The Mediterranean Tradition in Economic Thought (Routledge History of Economic Thought)

THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

ROUTLEDGE HISTORY OF ECONOMIC THOUGHT SERIES A HISTORY OF INDIAN ECONOMIC THOUGHT Ajit K.Dasgupta A HISTORY OF JAPANESE ECONOMIC THOUGHT Tessa Morris-Suzuki A HISTORY OF AUSTRALIAN ECONOMIC THOUGHT Peter Groenewegen and Bruce McFarlane A HISTORY OF CANADIAN ECONOMIC THOUGHT Robin Neill THE HISTORY OF SWEDISH ECONOMIC THOUGHT Edited by Bo Sandelin

THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT Louis Baeck

London and New York

First published 1994 by Routledge 11 New Fetter Lane, London EC4P 4EE This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1994 Louis Baeck All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publications Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Baeck, Louis. The Mediterranean tradition in economic thought/Louis Baeck. p. cm. Includes bibliographical references and index. ISBN 0-415-09301-5 1. Economics—Arab countries—History. 2. Economics— Mediterranean Region—History. 3. Economics—Europe, Southern— History. 4. Civilization, Arab—Greek influences. I. Title. HB126.3.B33 1995 330’.09182’2—dc20 94–16498 CIP ISBN 0-203-16822-4 Master e-book ISBN

ISBN 0-203-26338-3 (Adobe eReader Format) ISBN 0-415-09301-5 (Print Edition)

CONTENTS

The author

I

II

III

IV

viii

Preface

ix

THE MEDITERRANEAN TRADITION

1

Mediterranean economic thought and Atlantic economics

1

The roots of the tradition

6

What is in the term ‘tradition’

7

The revival of the Mediterranean tradition

10

The reading of ancient texts

14

Economic humanism: a new theme

17

THE NEAR EASTERN PRECURSORS

20

The dawn of civilization

20

The Mesopotamian legal tradition

24

Pharaonic Egypt

26

The biblical tradition

31

Conclusion

40

THE CONTRIBUTION OF THE GREEK ESSAYISTS AND PHILOSOPHERS

42

The emergence of rationalism and securalism

42

Essayists and pamphleteers in fourth-century Athens

46

Plato’s anti-economic tradition

61

Aristotle explores the economy

72

The historical trajectory of Aristotle’s analysis

91

THE ECONOMIC THOUGHT OF CLASSICAL ISLAM AND ITS REVIVAL

94

vi

V

VI

VII

Islam as a force in history

94

The sources and their interpretation

97

Law, jurisprudence and ‘hisbah’

99

The Persian tradition

105

Kalam and Falsafa

107

The global vision of Ibn Khaldun

112

Transfer channels and impact in the West

117

The revival of the Islamic tradition

119

THE ECONOMIC IMPACT OF THE CISTERCIAN ORDER

123

The Weber thesis revisited

123

Historical background

125

The Cistercians and the rural economy

126

A prototype of multinational agribusiness

127

The development trap of the twelfth century

127

As innovative corporate culture and structure

129

The transition to the late Middle Ages

132

MEDIEVAL THOUGHT IN THE LATIN WEST

134

The late blooming of the Latin West

134

The Roman legists

138

The teaching of the canonists

143

The contribution of scholastic theology

150

Albertus Magnus and Thomas Aquinas

151

The Languedocian Franciscan P.J.Olivi

159

Money and the abuse of power

165

The turn towards modern times

170

IBERIAN MONETARISM AND DEVELOPMENT THEORIES OF THE SIXTEENTH AND SEVENTEENTH CENTURIES

172

The cultural and economic setting

172

The great inflation

176

vii

The school of Salamanca

178

A new perception of inflation

181

Purchasing-power parity

185

The political economists or ‘arbitristas’

187

Portuguese ‘alvitrismo’

197

Review and evaluation

199

The historical unfolding of theories and their sources

203

Notes

206

Bibliography

215

Index

230

THE AUTHOR

In the course of the last three decades Louis Baeck has taught graduate students the history of economic thought and the economic problems of developing countries at the Catholic University of Leuven (Belgium). For six years he conducted field work and lectured at several African and Latin American universities. In the last decade he oriented his research on the Islamic world and on Indonesia. A prolific writer, he has produced numerous articles and eleven books, the latest Post-war Development Theories and Practice (1993) published by Unesco and ISCC. The author’s familiarity with classical philosophy and languages provides a solid basis for his work on the Mediterranean tradition.

PREFACE

There are many ways to approach the study of economic problems. Today we notice a revival of interest in the history of economic thought. This book presents an original blend of cultural development, economic history and economic thought in the cradle of Western civilization, the Mediterranean. The author takes us on a fascinating intellectual voyage, illustrating how ideas on the economy and its management evolved since the dawn of the high cultures. Against the pretence of the moderns who depict economics as a timeless and formal science with universal validity, in this welldocumented study economic thought is persuasively proclaimed to be an historical and cultural construct, with qualitative differences relative to time and place. The book covers a time span of five millenia and demonstrates how doctrines emerged and matured in the different worldviews, cultures, religions and philosophical schools of the Mediterranean. The author demonstrates a familiarity with a quite extraordinary range of the immense literature, and selects and evaluates the most authoritative sources of our past in a well-balanced intellectual discourse, accessible to readers with only a limited background in economics. The tale opens with the wisdom literature of pharaonic Egypt, where scribes sowed the seeds of the first rudiments of economic thought. The functioning of the well-organized temple and palace economy was embedded in a religious culture of outstanding originality and creativeness. The law-making kings of Mesopotamia followed suit, but they also opened the intellectual horizon to a legalistic way of thought for the normative ordering of the economy. In this they were followed by the authors of the biblical texts, who initiated an innovative and dialectic intermingling of lawgiving and moral consciousness. The bulk of the book concentrates on the trend-setting scriptures written by the most notorious Greek pamphleteers and philosophers of Antiquity. Their discourses on practical philosophy formed an historical bench-mark, engendering multiple renaissances. The book devotes a substantial and illuminating chapter to the economic doctrines produced by the scholars of classical Islam, and contextualizes Islam’s unexpected retraditionalization, spearheaded by the revival of economic fundamentalism in the 1970s. The final chapters detail the

x

novel doctrinal developments of the Roman legists, canonists and theologians of the Middle Ages, as well as the new turn taken by the post-Renaissance schoolmen and Spanish mercantilists of the Habsburg Empire. In the eighteenth century, stimulated by the rationalism of the Enlightenment, economic thought departed from the Mediterranean tradition. In the process of its northward and westward move—its ‘atlantization’—modern economics characterized itself as a purely rational construct, freed from the so-called shackles of ethical and religious norms. Economists, social scientists and historians who are dissatisfied with the highly abstract and formalized models of today’s economics will find the past a refreshing source of seminal ideas. In the West a renewed interest in the ethical perspectives of economics is noticeable. Leading scholars of the Islamic world turn their back on Western economics and rediscover the religious roots of their classical legacy. In other areas, for example, the economic tradition of the Slavophiles in the ex-Soviet Union, the cultural constructs of the past seem to have a promising future. The author’s conclusion is that the new humanism of today comprises a resurgence in cultural identity, set in motion by an assertive quest for the moral base of economic development. This search for our Mediterranean roots elucidates the challenges and problems confronting us today. The Mediterranean tradition is valued as an important source of inspiration for problem solving in areas where the conventional wisdom of mainstream economics offers no ready answer.

I THE MEDITERRANEAN TRADITION

MEDITERRANEAN ECONOMIC THOUGHT AND ATLANTIC ECONOMICS The etymological roots of the terms ‘economy’ and ‘economist’ are Greek. In ancient Greek, however, words like oikonomia, oikonomike and oikonomos were only used in the cultivated language of treatises like, for example, Xenophon’s Oikonomikos, in connection with the keeping of the household or the management of an estate. In everyday language on economic matters and financial dealings, the term chrematismos was commonly used. The ancient Greeks simply had no word for ‘economy’ and for ‘economies’ in the sense that we use it today. The formalized discourse on the general functioning of the economy, and especially its intrinsic laws, is a development of modem times. In 1621 a French manufacturer and pamphleteer by the name of Antoine de Montchrétien, published a book on the problems of the material wealth of the nation, with the title Traité d’Economie Politique. The label struck the imagination of his fellow mercantilists who used it freely. They generalized the label ‘political economy’ in the European languages. In later times, when the formal and scientific analysis of the economy came into ascendance, the term ‘political economy’ was replaced by the more neutral term ‘economies’. Nowadays, the term ‘political economy’ is only used by authors who wish to underline the social and political dimension of economics. From the middle of the nineteenth century until the Second World War, the history of economic thought had formed an important part of the curriculum for young economists. It played a significant role in the teaching of economics to student audiences as well as to the interested public at large. Keynes, Schumpeter and Hayek, three of the most influential economists of the 1930s, wrote extensively on topics of doctrinal history. Up to the 1930s, the history of thought represented an important part of research programmes in the faculties of economics. In the immediate postwar period, however, these programmes suffered a decline.

2 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

When asked for the date of birth of their science most economists hesitate. Some would mention the mercantilists and others the natural law philosophers of the seventeenth century. The mercantilists secularized economics by emancipating it from religious norms and moral standards. The natural law philosophers discovered the individual as the pivot of economic decision making. They paved the way for the methodological individualism of microeconomics. Other contemporary economists would point to the Enlightenment philosophers of the eighteenth century in Scotland and on the Continent, with Adam Smith as godfather. They legitimated the idea of the minimal state and the material self interest of the individual, as well as the rising importance of commercial society and its market laws. Many who take microeconomics as the hard core of their science, would give preference to the neo-classical triad consisting of Walras, Jevons and Marshall. Under the impulse of this triad the economic calculus was highly formalized and mathematized, while techniques based on methodological individualism and atomized welfare preferences were integrated in a system of general equilibrium. When asked for the origin of their science a great deal of economists would not care at all. In their view the predecessors of today’s economic theory, and more so its prehistory, ought to be considered as quaint, bypassed and thus irrelevant for our contemporary understanding of the economic system and for its practical problem solving. To them the study of the archeology of economics is a luxury without intellectual benefit, since ancient authors represent the underdeveloped stage of the discipline. One should not waste precious time and energy with the reading of past theories. Only the mainstream ‘orthodoxy’ and its novelties are worthwhile. The intellectually narrow view of mainstream economists today is that the history of economic thought only reveals the mistaken opinions of dead men. This view is clearly the offspring of our Western prejudice that no other time but ours can possibly teach us anything fundamental about mankind and human society. This questionable stance may well buttress the superiority of contemporary economics, but it is not an ideal starting point for an impartial test of its scientific and practical relevance. The pre-modern tradition of economic thought perceived the economy as embedded in a complex web of social and political institutions, regulated by religious and ethical norms. In this societal and cultural context, the articulation and development of a holistic approach was, from the conceptual point of view, more relevant than the specialized single-focus approach of modern times. At the end of the nineteenth century, economics emerged as an autonomous, specialized and formal framework of thought. Its paradigmatic focus and axiomatic principles were completely emancipated from non-economic constraints. A great number of today’s economists would argue that economics became the queen of the social sciences just by completely disentangling its scientific core from the aforementioned social and moral determinants.

