disregard for consumer preferences. Its attacks on the division of labor, which have a peculiarly Marxist odor, are wholly unoriginal. Distributists favor a society dominated by "guilds" (think of the AMA, ABA, SAG, etc.) which restrict entry into certain labor markets, thereby driving up the price of whatever depends on certain kinds of labor for its production. They act, therefore, in the interest of members at the expense of non-members. They get away with it only because they have the backing of legally sanctioned force.

As Sadowsky noted: "there is no revealed solution to the problem of poverty any more than there is a revealed cure for cancer. Just as there is no revealed medicine, so there is no revealed economics." (39 n. 63) (See James A. Sadowsky, S.J., A Christian Response to Poverty (London: The Social Affairs Unit, 1985.) Woods’ anti-Austrian Catholic challengers, however, imply that the economic opinions of seven consecutive Popes virtually are revealed economics. Woods, however, does not ask his fellow Catholics for more than a respectful hearing and thoughtful reflection for his own viewpoint:

Those of us within the Church who advocate the Austrian approach to economics are not demanding that the popes preach Austrian economics from the Chair of Peter. . . . What we stand for . . . is the legitimate liberty of opinion that is supposed to be permitted in matters that do not touch upon Catholic dogma. (215; my emphasis. ~ A.F.)

Not all of his fellow Catholics will allow this liberty. This reminds me of how my own narrowness once led to embarrassment. In 1983, new to the libertarian movement and seeking out fellow Christian libertarians, I assumed that all I had to do was find a pro-lifer. I was soon put in touch with Doris Gordon of Libertarians for Life. Within the first minute of talking with her, however, I discovered that she was, and is, an atheist. (There are also non-libertarian atheistic pro-lifers: Catholics should exploit these "anomalous" facts, especially when exposing Catholic public figures who are more afraid of "imposing their religion" than of undermining the rationalization of murder.)

We may be confident that Gordon arrived at her pro-life position without the help of the magisterium. One may, of course, derive a true conclusion validly from false premises, but is that what Gordon did? She may have drawn it from premises whose truth ultimately depends upon a metaphysics she rejects, but that is a different kind of criticism. Even so, Gordon is not "wrong on abortion" because she does not affirm theism. At worst her philosophy might ultimately underserve her moral convictions. (Some Calvinist apologists I have known would have argued that Gordon had no epistemic warrant for the premises from which she derived her conclusion about unborn human life. One was Gregory L. Bahnsen (1948–1995); another is John H. Robbins. Respectively, they are protégés of Calvinist philosophers and theologians Cornelius Van Til (1895–1987) and Gordon H. Clark (1902–1985). Evidence that I once swam in their waters is available here.)

I adduce the (for some) irritating fact of pro-life atheists because it goes to the heart of the Catholic view of reason, which Tom Woods champions. If we are to conclude that Mises and Rothbard are wrong about economics, more evidence is required than that their views do not square with that of seven consecutive popes.

My repeated references in this review to "seven consecutive popes" reflect a recent conversation with a Catholic critic of Austrianism. He used that phrase several times as if to underscore its centrality to his case against Catholic free-market defenders like Woods. As I mentioned, we are not going to find popes handicapping sporting events. And when it comes to faith and morals, it would not take seven but only one pope speaking ex cathedra to bind a Catholic’s conscience. If it does not pertain to those matters, if it is instead about, say, music, architecture, or economics, then not even the considered opinions of 265 consecutive popes, in themselves, would suffice to bind it. Especially ironic about this critic’s line of argument was its sharp contrast with his powerful defense, delivered in a lecture just before he and I chatted, of Archbishop Marcel Lefebvre’s 1988 consecration of bishops without the Pope’s explicit permission (and arguably against his wishes). According to this critic, therefore, a faithful Catholic may withstand Paul VI to his face on Novus Ordo Missae, but not on the living wage, or John Paul II on episcopal consecration, but not on "consumerism."

Nonbelievers can (surprise!) arrive at knowledge of the world despite their unbelief, and believers can learn from them. When that knowledge bears on the application of faith to practice, they have a duty to learn from them. The Church and the Market will help them discharge that duty.