THE MEDITERRANEAN TRADITION 3

A large consensus between social scientists has it that ‘modernity’ initiated a qualitative break between the cultural roots of our past and our present. This cultural divide caused also a paradigmatic divide in the history of economic thought. Consequently, a problem arises in the choice of epochal labels to be used by historians. For references to the period prior to modernity, the use of prefixes like ‘preclassical’ and ‘before Adam Smith’ are very common. Intentionally or not, such labels convey the idea that modernity posits the universal norm for all times. This may be so in the West for the relatively short period of time following the Enlightenment, but in order to identify the more remote past, such derivative prefixes are evidently not the most adequate markers. A good label ought to bring out the proper identity of the subject under analysis. Since we choose to study ancient doctrines in their own right and from their proper perspective, the label ‘Mediterranean’ seemed to be a well-suited metaphor. Indeed, the genesis and the later flourishing of our Western worldviews and conceptual roots are to be found in the successive civilizations of the Mediterranean. They initiated the tradition of conceiving society as an orderly cosmos, regulated by myth, religion, ethics and politics. In the worldview of our Mediterranean past, the material sphere and the things that we call economic, played only a subordinate role. As a consequence, a systematic articulation of thought on the material organization of life was slow to develop. In the Mesopotamian, Egyptian, Persian, Minoan, Mycenean, Phoenician and Syrian civilizations hardly any theory evolved which merits the name of economic thought. This theoretical void stands in stark contrast with their capacity to organize the complex estates of kingly courts and temples, with the practice of banking and of long-distance trade, and with the considerable amount of empirical evidence on all these activities that survives in the literature. In these complex societies, however, some sort of political ordering and moral legitimation was required to keep in check the excesses of the powerful and the wealthy against the weak and the poor. In the oldest civilizations of the Mediterranean, the registered economic comments—on the terms of trade, on monetary media of exchange, on interest and usury, on debt slavery, on banking and accounting—are entwined with religious and moral messages and with the codices of law. Their scriptures aimed at the legitimation of stability and order in the cosmos and in society. The basic theme was how to stave off chaos by a stable and just social order. Their compact worldview did not permit the aspectual differentiation which we moderns take for granted. The gradual differentiation of the ancient worldview into separate domains like religion, philosophy, ethics and political science is due to the intellectual revolution of Greek thinkers. The Sophist movement gave the first impetus to which the Socratic philosophers reacted with a restorative synthesis. The Sophists were the first intellectuals in history to confer moral and social respectability to the material organization of society, to the economy and to the people engaged in it. Socrates, on the contrary, absorbed the ascetic bent of the

4 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

Pythagorean movement and set the pace for a philosophical counter-reaction. Plato, in particular, was the leading prophet of the counter-reformation against Sophism and against its economic ideology in particular. His disciple Aristotle broadened the spectrum of intellectual interest and rediscovered the economy. His pioneering efforts in the conceptualization of processes like the social and economic development of the city-state, of trade and barter, and of moneymaking, were of the highest quality to be found in Antiquity. After Aristotle’s quantum leap, there followed a long period of intellectual uninterest in things economic. The philosophers and intellectuals of the Roman Empire and also the early Church Fathers, with the exception of the Stoics, viewed the economy as a morally questionable domain of activity, which was left to people of lower status. As a consequence, economic thought was kept in a low key. With the unfolding of the second millenium of our era, the three religions of the book —Judaism, Christianity and Islam—took over the moral lead in the intellectual revival of interest in economic matters. In varying degrees all three absorbed elements of oriental wisdom, Roman law and Greek philosophy. In the beginning of our second millenium this combination produced a scholastic tradition which bloomed, first in Islamic culture, then in the Latin West. Islam was the last religion of Antiquity. When the Arabs moved eastward they came into contact with the ancient culture of Persia, and an economic literature of exceptional quality emerged. The major preoccupation of the later scholastic scriptures, however, was the moral and religious demarcation between licit and illicit economic practices. As a sideline in this intellectual endeavour, some of their great masters discovered how the economy functioned in reality. Gradually they gained a better insight into its intrinsic laws. On the basis of a rediscovery and actualization of Roman law in the University of Bologna and the rise of humanism, a secular literature on the regulation of the economy evolved as a rival to the scholastic scriptures. With the advent of modern times, the search for new ideas spilled over the bounds set by tradition. The ascendancy of the Spanish Empire and its conquest of the New World created new theoretical and practical problems which required fresh and adequate theological and moral legitimations. The intensification of international trade, the dislocation of the regional economies under the supranational pressure of the Empire and the development of worldwide financial markets, were intellectual challenges for the rejuvenated scholastic school of Salamanca. This second blooming of Latin scholasticism in the intellectual centre of the Empire met the challenge in a brilliant display of intellectual and moral capacity. The malfunctioning of the Habsburg Empire as a supranational economic space, its military aggressiveness against France and Turkey, its religious wars against the Dutch Federation and the German princes, over-taxed and exhausted its resources. The invention of the printing press amplified the capacity of treatise writing and pamphleteering. The Spanish and Portuguese literature of the

THE MEDITERRANEAN TRADITION 5

seventeenth century arbitristas offered for the first time in history a concentrated intellectual effort to formulate theories and guidelines for the economic development of nations. After this last big push, the Mediterranean tradition went into decline and the Atlantic worldview of modernity took over the intellectual lead. The lands of Islam, from their side, had already passed their cultural and intellectual peak in the fifteenth century. With the subsequent decline of the Habsburg Empire at the end of its ‘Golden Age’, the historical phasing out and the dwarfing of the Mediterranean zone set in. After four millenia of hegemony in the material as well as in the intellectual field, the Mediterranean civilizations had lost their spell and loosened their grip on history. The new nations of the North, especially England and Holland, entered the scene. After an intense struggle with the Spanish Empire they took over the initiative in colonization and in world trade. The industrial revolution that followed, and in its wake the international expansion of capitalism, was also the work of these new Atlantic nations. In the intellectual field the Enlightenment represented a radical push towards the secularization of thought and its differentiation in separate disciplines. The flourishing of an autonomous branch of scientific economics was one of its results. The use of the label ‘Mediterranean’ for different cultures over a span of time stretching from the Sumerian beginnings to the School of Salamanca, may appear to be questionable. The modelling of thought, and thus also of economic thought, are essentially cultural constructs. As constructs of culture they are modelled in different ways. From the perspective of economic thought, however, these different Mediterranean cultures bear a family resemblance in a number of qualitative characteristics. Their kinship structure is clearly recognizable in the subordination of things economic to higher norms, in the insistence on the checks and balances to contain the accumulation drive, in the holistic and organicist conception of society, in the moral legitimation of the hierarchical societal order, and in the preference for stability over change. The second point needing some clarification is the use of economic thought in our title. In his monumental study, Schumpeter quoted two criteria to distinguish ‘economic thought’ from ‘economic science’. The latter presupposes a conceptual superstructure and applies special methods and tools in the process of investigation, while the former belongs to the pre-scientific stages. In another locus of his work, however, Schumpeter stated to begin with that: ‘the history of economic thought starts from the records of the national theocracies of antiquity’, and ended by proclaiming ‘but the history of economic analysis begins only with the Greeks’ (Schumpeter 1979:52). The distinction drawn by J.Spengler is more specific: ‘economic science may be viewed as a sub-category of economic thought and [is] restricted to models or analogues of market-oriented, price-system-dominated, capitalistic economies peopled by free rather than hierarchical men’ (Spengler 1980: 16). Spengler correctly broadens the criteria with his reference to the hierarchical in contrast with the egalitarian structure of society.

6 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

This emphasis on hierarchy has been ably expounded on the basis of ample empirical evidence in the work of L.Dumont. After years of intense research on the Indian caste system, the French anthropologist published a study of Western society. In sharp contrast with its predecessors, modern society proclaims to strive at equality of opportunity for all individuals (Dumont 1966, 1977). According to Dumont, hierarchical society compensated for its structural inequality by worldviews in which the concepts of order and stability, as well as the holistic fibres of society, predominate over all other considerations. In the view of Dumont, the genesis of an economic ideology and the conceptualization of its scientific superstructure were only possible after the rise of individualism followed by the social and political emancipation of the homo aequalis. The interpersonal and the intertemporal utility calculus embodied by the homo economicus, can only come to bloom with the paradigm of modernity, since this celebrates the equality of opportunity. In the footsteps of Spengler and Dumont, we conceive the Mediterranean tradition as one of economic thought, but not of economic science. The rational-choice model and the methodological individualism of modern economic science could develop only in the cultural constructs of the Atlantic tradition. THE ROOTS OF THE TRADITION To the question ‘How far have we to reach back to find our roots?’, the German philosopher Karl Jaspers introduced the concept of an ‘axial age’. According to the axial-age hypothesis, the period of about five centuries BC witnessed the emergence of a major spiritual, moral and intellectual breakthrough within the orbit of the higher civilizations. In less than two centuries a number of spiritual movements transformed the cultural project in five different zones of higher civilization. The first movement was animated by the Iranian seer Zarathustra. The second was Hebrew prophetism with Deutero-Isaiah as spiritual prince. In Classical Greece a group of philosophers explored unknown intellectual paths. In India the message of Buddha offered the inspiration for the Upanishad tradition. In China Confucianism and Taoism initiated a novel cultural flourishing. Karl Jaspers used the term ‘axial age’ because he conceived its workings as the hinge on which human history has turned. According to his view these new departures in spiritual, moral and intellectual life were cultural benchmarks in the sense that they had an everlasting influence on human history. A great deal of the many cultural and spiritual renaissances the world has known, are in fact novel re-interpretations and revivals of this axial tradition.1 The ‘axial-age’ hypothesis challenged the historians of antiquity who, in due time, held a conference on the theme.2 A more recent edition of a number of papers written by specialists in cultural dynamics explored the theme in greater detail (Eisenstadt 1985). As a result of the additional research on the religious, cultural and social dynamics of the first millenium BC, newly labelled as the age of transcendence, some specific aspects of the intellectual history of mankind

THE MEDITERRANEAN TRADITION 7

were clarified. As a consequence, we are better informed on the dynamics of spiritual reforms and social changes of the axial age. The Eisenstadt papers drew attention to the following points: 1 The rise of the ethical religions and their gradual rationalization. 2 The origin and genesis of a new sense of historical consciousness. 3 The intellectual exodus out of cosmological compactness and the gradual appearance of specific value spheres: religious, moral, political, philosophical. 4 The influence of independent and critical elites. This enriched version of the axial-age thesis is more attentive to the crossfertilizations between the Mediterranean cultures. In order to exemplify this cultural intercourse, the oriental influences on the development of biblical theology offers a good case. The difference in spiritual and moral values of the post-exilic Deutero-Isaiah in comparison with those of the pre-exilic Isaiah are largely attributed to Babylonian and Persian influences. The Jaspers thesis has also been challenged by recent research which has cast light on the material artefacts of the pre-axial civilizations. If we take into account achievements in various domains, such as agricultural techniques, bureaucratic organization and religious and moral ideas, from Mesopotamia and Egypt on the subsequent Mediterranean cultures, our cultural horizon widens considerably. The civilizations of Mesopotamia created palace and temple complexes of an unparalleled grandeur and pioneered with law codices. The Egyptian wisdom literature produced the first recorded expression of humanism in history. However, in the domain of economic thought they were only precursors, not founders of a tradition. WHAT IS IN THE TERM ‘TRADITION’ The moment has come to clarify the last term figuring in our title, namely the concept of tradition. The history of ideas informs us that changes in worldviews are generally the work of spiritual and intellectual elites who are able to launch a new tradition of thought or to achieve a re-interpretation of an old one. The communication of new ideas by elites is a necessary but not a sufficient condition for the genesis of a tradition. As a rule the institutionalization of the communication process is an important step. A tradition may be called an historical embodiment of institutionalized communication which in the course of time grew into a classical reference (Lambert 1957;Grunebaum 1969; Assmann 1987). In the intellectual history of mankind, the concept of tradition represents a process of an organized and enduring influence. As a rule, the historical florescence of an intellectual tradition requires the following stages: thematization, textualization, institutionalization and canonization or canonicity.

8 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

The first step is the process of thematization. This is a condensation of elite communication caused by changes in the historical perspective, by a rupture in collective experience, by technical improvements or scientific discoveries, by social disruption, by economic crisis, by environmental and ecological degradation. New thematizations are generally elicited and become manifest in the wake of a crisis mood generated by shocks in historical consciousness. Thematization can also be the result of an erosion or a breakdown of the censorship by the ruling power and by the cultural establishment, so that new horizons open up. New and intensive thematization produces a quantum leap in elite communication by which the formerly unspoken, latent or implicit cultural and intellectual novelties break into the open. According to the sociology of cultural dynamics, the issue-building of thematization is highly correlated with the Zeitgeist or with new trends in historical awareness. An example of thematization in pre-axial times is the new interpretation of maat, the Egyptian principle of cosmic order and justice. This new interpretation was expounded by the scribal schools after the social upheaval that caused the transition from the Old Kingdom to the Intermediate Period. In ancient Greece, the crisis of the city-state in the fourth century BC provoked an intense wave of treatise writing by pamphleteers and philosophers. One of the major themes of the Islamic as well as Catholic scholastics was their ambition to harmonize faith with rational thought and to refine the concepts of theology in the wake of a revival of Aristotle’s philosophy. This adaptation of a theological tradition to rational premisses also formed the first step in the development of scholastic economic thought. The pamphleteering of the Spanish arbitristas represented another interesting case of new thematization in an age of crisis. As a consequence of dynastic felicity and military conquest, the Habsburg Empire had coalesced in the course of one generation into a common market composed of very unevenly developed regional economies. In their numerous treatises, the arbitristas dramatized in chorus the plight of Castile, its imperial centre. Indeed, this political centre of the Empire was economically underdeveloped. The central theme of the treatises challenged the idea of imperial coherence and emphasized the need for regional and national development. In periods of intense problem awareness new themes flourish which render the old explanations obsolete. Cultural and intellectual system building, however, cannot thrive on oral communication alone. The codification process is the second step of tradition building. In order to meet the test of historical impact, the results of thematization need to be put down in written form. This codification may also be called the process of textualization. Lost texts rarely lead to the founding of a tradition. The most important publications of the Sophists were lost. Their ideas are only known to us by an indirect way, the most important being the writings of Isocrates, Xenophon and Plato.

THE MEDITERRANEAN TRADITION 9

Some of the tradition-founding texts have been assembled by disciples after the death of the master. A great deal of Aristotle’s important texts were published after his death on the basis of lecture notes. The teachings of Jesus were written down in a collection of gospels by authors who lived one or two generations after his death. When several manuscripts are extant with divergent versions, the interpretation of the various texts of a tradition invites an almost unending stream of exegesis. Fundamental themes recorded in manuscript, even those written in beautiful prose like Plato’s dialogues, rarely develop into a tradition without the supplementary process of institutionalization. The degree of social and intellectual independence of the theorizing elites from the establishment in power was a crucial factor in tradition building. In Pharaonic Egypt the scribal schools were staffed by elites submissive to the central power of the state. The Pharaoh was the only incarnation of the cosmic and social order. A change in the worldview or in the intellectual tradition could only arrive concomitant with a social revolution, or after an invasion by a foreign power. As a consequence the Egyptian scribes eschewed the formulation of personal views and of polemics in general. Hebrew culture and religion, on the other hand, permitted the development of a spiritual and moral opposition against the earthly powers. It postulated the submission not only of ordinary people but also of the king and his officialdom to the will of Yahveh. The absolute freedom of Yahveh represented an ultimate check against the possible abuse of the earthly powers as well as against the human shortcomings of the people. The thematization of ethical radicalism by the Hebrew prophets who proclaimed themselves spokesmen of Yahveh, had not been possible without a margin of elite independence from the earthly power structure. However, this freedom of the prophets was not without limits, since Amos was told that Israel and its court could not bear his radical social criticism. Tradition building was facilitated by and became more solid with the creation of institutions functioning as transmission belts. The School of Isocrates, Plato’s Academy and Aristotle’s Lyceum were examples of institutionalized propagation of texts and treatises. In the lands of Islam the madrashas were important law schools and scholastic centres by which the different schools of thought propagated their texts. In a similar vein, the schools of the monastic orders and the medieval universities played a crucial role in the institutionalization of themes. Normally, the institutionalization of themes requires a great deal of energy spent on painful exegesis and on actualization of bypassed concepts. The reworkings of a tradition, codified in commentaries of classic texts, took form already in Antiquity. In some cases this exegetic and interpretative effort developed into an autonomous tradition in its own right, overshadowing or distorting the themes of the original. When this exegetic performance generates a ‘back-to-the-roots’ movement, a revival may set in to regain the primeval purity of the tradition. The history of economic thought is replete with such revivals.

10 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

The process of canonization is the fourth and last phase that completes the building of a tradition. Canonicity is a selective process aiming at institutional theme bundling and text stabilization. Canonization is not a monopoly of Church authorities. Ideological movements like Marxism and others have practised the process of canonicity as well. In the scholastic tradition of the Latin West, some of Aristotle’s works, with the inclusion of those on economic issues, were regarded as one of the most respected theoretical references. The pre-axial traditions of Mesopotamia and Egypt have had less direct impact on later traditions because their elites were less successful in the canonization process. Being submissive to and in compliance with the authorities in power, they took the existing order for granted and failed to develop an independent conceptual framework. However, the breakthrough of the Greek system builders would not have been possible without the achievements of the pre-axial predecessors of Mesopotamia and Egypt. Their worldviews were the first cultural constructs for a just social and economic order. THE REVIVAL OF THE MEDITERRANEAN TRADITION In several European and American research centres a renewal of interest in the study of past economic doctrines is noticeable. On the European continent new associations have recently been set up. They organize symposia and conferences on the theme of the history of economics. In some centres of Islamic culture, the renewed intellectual interest in its own classical tradition forms part of the fundamentalist revival. Also new is the fact that researchers study the past doctrines, even the most ancient ones, not only out of historical interest. Rather, they are valued as sources of inspiration in attempts to conceptualize and solve actual problems for which the conventional wisdom of mainstream economics offers no ready answer. An example of this doctrinal retraditionalization is the revival of interest in the relationship between economics and ethics. This is not the place to canvass in minute detail the renewal of interest in past doctrines in general, but a brief discourse on the revival of the Mediterranean tradition in economic thought seems appropriate. The rapid changes we go through constitute an influential factor in this. In geopolitical terms, the postwar period has been identified as one of ideological bipolarism in which the superpowers achieved a high degree of societal order and political discipline within their sphere of influence. From the end of the 1940s the development process of nations was conceived as an effort to replicate everywhere the models of the hegemonic leader of the West (the United States) or of the Soviet Union. An intense wave of Westernization and of Sovietization set in, with the nations of the Third World as a peripheral zone, where at times conflicts of interest between the superpowers were fought. Since the 1980s the superpowers have gradually lost their grip on events. With the relative erosion of

THE MEDITERRANEAN TRADITION 11

the hegemonic discipline, the dynamics of history have produced an unexpected wave of ethnocultural reassertion and turbulence. The Islamic culture was the first to rediscover its classic tradition of thought, but others followed in this reawakening. In the West, the Mediterranean heritage of economic thought never died out completely. Notwithstanding the triumph of the Atlantic tradition it generated notable revivals. The first assault against the deductive abstractions of Ricardian economics appeared in the first quarter of the nineteenth century. Its leading author was Simonde de Sismondi, a prolific writer and a militant for different causes. Sismondi rejected the abstract Ricardian modelbuilding, which he dismissed as a science of hedonistic calculus, but he praised Adam Smith for his empirical approach. Sismondi was an economist of Mediterranean flavour, a fighter for social reform and an inspirer of the German Historical School. In reaction to the abstract, microeconomic models of the neo-classical revolution, the German Historical School held a brief for a more comprehensive approach. At the end of the nineteenth century, Gustav Schmoller as mentor of the younger branch of the school, influenced a whole generation of German social scientists with his historico-ethical approach. His rejection of abstract analysis resulted in a synthetic approach with great attention to minute empirical detail. The proclaimed ambition was the understanding of the historically anchored and socially determined matrix in which economic agents behave. Schmoller’s method was truly interdisciplinary in the sense that it was attentive to all the relevant factors of economic action, and not only to its economic logic. The value of its research findings resided not so much in the slender analysis it offered, but rather in the empirical information it contained. The most brilliant representative of the school, Max Weber, developed the Verstehende Methode on a more theoretical basis. He concentrated his research on the different cultural constructs of economic thought, on the moral motivations that move the economic agents and on the value systems of the past. By his systematic entwining of the value judgements (Wertbeziehung) of the actors with their historico-cultural roots, Weber was a pioneer of economic sociology. In his masterful comparison of traditional value systems with those of ‘modernity’, the reader senses that Weber was stirred by deep emotional feelings of nostalgia. With a pang of disappointment Weber illustrated the ambivalent nature of modernity. In Western civilization, a pattern of culture had evolved whose technical, scientific and economic superiority was disputed by very few people. Yet the time was long past when modern man believed in rationality, and its scientific offspring, as the superior path, leading to the discovery of human fulfilment, of the true art, of real happiness and of the true God. Science had become a narrow and specialist activity. As such, it had become the motor of a development whose sense and whose overall rationality that same science was unable to explain. Max Weber indicated the sore spot when he wrote sharply of the disenchantment (Entzauberung) emerging in the wake of modernization. True,

12 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

modernization engendered material prosperity, but it had also banned the poetry and mystery from life. It had eroded traditional value orientations and was, as yet, unable to create a relevant tradition to face the uncertainties of the future. According to Weber, our scientific world (and with it the economic profession) created too many Fachmenschen ohne Geist; that is specialists without imagination, and Genuszmenschen ohne Herz, hedonists without feeling. This sounds like a moral critique of modernity and of its misdevelopment, in true Mediterranean tradition.3 Of special interest is the debate between representatives of the Historical School and historians of Antiquity like E.Meyer and J.Beloch, since it has been taken up by the economic anthropologists of our time. The historian K. Bücher and his disciples of the Historical School maintained that the value orientations and the institutional matrix of the ancient economy were qualitatively different from those of modernity. For an adequate understanding of its functioning, these value systems had to be evaluated by a relevant criteriology, that is by a methodology that would take into consideration this cultural divide. The classicists who adhered to Meyer’s group argued that the economic life of Athens in the fourth century BC made no difference to that of modernity. For them the Greeks were already moderns as far as economic motives are concerned. There was no use for a special method aimed at understanding the different mentality, since in Meyer’s view the Mediterranean culture should not, methodologically speaking, be separated from modernity. In the 1930s, K.Polanyi, a Hungarian economic sociologist, who by his studies in Germany became familiar with the debate, opted for the primitivist thesis of K.Bücher. After his emigration to the United States, he animated an interdisciplinary team of historians, anthropologists and economists. Its research publications have influenced the study of ancient economic history to this day (Polanyi 1944, 1957). Briefly stated, Polanyi’s thesis may be summarized as follows: 1 The economic relations, especially the exchange relations, of the primitive societies and ancient civilizations can be classified under three broad headings: reciprocal, redistributive and commercial. (a) In early primitive societies and in those studied by anthropologists today, the reciprocal type predominates. Their economy and its exchange relations are deeply ‘embedded’ in the overall system of religious, cultural and social relations. (b) The redistributive type is characteristic of the ancient economies of the Near East, where the political and religious establishment, like the royal court and the temples, controlled and gathered the products of peasants and craftsmen and redistributed them to its dependants. The mobilizing power of the redistributive system aimed at the optimization of the

THE MEDITERRANEAN TRADITION 13

surplus of the subsistence economy for distribution to administrative staff and craftsmen engaged in court and temple service. (c) The commercial type is characterized by the trade and exchange relations in a market economy. 2 The predominance of the commercial type dates from the breakthrough of modernity in Europe. Under the impulses of a mercantilistic bourgeoisie the economy was gradually ‘disembedded’ from its social fabric and its economic value orientations were emancipated from the religious and ethical contexts. This resulted in a development model where economic considerations tend to dominate all other value orientations. 3 The paradigmatic and methodological framework of modern economics is of no use in the study of primitive or ancient economies, since their market relations were underdeveloped. The approach of the anthropologists may provide more valuable keys for the study of ancient economies. Even the most critical scholars with serious reservations about the details, admit that the research findings of Polanyi’s group have shed new light on the study of ancient economic history, as well as on the history of economic thought. The movement animated by Polanyi represented a revival of the Historical School, enriched by the field-work findings of contemporary anthropologists. The nineteenth-century movement of Russian populism, enjoying a revival since Gorbachev’s perestroika is another interesting case. Since the time of Tsar Peter the Great, Russia had been torn by ambivalent attitudes towards modernization and Europeanization. From the outset, Russian intellectuals perceived their culture and their religion as the better child of Christian Orthodox Byzantium. While Latin Europe since the Middle Ages had chosen the path of rationalization, modernization and secularization, Russia, like the other cultures rooted in the Christian Orthodox religion, kept to the social bounds and values of the Mediterranean tradition. After the aborted attempt of Peter the Great, Catherine the Great opened her court to the ideas of the Enlightenment and encouraged the intellectual members of the Russian establishment to study and travel in Western Europe. The shocking radicalism of the French Revolution and the invasion of Holy Russia by Napoleon, cooled the admiration for the West in the circles of the Slav intelligentsia. In the second half of the nineteenth century, when industrialization took-off, Russian intellectuals interested in philosophy, art and literature, split up into two opposing camps: the Slavophiles or narodniki, and the Westernizers, or zapadniki (Berdiaïev 1970; Walicki 1975). The Slavophiles idealized the Russian village and equated Westernization with capitalist industrialization, and thus with increasing penetration of Russia by European materialist ideas and values. From the beginning, this fundamentalist ideology had a messiantic and nationalist flavour. The great writer and socially minded aristocrat, Leo Tolstoy, wrote in the 1860s his great novel War and

14 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

Peace, to celebrate the victory of the fatherland against Napoleon’s armies and their revolutionary ideas of the Enlightenment. The Slavophiles were staunch defenders of the Christian Orthodox tradition of the pre-Enlightenment world. They built a wall against its rationalism and secularism. They were a sort of romantic socialists, who lived in the firm belief that their community-oriented development was superior to Western individualism and capitalism. Those narodniki with an economic bent, were well aware that industrialization was necessary for Russian development, at least to keep foreign military powers at bay. The leaders of this movement separated themselves from the cultural Slavophiles and they transformed their movement into an anti-urban populist party in defence of the peasantry. This positive attitude toward economic development gained more adherents after the defeat of the Russian fleet by Japan in 1905, but even then the claim was made that Russian industry had to be less destructive for the peasantry and for the local artisans. In the early twentieth century the socio-economically minded narodniki evolved into a populist movement. The populists were severely attacked by the upcoming radical socialists and Marxists, and after the great proletarian revolution, they lost their grip on events (Van Regemorter 1985). They lived on as an undercurrent that reemerged in the wake of Gorbachev’s reforms. In the mainstream textbooks on economic development and also in the studies of the history of economic thought, the analyses produced by the Slavophile movement have been neglected. Its major proponents professed an economic humanism whose main objective consisted in keeping the baleful influences of Westernization and capitalism at bay. Its most important economic thinkers and pamphleteers of the tsarist period, like Chernyshevsky, Flerovsky, Vorontsov and Danielson, as well as the influential agrarian economist Chayanov of the Communist period, were more or less ignored by the development literature of the Western scientific establishment (Chayanov 1966).4 Chayanov’s penetrating analysis of the socio-cultural dialectics between economic motives and economic calculus, as well as his study of the kulak were rejected by the scientific approach of the Communist planners. In the 1960s Chayanov’s writings influenced African populist regimes like, for example, Nyerere’s ujamaa movement and other cooperative organizations in the Third World. THE READING OF ANCIENT TEXTS From a methodological point of view textbooks on the history of economic thought offer a variety of perspectives. Indeed, the doctrines of the past can be ordered according to different criteria. The retrospective approach has a certain appeal to contemporary historians of thought because it sheds light on the question ‘how and when’ the authors of the past discovered what we modern economists consider to be the postulates of our science. The retrospective approach is also the most common (Gislain 1991; Servet 1991).

THE MEDITERRANEAN TRADITION 15

The retrospective approach is characteristic of the scientific absolutism of modern economics, since the contemporary state of the art is deemed to be the absolute norm by which all past texts ought to be evaluated. Evaluation requires standards of judgement and in the absolutist approach these standards are our own. In his widely used handbook, Mark Blaug, in the most explicit way, posits that his standards are those of modern economic theory (Blaug 1985:1). For the practitioners of this approach a major problem may arise when, as happens to be the case, there exists amongst themselves disagreement over some basic axioms. Economists have always tended to split up into rival schools: Neoclassical, Keynesian, Monetarist, Institutionalist, Marxist, etc. According to the ideological vistas and the scientific method characteristic of the school to whom the author belongs, past theories will be seen through a different prism. Differences of perspective, however, occur even amongst economists of the same school. Although they both came from the neo-classical tradition, Schumpeter and Hayek produced rather different writings on the history of economic thought. Schumpeter opted for the Lausanne vintage, with its norm of Walras’ general equilibrium, while Hayek wrote his historical discourses with a definite Austrian accent. These two distinctive currents of neo-classicism resulted in a rather different history of economic thought. On the basis of the retrospective perspective, every ‘school’ produces its own version of doctrinal history. This is in contradiction to the claim of absolutism cherished by the retrospective method. An alternative approach is proclaimed by the adherents to historical relativism. On the basis of this principle, past doctrines are situated in the context in which they originated. Pure relativism rests on the premises that there are no trans-historical universals. Ideas and doctrines are only historico-concrete time-products with an ephemeral and limited life-span. Moreover, the relativistic approach splits up into two different schools. One school takes the material infrastructure of a given period of reference, the other prefers to focus attention on the ideological superstructure. The French philosopher Michel Foucault proceeded along these lines in his search for the archeology of the social sciences in general and of economics in particular (Foucault 1966,1969). According to this author, the ideas and doctrines pertaining to a particular segment of society like economics, are interlocked in the intellectual climate of the time, or with its episteme. For Foucault, the term episteme stands for the epistemological idealtype of an epoch. K. Pribam’s textbook, A History of Economic Reasoning, on the history of economic thought is also a clear application of the episteme approach. It is interesting to note that even in his title, Pribam signals this by using the phrase economic ‘reasoning’ rather than economic thought. In a short introductory note he defines his position: The struggle over the fundamental aspects of economic analysis is due to factors outside the scope of economics strictly speaking. The ultimate

16 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

causes of that struggle are found in conflicting currents of thought which have determined the development of methods of reasoning in all fields of intellectual, social, political and moral activities of the Western Hemisphere. (Pribam 1983:XLIX) The dismissal of a genetic filiation between the thought of different epochs is another important characteristic of historical relativism. It also rejects the idea of the gradual accumulation of knowledge by succeeding generations. Dasgupta, an adherent of the epochal view, holds the extreme thesis that the data of the real world, analysed and conceptualized by economists, are changing so often and so fast that any comparison over time is an almost impossible undertaking. He concludes his argument with the following statement: ‘In economics old theories do not die. And they do not die not because one is built on the other, but because one is independent from the other’ (Dasgupta 1985:2). Up to a point, changes in worldview as well as shifts in the value system develop in a dialectic way with revivals and renaissances inspired by canonized traditions of the past. Consequently, social scientists may in some cases feel themselves nearer to an episteme from an epoch of the remote past than to an axiom of their immediately preceding period. The very idea of revival confirms the view that a revolution or change in tradition may at times be the result of a mere renaissance of an ancient one. This brings the authors of ancient cultural and intellectual traditions nearer to us. It also means that they have an everlasting impact. The history of thought is of interest for the social sciences for still other reasons. The social scientist does not enjoy the privilege of the natural scientist, who can organize a great number of experiments in the laboratory in order to test hypotheses. The empirical material for testing in the social sciences is more difficult to get. A number of phenomena manifest a low frequency of occurrence. And most of the time they take place in different circumstances. An historical search that leads us to our remote past offers the possibility of studying the dialectics between the real world and its conceptualization in a multiplicity of different material circumstances and sociocultural contexts. The more remote the period in time, and the farther the move from the epistemological tradition of their own epoch, the richer the harvest may be. Historians of economic thought who cross the cultural and epistemological divide between the Atlantic and the Mediterranean tradition profit from a wider horizon and a broader vista. They are confronted with a more representative historical sample of the interactions between reality, human action and the structuring of conceptual superstructures. The reading of ancient texts is like exploring foreign lands with different cultures. The difference in the conceptual language creates a sort of estrangement and at the other side opens new horizons. The gains in intellectual insight will be greater the more we depart from our own contemporary standards in the study of ancient thought (Bubner 1992:12).5 The

THE MEDITERRANEAN TRADITION 17

cross-cultural reading of economic thought sharpens the critical sense about our own constructs, which are mostly taken for granted. In a similar vein of opinion, Todd Lowry (1987:5) states: Our methodology and our notions of what is important, our paradigms and our research programs, keep changing from generation to generation, both in evolutionary and revolutionary transitions. This would lead us to believe that the study of the history of economic thought is one of the best possible antidotes for intellectual ossification. The correct way of reading ancient texts is to approach these concepts and theories from the perspective of their own episteme. It requires the understanding of that time’s conceptual compactness. Almost all the economic works of Antiquity are relatively small parts of texts and treatises which were written for very different purposes. In Pharaonic Egypt the few comments relating to the economy are to be found in the wisdom literature. Aristotle, the most prominent economic commentator of Antiquity writes about economic topics in his two major treatises of practical philosophy: in the Politics and in the Nicomachean Ethics. With the scholastic authors, the economic commentaries were part of moral theology and of canonical law. In the Islamic tradition, the texts of different law schools and the hisbah literature were very important sources. ECONOMIC HUMANISM: A NEW THEME Since the advent of modern times the goal of material well-being has moved centre stage. In the second half of our century economic growth has become a central societal goal not only in the West but also in the former Communist countries and in the new nations of the Third World. The transnationalization of manufacturing firms and of financial markets produced forceful integrative impulses. The acquisitive motive and the growth ethos transformed the world into a global market-place. Economics became an attractive subject of study for many students and the economist became the allocation engineer of means and resources in a growing number of institutions. And yet, in the 1970s, when the prestige of the economic profession was at its height, a crisis mentality developed in which fierce criticism was voiced by some of the most distinguished economists. The critical mood rekindled the interest of economists in methodological and epistemological problems. An oftenformulated objection was that the logic of economics had been reduced to sheer instrumental rationality. A definition of economics, which figures in most introductory handbooks, underlines this instrumental reductionism. In the common handbook definition, economics is a science which studies human behaviour as a relationship between a given hierarchy of ends and scarce means which have alternative uses.

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A discourse in which the evaluation of the ends predominates, like the Mediterranean tradition, was deemed unscientific. In modern economics the allocative logic of means became chapter and verse of the discipline, while the debate on the ends was evacuated. Modern economics opted for a neutral code of valuation with mathematics as its lingua franca and chose applied statistics as its empirical handmaiden. The principle of nonevaluation of the ends and of concentration on the allocation of means became the inherent characteristic of modern economic calculus. Some branches of economics were more affected than others by the crisis mood, but development economics was one of the first to succumb. In a provocative essay, the well-known development specialist A.Hirschman stated that ‘much of the zest and hope that characterized the work in this area of the 1950s and 1960s, is no longer present’ (Hirschman 1982:373). With special reference to the outspoken Western ethnocentrism of development economics, H. Bruton declared ‘with only limited exceptions, in both the literature and in practice, development has come to mean a replication of the models imported from the West…the equalization of development with westernization impeded the construction of an authentic development theory’ (Bruton 1985:1,102). In the lands of Islam the critical mood rests on a fundamentalist revival of its own historical tradition. The fact that Western development economics neglected the episteme of Islamic culture became chapter and verse of fundamentalist literature. The process of cultural colonization by Western specialists was denounced as intellectual ‘bedouinization’. With a better knowledge of Islamic social and economic thought, a great number of blunders could have been avoided in many development projects. For development economics in general, a comprehensive historical survey of economic thought offers a mine of multicultural information and inspiration. The critical mood aroused a renewed interest in the philosophically inclined economists in methodological and epistemological questions. In this field of study, decisions concerning ‘value’ and not just of ‘allocative strategy’, together with problems of ‘sense’ and not just ‘empirical facts’, have priority. In Europe and in the United States the renewed interest in the historico-concrete notion of ethics and social responsibility responds to this need (Sen 1987). This interest in the ethical dimension in economics goes hand in hand with the rehabilitation of Aristotelian practical philosophy. Two decades ago this rehabilitation was signalled by a collection of essays published by a group of German scholars (Riedel 1972, 1974). Now it has spread to different faculties of philosophy and of social sciences in other countries as well. In political philosophy a similar movement was animated by scholars like Strauss, Voegelin, Arendt and Rawls. More recently, the Italian political philosopher E. Berti published a general survey of the ongoing research, in co-operation with colleagues from Germany, France, Italy and the United States (Berti 1988, 1989). Its scope is not so much an antiquarian retreat to pre-modernity, for this would mean a loss of some

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fundamental acquisitions of modernity. On the contrary, it also reacts against the complacent irrationality that is often linked with most radical representatives of postmodernism. The survey contests the mathematical abstract basis of modern social and economic science and opts for a rehabilitation of the historical concrete notion of ethos. This new thematization of today’s practical philosophy is an intellectual cross-fertilization that brings ethics back into the social sciences, and thus in economics, where it belongs.

II THE NEAR EASTERN PRECURSORS

THE DAWN OF CIVILIZATION The Near East was the cradle of some of the earliest and most spectacular civilizations of Antiquity. Mesopotamia and Egypt, where civilization started, have had the longest history on record. Their individual histories tell of the genesis and development of civilization itself. Their material, political and cultural achievements greatly influenced the later developers of the Mediterranean tradition, more specifically the Persians, the Israelites, the Greeks and the Romans. From about 10,000 to around 4,000 BC, the swamp area formed by the Tigris and Euphrates basin witnessed a neolithic revolution that created the foundations on which a higher civilization could flourish (Mellaart 1975). The neolithic revolution was a vital stage in mankind’s increasing mastery of its natural environment, leading to a more stable and better organized mode of subsistence. The shift in the technical mastery of neolithic humans, from that of a simple hunter and food gatherer to that of herdsman and peasant, was an epochal marker of economic history. By improving their skills, peasants and herdsmen were able to produce a surplus over and above the requirements for bare subsistence. In the course of time the regular production of a surplus induced a change in the capacity to accumulate. Surpluses over and above subsistence requirements permitted access to higher forms of social organization. The settlement of small human groups in villages transformed the occupational differentiation of the population. In the next stage, a breakthrough to a higher level of civilization facilitated the creation of a social and cultural context in which some villagers, like chiefs, priests and craftsmen, were gradually released from food production. From then on they were able to devote more time and energy to spiritual and cultural tasks. The resulting social differentiation, the growing control of the mass of the population by political and spiritual minorities who imposed themselves as authorities, and finally the agglomeration of a cluster of dynamic villages into urban centres, were the successive stages in the formation of a higher culture.

THE NEAR EASTERN PRECURSORS 21

The next decisive step was the invention of a script.1 This transformed the technique of communication from an oral tradition to a written one. The script caused a qualitative jump towards higher forms of civilization, since it facilitated the functioning of administration, the accounting of commercial transactions, and the transfer of precise and detailed information to following generations. Mesopotamia, followed by Egypt, was the first Near Eastern civilization to master all the material and social techniques leading to the formation of urban centres. The primeval city-states were often at war against each other, but in the course of time a centralized kingdom was formed, first by the Egyptian Pharaoh and later by the Sumerian kings. These states were run by a highly centralized political authority and by an influential religious establishment. In Mesopotamia and still more in Egypt, the combined control of power by the political and religious authorities resulted in colossal estates which dominated the material sphere of life. The administration of these vast palace and temple complexes was assured by a skilled top class of viziers, by central and local functionaries, by large teams of scribes and by a caste of high priests, as well as by lower placed officials.2 From a relatively early stage in their development, the Mesopotamian and Egyptian civilizations produced a mass of scripts in stone tablets or in other forms for various purposes: administrative material of public scribes and notaries, literary and religious texts, the bookkeeping of storing and redistribution by palace and temple administrators, diplomatic correspondence with neighbouring courts and princes. The two civilizations used the technique of writing with a rare intensity. Mesopotamia gathered a staggering amount of records, paralleled only by that of Egypt. A great deal of the Mesopotamian tablets still await deciphering and classification by specialists. The amount of empirical, detailed evidence in the form of bookkeeping and accounts of Mesopotamian estates is impressive. A considerable amount of the Egyptian records, however, has been lost. The unparalleled record of Mesopotamian tablets and Egyptian hieroglyphs was the work of bureaucrats and of scribal teams in official charge. These scripts constituted the textualization of myths and wisdom literature, formulated by government scribes; they were not the product of relatively independent elites or of social philosophers. In a sober and descriptive style and in casuistical form the scripts communicated the worldview, the legitimation of the commandments, the admonitions and the instructions, inspired and controlled by the king and by his court. The myths illustrated in a prosaic, matter of fact fashion, the stereotyped cases and models of human behaviour.3 In almost all these texts, the scribes bowed respectfully to the authorities in power. They shyed away from polemics in general. With the advent of the axial-age civilizations, this would change. The axial times inaugurated the appearance of independent elites in different guises: as seers, as prophets, as pamphleteers and as philosophers. In the pre-axial civilizations, the cultural and political dependence of the officials resulted in a rather stereotyped mode of formulation of the same and

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often recurring themes. The central core of the thematization by state officials and spiritual leaders alike was the ordering of the cosmos and of society. The role played by the king or Pharaoh as the earthly representative of the transcendental powers was a paramount feature. In the beginning these civilizations functioned with a complete absence of ethical norms. Good and evil were seen as results of physical phenomena like, for example, a flood of rivers or the life-giving energy of the sun. In times of social crisis, however, when the contested central authorities strived at some reform, the texts of the wisdom literature and the promulgated law codes accentuated the notion that the king was the shepherd of his people. In this role he was not only described as the supreme guardian of justice but also as the protector of the weak in society, like orphans and widows. The scribes hardly ever manifested an intention or an attempt to formulae general ideas in a conceptual frame of reference. The tenacity with which the Mesopotamian and Egyptian scribes stuck to discourses put in very concrete form and formulae is one of the reasons why the philosopher Jaspers excluded these elites from his club of axial times. In his comprehensive comparison of the pre-axial civilizations with those of later times, the political scientist E.Voegelin offers a penetrating analysis of their worldviews (Voegelin 1957–87). He sees Mesopotamia and Egypt as prototypes of all the cosmological empires. These were mostly structured on the same monarchic, theocratic and hierarchic principles. The central thesis of Voegelin’s study is that conceptual compactness was the supreme cultural construct of these empires. All the cosmological civilizations manifested a striking unity in their mythological, religious and political bundle of ideas, which served as legitimations of the cohesion and stable functioning of the cosmos as well as of society. This conceptual compactness excluded the conception of separate domains of thought. It impeded the articulation of distinct concepts for the religious, political and social domains of life. They heralded as a supreme achievement the triumph of order over chaos. Civilization was viewed as a coherent effort to stave off the ever threatening chaos: in the physical cosmos, in the hierarchical structure of society and in the horizontal relations between people. Order and stability had absolute priority. Change was mistrusted as a harbinger of disorder. Only the permanent was meant to be ultimately significant. A basic characteristic of these civilizations was the deep involvement of the political and religious authorities in the material organization of life: in agriculture, in crafts and in the organization of specialized labour. Moreover, the authorities of the state palaces and the temples managed the collection and the orderly redistribution of the economic surplus generated by the subsistence economy. Central to the city-state development of Mesopotamia and to the central-state formation of Egypt was the early hierarchization of the egalitarian tribal societies that preceded them. The horizontal ordering of different functions–between administrative ones and productive ones–was soon followed by a rigid vertical specialization. The

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hierarchical bureaucracy associated with the palace and the temple was pivotal to the functioning of the political, social and economic system. In Mesopotamia a pattern of warring city-states preceded state formation. Egypt, on the other hand, achieved at an early stage the union of the southern with the northern kingdom. The economies of Mesopotamia and Egypt were classic examples of the storage and redistribution type. The palace and temple bureaucracy was responsible for the management of the circulation of wealth over the entire economy. Its officials, assisted by an army of scribes and bookkeepers, first extracted the surplus produced by the peasants. In a second round the collected products were redistributed to the clients and dependants of the system: the members of the bureaucracy, the servants and the craftsmen. The colossal dimensions of the palace and pyramid complexes give us a hint of the high quality in managerial skills available. In its most developed stage the palace and temple economy provided work for an increasing number of specialized craftsmen and other skilled people. Although Mesopotamia lacked the marvellous wall-paintings of Egypt, showing the craftsmen and other specialists at work, the agricultural technology in the Tigris-Euphrates region developed ahead of that in the Nile basin.4 As time went on, the Mesopotamian civilization evolved into an urban culture, while the Egyptian population lived in scattered and small villages. The Egyptian cities never achieved the importance and the mass population of the urban civilization in Mesopotamia. In the course of its evolution, the legitimation of the superstructure and of the guiding principles which regulated the functioning of the redistributive economy and its bureaucracy, gave rise to different cultural traditions. In Mesopotamia a law tradition evolved, based on legal codes, while in Egypt the ordering of the universe, society and the economy was regulated by a culturally internalized set of norms, epitomized by the concept maat. It is worthwhile noticing that the cosmological compactness of maat went far beyond the domain of legal fairness and social justice. It became a general principle of ordered life. The people of the Bible followed a different path of development. There exists no scholarly consensus as to the nature of the process involved in the emergence of Israel in the early Iron Age. The conventional thesis (following Old Testament traditions) is that after an age-long wandering with their herds in the desert fringes of civilization, the Israelites infiltrated and settled in the already urbanized Syrian strip of land called Canaan. There the egalitarian traditions of its tribal economy were confronted with the strains of acculturation to the hierarchical palace and temple system of the Near Eastern city-states and monarchies. From the time of Solomon and the ensuing centralization of monarchical power, the mobilization of an economic surplus by the court bureaucracy had occasioned a growing number of vexations, exactions and iniquities by officialdom. In the process of acculturation to a city-state system, the welfare gap between the urban and the rural population widened. Their tribes split up socially between rich and poor. In the mood of moral crisis that

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developed, the pre-exilic prophets denounced the moral disorder. They initiated an historical tradition of ethical radicalism. The historical research on the worldviews of the ancient Near East has illustrated its different stages of development. In the early stages of civilization a cosmological worldview prevailed: human society was viewed as a copy of the cosmos. The categories of good and evil, light and darkness, order and disorder belonged to the physical world. The ethical consciousness, or the awareness that good and evil, right and wrong, just and unjust are a result of man, of society and of its cultural constructs, emerged at a later stage. As a rule this new awareness evolved after the turmoil of a great societal or political crisis which elicited a new theology of the hierarchical order and of its practical organization. The idea of a moral base of development originated in the pre-axial civilizations after a series of ruptures in collective experience. The legal codes of Mesopotamia, the Egyptian concept of maat and the ethical radicalism of the Israelite prophets created a new historical consciousness in which the primeval norms of social justice and fairness in the economic order entered the historical scene. In the following sections the different paths of these precursors will be illustrated. THE MESOPOTAMIAN LEGAL TRADITION The legal codes of Mesopotamia are justly famous. Historians of the Mesopotamian codes have drawn attention to the fact that they are not so much a collection of more or less abstractly formulated laws than a series of practical court decisions or a list of law cases. Their legal codes came nearer to the model of case law than to that of the general norms formulated by Roman law. To express the structuring spirit of these practical texts, the two most used terms were kittu and misaru. They expressed the ideals of justice and of equity. Justice required compensation or adequate correction of the wrongdoing. These codices were the earliest legal texts on earth (Kraus 1973, 1984; Bottéro 1987). The judicial bureaucracy had several tasks: settle disputes between individuals or groups, enforce official instructions, authenticate certain acts as legally valid and inflict punishment on wrongdoers. In some cases the bureaucracy also intervened legally to correct economic inequalities. In most of these cases, the inequalities were the result of administrative errors in tax collection and in the distribution of labour. 1 The oldest record of social and political reform referred to the initiatives of Urukagina, king of Lagash at about 2,400 BC. 2 The first legal code was issued by the Sumerian king Ur-Nammu at about 2, 050 BC. It is interesting to note that this code contained the first historically recorded references to the needs of marginal groups. In his code the king proclaimed that the mighty were not allowed to wrong the weak, the widows and the orphans. The second Sumerian legislative text is the code of Lipit-

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Ishtar, issued about a century earlier than that of Hammurapi. In the prologue it proclaims that Lipit-Ishtar, the obedient pastor, has been called to establish justice in the land and to break by force evil-doing and ill-will (Kramer 1961:6l). 3 About a century later (now dated towards 1,790 BC) the first Akkadian code originated in the city-state of Eshnunna. This code innovated with its regulations of financial dealings and price control. Its laws fixed the price of basic goods, the wage of craftsmen and labourers in the service of official estates, the control over the loading of boats and chariots. The code enumerated several stipulations concerning the standard of payment procedures (Szlechter 1965:55–77). 4 The most famous code, the one from the Amorite king Hammurapi, dates from about 1,750 BC. In fact it was a collection of several former legal and customary traditions completed with new additions. The code of Hammurapi depicted the king as the representative on earth of the divine powers. Being a vicar of the divine, the king was perceived as a shepherd of his people and as the ultimate protector of justice. The sanctions applied to the wrongdoer to compensate the victim were rather severe. They were still based on the famous law of the jungle: an eye for an eye and a tooth for a tooth. A better perspective on the law regulations can be obtained by reference to the functioning of the economy in successive Mesopotamian societies. The circulation of wealth was centrally organized, but at the margins of the court and temple economy, an embryonic private money and market system took some form from the beginning of the second millenium BC (Klengel 1978). At that time, coined money was not yet invented. In the absence of money, the coded weight of current valuables functioned as a measure of value. A money-weight of barley or of silver were the most used measuring rods in the process of exchange and trade. Concomitant with the evolution of a trade circuit outside the bureaucratic system, there evolved a circuit of banking and credit with remuneration on the basic interest. As time went on the economy became more complex.5 In such a mixed system, detailed regulation was required. In the developing mixed economy of Mesopotamia two types of court decision cast more light on the regulation of economic and financial dealings: 1 The first had to do with court decisions on the maximum permitted period of slavery by debtors who proved to be unable to meet their obligations of debt repayment in due time. In most customary law traditions before Hammurapi’s a period of six years of slavery under the mastery of the creditor was the usual sanction. Hammurapi’s code relaxed the burden, with the result that the maximum term of debt slavery was limited to three years (Damdamaev 1984).

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2 In Mesopotamia there is no record of any moral reproach or legal prohibition against interest on lending or credit. The normal interest rates registered in court records were as follows: if payment was in barley, the interest amounted to 33.3 per cent, and to 20 per cent if interest was paid in silver. Research findings have demonstrated that the difference between the two rates of interest was marginal, the reason being that the price of barley dropped to a lower level at harvest time, which was also the normal period of interest payment (Garelli 1969). We have to be aware that in these moneyless societies a loan represented a claim on goods or services to be paid back by the debtor in real goods and services after a fixed period of time. Since goods and services were perceived as utilities, the creditor had to be compensated by a real compensation of equal value. If debtors failed in their obligations, they had to repay their debt by slave work for the creditor. The detailed research findings of Garelli seem to imply that with the high growth coefficient of barley from seed to harvest characteristic of these fertile lands, an interest rate of about 30 per cent seemed not to be exorbitant at all. Debtors who took a loan in barley could easily pay back the borrowed goods and the interest on the condition that they judiciously invested part of the loaned barley. The Mesopotamian societies were conscious of the productivity of a loan and thus did not disapprove of the paying of interest. The protection of the law had more to do with disapproval of prolonged debt enslavement than with moral disapproval of the practice of interest itself. In the earliest codes onward, orphans and widows appeared in the legal texts as potential victims who required special care. Studies of these legal codes have made clear that the multiple references to the fair treatment of widows and orphans were generally formulated in a stereotyped way. The supposition that these references also served as propaganda for the sovereign, with an eye to public opinion, may not be excluded. Indeed, the legal codices do describe the king as the incarnation of the ideal leader or shepherd of his people. A great many of these good intentions did not materialize in reality. Apparently, the selfglorification of earthly rulers is an age-old tradition. In the second half of the second millenium BC the centralized palace and temple system of economy was contested by regional underlords. A more decentralized system developed with warring feudal lords in growing control of the circulation of wealth. In the long period of disorder that followed, successive superpowers like Assyria, Babylonia and Persia would come to dominate the scene. PHARAONIC EGYPT In early Mesopotamia the local patriotism of the city-states impeded the development of empires. Egypt followed another historical trajectory. The unification of the two kingdoms created the first central state of Antiquity. The

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power structure of the Egyptian Empire rested on the divine kingship of the Pharaoh. From the beginning, the historical myths and the wisdom literature presented the Pharaoh as the herdsman of the land and the people as the herd (cattle) of the gods. Central to the Egyptian worldview was the concept maat (Assmann 1990). In the characteristic compactness of the Egyptian worldview, maat stood for justice and truth, but also for the harmonious order of the universe and the ideal state of society. Maat was the Egyptian dogma of theological and political cohesion, made explicit in the oral myths and in literary texts. Working within the frame of a hierarchic society, the elites and scribes of the Old Kingdom envisaged the order of human society as the mirror image of the harmony governing the universe. The Instruction of Ptahhotep, dating from about 2,450 BC, was one of the oldest texts and was still primarily aristocratic. Ptahhotep was a vizier and one of the most important officials of the Pharaoh, who proclaimed that justice ought to go hand in hand with impartiality. This dictum applied especially to the judges and bureaucrats of the state. Honesty in the official business of collection, storage and redistribution of the national product was highly praised. With aristocratic prejudice Ptahhotep advised his underlings ‘to bow their back to the superiors’ and ‘to subdue the hotness of their heart and mouth’. When insufficiently under control, the heart and the mouth were apt to betray reason. In Egypt the rule of silence, or the keeping of the inner feelings to oneself, was proclaimed to be a golden rule. The cohesive worldview of the Old Kingdom, the managerial capacity of its bureaucracy, the skill of its specialized craftsmen and the sizeable economic surplus of its agricultural system created a civilization whose grandeur still arouses our awe and admiration. The mobilization of the country’s resources for the building of the pyramids, the temples, the palaces and the funerary monuments was the way in which the Pharaoh and the system were able to give a conspicuous display of their power. The technical pre-requisites of this economy were the storage and redistribution of the productive surplus. It required a meticulous bookkeeping method to record all the factors of production and a large-scale planning system to administer their productive allocation. In a highly hierarchic society the moral prerequisite of the economy was that all those engaged in it were assured of their due in relation to their position and status in the societal structure. For centuries the Old Kingdom’s social harmony and political stability stood in striking contrast to the turbulence of the neighbouring Near Eastern citystates. With the tenth dynasty, however, the excessive exploitation of the masses by the local rulers disrupted the social harmony. At the end of the Old Kingdom, the abuses of the officials in charge of the collection, storage and redistribution system, caused a deep sense of frustration. The exploited and frustrated peasants and the craftsmen lit the fuse of insurrection. This social revolution, which was the first one recorded of Antiquity, dealt a shattering blow to the Old Kingdom. The revolution transformed the Pharaonic system into a crumbling citadel. Under the shock of the subsequent social and political chaos, the elites of the Middle

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Kingdom felt the need of an ethical deepening of maat. Whereas in earlier times maat symbolized the immutability of the cosmic order, the collapse of the old order made it necessary for the Egyptians to rethink their core values. The world, once so tidy and governable, had landed itself in social disruption, worse still in a political chaos. In the cultural revolution that followed, maat came to signify the moral ideal of social justice and of individual equity on earth. Righteous behaviour of the mighty and of the people would guarantee a felicitous, eternal afterlife. In the murals of that period the goddess of maat was symbolized as the ultimate judge, who held in her hands the balance of good and evil. Stimulated by this early humanistic view of history, the development of moral consciousness took a start. Whereas in former times the idea prevailed with the Egyptian powerful that immortality could be gained by the construction of monumental tombs and luxurious offerings, the new value orientation shifted the focus towards correct moral conduct. The new theme was worked out that individual and official behaviour based on moral restraint, equity and reason would bring happiness on earth and offer eternal bliss hereafter. In Egypt the second millenium BC inaugurated an intense thematization of a new maat concept. This was illustrated and commented on in a series of literary texts whose humanism was unique for that time. Representative of the new religious and moral consciousness were the texts, dialogues, lamentations, maxims, instructions and teachings of wisdom literature that expounded the ideal ethical standards for a harmonious society (Lichtheim 1975; Simpson 1973). The first literary legacy of this time is the Instruction to King Merikare. It added a new dimension to the didactic genre since it was the testament of a departing king to his son and successor. After insistent advice on how to repress revolts, the old king invited his son to be wise and good for the humble and to beware of flattery by underlings. The message was very clear: a good king is a just king. The practice of justice offers the best guarantee for order and social harmony. The work became famous for its lofty morality, which went far beyond the pragmatic maxims of Ptahhotep. The Admonition of Ipuwer treated evil as a social phenomenon, which was conceived to be a result of political and administrative disorder. The proposed solution, however, was a traditional one: only a strong king can stave off chaos and guarantee a stable society. One of the most famous themes was known under the name of The Lament of the Eloquent Peasant, also called the Tale of the Oasis Man. As an illustration of the development of an ethical consciousness in this administered economy the text is of great interest. Indeed, it told in plain words that the king was not only attentive to justice but also a protector of the humble peasant against greedy administrators. In simple words, the text unfolds the injustice inflicted on a peasant who has been bereft of his belongings by a local steward. In his appeal for justice to the regional judge, the peasant refers to the Pharaoh, who is heralded as a wise shepherd of his people. The regional officer informs the king of the wrongdoing by the local steward. Following the intervention of the

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Pharaoh, the peasant gains his cause and is rewarded for his correct appeal to the supreme judge. The message is clear enough: the triumph of maat is the work of the Pharaoh. And without the king’s application of maat the people are at a loss before the greedy officials and the stewards of the regime. Equity for all became a very popular theme of the Middle Kingdom. The text of the Eloquent Peasant who won his case against the local official, was designed to demonstrate that the Pharaoh’s justice was not a class justice (Horning 1989:385–427). Part of the wisdom literature served to illustrate the various norms of justice essential for the orderly functioning of the system represented by the social and political, the palace and temple economy. The scribes were more concerned with the articulation of the political and ethical standards of the regime than with its requirements of technical or managerial efficiency. The imperative to guarantee the harmony and the stability of the hierarchical system, led to continuous praise for the Pharaonic system as an impartial and equitable administration. Specialists argue that this theme of peasant ethics may have influenced some pre-exilic Israelite prophets like Amos (Lanczkowski 1960: 75–93). In the ultimate phase of its development, the scope of maat had been broadened and deepened to include the conscience of the individual. In a cycle of texts like The Dialogue between the Man and his Soul, The Prophecy of Neferty and The Complaints of KhaKheper-Resenebu new themes unfolded with the accent on the psychological and existential problems of the individual. In these dialogues on the inner self of people, the difficulty in openly speaking out and the human risk in taking radical action had pride of place. The principle of maat became a spiritual norm for the soul, and the political aspect lost its priority. In the cultural history of Antiquity the Egyptian incubation towards an ethical consciousness stands out as a unique experience. More than a millenium before the Socratic philosophers of Greece, the scribes elaborated a compact worldview offering a synthesis of the human, natural and supernatural spheres of life. Maat linked these spheres into a meaningful, intelligible whole, for a hierarchic society functioning on a redistributive economy. The Egyptian scribes held no brief for philosophical abstractions like the Greek philosophers. They textualized concrete norms of behaviour in a style understandable by many. Their wisdom literature played a major part in shaping the norms of behaviour for political, social and economic life. With a sound balance between ethical idealism and material realism it was designed to satisfy the considerations of power and of humanism. The style of the didactic literature never became dogmatic. The concrete mode of thought and expression of the scribal schools had a vital role to play in the harmonious functioning of the regulating and arbitrating mechanisms. Notwithstanding the fertility of their imagination, the subtlety of their thinking, the ability to manage complex institutional networks like their storage and redistribution economy, or the planning of their monumental architecture, the Egyptian scribal schools failed to produce even an embryo of economic thought. The attention of the scribal elites was concentrated upon divine kingship, upon ritual and upon ceremony, literature and administration. The scribal schools did

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not argue their theme with theoretical arguments, they illustrated it with a luxury of typical cases and examples. Recurring themes were the relations of solidarity and the principles of equity which linked together the vertical segments of society as well as the horizontally differentiated groups. Egyptologists have singled out the economic system of Egypt as a classic example of the storage and redistribution type. This involved high state functionaries belonging to the palace and temple complexes. This centralized body together with the regional offices assured the collection and the storage of the wealth produced in the country and administered the necessary imports from abroad. The same agencies redistributed this wealth to the institutional clients of the palace, temple and regional estates, in the form of gratuities and wages in kind. On the sidelines of this highly regulated system only a small part of the production by peasants and craftsmen was left free for barter or for commercial exchange in a local market. Most students of Egypt’s economy come to the conclusion that a market mentality was nonexistent. In an economic study of the village of necropolis workmen at Thebes in the Ramessid period, J. Janssens stated that at that time ‘The working of the Egyptian mind seems roughly stated to be concrete in relation to commodities, but vague in relation to their prices’ (Janssens 1975:540). The circulation of wealth was managed by the Pharaonic administration with the result that only a marginal amount found its way to the private markets. In these markets, visitors tried to obtain through barter or through commercial exchange some particular or concrete commodity they needed, but were unable to produce themselves. Until recently, this behaviour was very common in the rural areas of developing countries. The people who engaged in this sort of bargain were called ‘target’ buyers or sellers by contemporary anthropologists. The barter or the exchange was not yet guided by the motivation to acquire an institutionalized ‘purchasing power’ or money that represents a general claim on commodities for later buying. Target sellers and buyers were typical in economic systems in which the major part of the wealth was collected and redistributed by administrative mechanisms or in subsistence economies. This underdeveloped state of markets also explains why the Egyptian system failed to develop a monetary economy complete with banking institutions like some Near Eastern states. Specialists in Egyptian economic history claim that bargains were engaged on the basis of a transitional structure called ‘money-barter’ (Janssen 1975: 127–85; Trigger et al. 1983; Husson and Valbelle 1992). This was a system by which the relative value of the commodities was estimated or reckoned with reference to a precise weight of another commodity that figured as a numéraire, as a measuring rod or as a standard of reckoning. This measuring standard has also been called ‘reference money’. It appeared in an intermediate stage between a pure barter economy and a money economy. In this stage the numératre only functioned as a value reference but not yet as an instrument of exchange and a symbol of universal purchasing power.

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The three commodity items of which a precise amount of weight figured as reference money in Egypt were grain, silver and copper. Possible confusion and conflict on account of the cyclical variation in the value of these three referencecommodity standards were kept in bound by the officially controlled regulation of the conversion rate between the three items by the administrative authorities. These institutional constraints on the logic of the market demonstrated that the Egyptians may have been aware of the functional contradiction between a hierarchical society’s centrally regulated economy and between the development of a market economy based on money. The different cases by which maat was exemplified in the didactic literature offered clear evidence that its ethics of vertical and horizontal cohesion and solidarity formed a central part of the system. In the age-long course of Egyptian history maat was transformed from a coercive, cosmic worldview into an ethical norm which kept the balance between humanism and realism. As it was illustrated in the Peasant’s Lament not only the lower officials but also the Pharaoh had to bow to maat. In hierarchical systems, the society and the economy could not maintain its continuity without a pervading sense of social justice. An economic calculus based on the allocation of means would have wrecked this hierarchical order. In an interesting booklet the Egyptologist S. Morenz characterizes the Egyptian economy as a ‘prestige-economy’ (Morenz 1969). The vast amount of resources spent on the monumental palaces, temples, tombs and estates of the officials in general and the artistic spell of its wall paintings may give the impression that they were mere status symbols. However, prestige mobilization on the basis of conspicuous consumption has not been a unique feature of hierarchical societies. Perhaps more convincing is the argument advanced by Morenz that in the Egyptian worldview, the earthly hierarchy was believed to continue in the afterworld as well. The funeral cult and its architectural structure had to be in proportion to the status of the individual on earth and thereafter. In the Late Period the humanist dimension of maat weakened and the norm came increasingly within the bounds of the transcendental or spiritual. Maat became part of a moral theology emphasizing the personal responsibility of the individual before God. This theology stated that people, for good and evil, will be judged, sanctioned and praised in the world hereafter. The ordering of the cosmos and of social relations moved back to the realm of the divine. THE BIBLICAL TRADITION In Antiquity, no other text has had such a deep and enduring influence on the shaping of a people’s identity and destiny as the Israelite Bible. Ever since it was consecrated by the Christians as a canonical scripture, the Old Testament has had a supreme impact on the structuring of ethical consciousness in a great number of Mediterranean cultures. The genesis and development of its thematization, codification, institutionalization and canonicity have been analysed by

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generations of biblical exegetes. Since half-way through the nineteenth century historians have joined the chorus. During more than a century of historical criticism and philological scrutiny, these scholars accumulated an impressive amount of research findings. The more recent combination and juxtaposition of text exegesis with archeological material, queries the method and sources of these biblical historiographers. The current flux in research methods and scholarly opinion makes it well-nigh impossible to present a clear picture of ancient Israelite society, culture and religion. In the last two decades, the epochmaking biblical studies of the Wellhausen–Alt–Noth–Albright schools were challenged by the historiographic analyses of authors like Hayes and Miller (1977), deVaux (1978), Bright (1981), Jagersma (1982), Soggin (1985) and Frick (1985). According to the biblical texts the most important historical markers of ancient Israel, its culture and religion, were the Exodus, the settlement in Canaan, the formation of monarchy, the exile and the return home of its religious elite. Historical research widened the horizon to the broader context of the Near Eastern region in general. In the light of the region’s socio-cultural, religious and economic background, the emergence and development of Israel is now seen to be more complex than the Old Testament texts suggest. Earlier hypotheses on the conquest, installation or settlement (Landnahme) of the ‘promised land’ by wandering nomads, are questioned. Recent research findings suggest that the emergence of Israel was an evolutionary process of transformation of the earlier village-based economy (Hopkins 1985). The gradual infiltration of newcomers into the pastoral–agricultural subsector of the Canaanite complex was a movement of people in response to increasing demand for manpower and social reproduction. As time went on, the Canaanite elite was unable to avert its internal crisis and the believers in Yahveh, in alliance with other local groups, took over the initiative. The Israelite monarchy revitalized the Canaanite palace and temple complex, and transformed the tribally organized village economy into a more specialized, centralized and productive subsector. In the ensuing socio-political change and economic development, the tribal structure suffered, the gap between wealthy and poor widened and religious syncretism challenged the traditional cult of Yahveh. The rising aspirations towards justice in Egypt and in the Near East had a considerable impact on the ethical development of the people of the Bible. Direct antecedents of the biblical thematization of justice and righteousness may be found in Babylon as well as with the neighbouring Western Semites. Indeed, after the Assyrian conquest of Israel (721 BC) followed by the Babylonian occupation of Judah (587 BC) the religious and intellectual elite was sent into exile in Mesopotamia. When Persians took over the role of Near Eastern superpower from Babylon by the end of the sixth century BC, their King Cyrus permitted the exiled elite to return to Jerusalem. The direct Persian influence on the Bible’s theology was to endure until the conquest of Syria by the Macedoneans and even thereafter. Indeed, the rabbinical schools who feared the penetration of Greek

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philosophical ideas, elicited the spiritual and intellectual guidance of Persian ideas in defence. For a good understanding of biblical ethics regarding the economy, its radicalized thematization by the pre-exilic prophets offers a promising avenue. The term ‘prophet’ derives from the Greek prophetes which means ‘one who announces or proclaims something for the future’. Around 250 BC, the Jews living in the diaspora of Alexandria started translating the Bible into Greek and produced a version under the name of the Septuagint. The translators found the term prophet a fitting equivalent of the Hebrew nabi or ‘the one who is called in the religious sphere of oracle telling’. The prophets were viewed by their contemporaries as announcers of bad tidings for the king, for his court, the priest and the people, the reason being that after the settlement in Canaan, the ‘chosen people’ had departed from Yahveh’s grand design. In their messages the prophets referred to a wide range of problems: religious, cultural, political, social and economic. The message of the pre-exilic prophets matured in an historical context of social and economic change, accompanied with ruptures in its tribal system. In contact with the city-states of the fertile Canaanite plains, it was confronted with a civilization on a higher level of development. This confrontation proved to be a major culture shock. The Hebrew patriarchal tradition, its covenant with Yahveh and its egalitarian structures of the tribe were no match for Canaan’s highly developed cultural and material system. The functional complexity of the Canaanite palace and temple economy, its administration and ruling by a central bureaucracy, the fertility cult of a society living on fluctuating harvests and the commercial practices of an urban civilization were extremely challenging for the believers in Yahveh. Aware of the shocking difference of lifestyle and culture, but lured into the cultural and material attractions of a more advanced civilization, they stepped into a traumatizing process of acculturation. A wave of thematization began in which the defenders of the desert tradition accused the modernists of moral corruption. In the public debate, the prophets emerged as conservative oracle tellers, fighting the modernists who advocated Canaanization. As servants of Yahveh they distanced themselves from the new development model and from the changing power relations of this new course. They vehemently denounced the Israelite upstarts who were nestling themselves in the resulting religious and cultic syncretism. The critical wave of prophetism became very strong when the Israelite monarchy took over the ‘oriental’ lifestyle and its administrative centralism. The prophets responded to the call of Yahveh to defend the purity of the egalitarian tradition and its tribal norms of equity. At the time when the needed outsiders were infiltrating the land, the Canaanite civilization had already past its peak and suffered a societal and political crisis. Like the rest of the Near East, the centralized palace and temple economy of Canaan was paralysed by decline since the beginning of the first millenium BC. The storage and redistribution

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system had given way to a more fragmented and feudalized ‘un-system’. The estates administered by local officials exploited the peasant population and the herdsmen. An increasing part of the produced wealth was levied to sustain a privileged class at the service of the new court machinery. In this spoil-system, the newly founded Israelite monarchy proved to be a vigorous adept. The people felt betrayed by the growing inequality in the social distribution of goods and land property. The rapid social and economic changes, accompanied by acculturation, offered ample opportunities for abuse of power. Moreover, some traditional norms of behaviour and standards of reference lost their meaning in the context of acculturation and detribalization. With the passage from an egalitarian village economy to a more specialized and commercialized one, the adequacy of the tribal laws was questioned by the new power elite. The organization of the state on a monarchical basis, the more intense mobilization of the village economy by the court officials and the growing number of people settling in urban centres, weakened the bonds of tribal cohesion. Against the ruling class which marched with the tide of historical development, the prophets reasserted the traditional norms of Yahveh’s Covenant with the people of Israel. In the opposition between the two modes of existence, between the two types of civilization and between the royal theology initiated by the house of David and the Mosaic ascetic tradition, the role of the prophets may be differently appreciated when looked at from different aspects. Being solidly on the side of the Mosaic tradition and the tribal cults, Amos campaigned to give a new ethical conception to the Covenant. His vehement attacks against the urban establishment which exploited the socially marginalized, initiated a profound transformation of traditional social concepts like the solidarity of family and tribe. Moreover, Amos was a theological innovator with his new interpretation of the bond between Yahveh and his people. In place of the old mythical Covenant, the prophet proclaimed a new way based on an ethical foundation of justice. In the ensuing theological debate, two ancient norms of mishpat (justice) and tsedaqah (uprightness, equity) were revitalized by the pre-exilic prophets as terms of reference. In their message, the new meaning given to these terms came back as a refrain: since Yahveh is a just God, His people must live up to His justice. As a consequence of the commercialization of the village economy, the rural population interacted more intensively with the urban bureaucrats, craftsmen and merchants. Agricultural activities were increasingly dominated and directed by the urban sector in favour of its own political and economic requirements, at the expense of groups who continued to live and think in the mould of the patriarchal tradition. With the early prophets, the most commonly used term of merchant was ‘Canaanite’. When the monarchy transformed the economy into an important centre of international trade, a number of Israelites stepped into business without any regard to customary law. This aroused the ire of the traditional establishment (Silver 1983).

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Inspired by the models of Near Eastern royalty, the monarchy tended to acquire a firmer control of political power and of the economic system. The Israelite kings, like the other Near Eastern monarchs, came to reward their most loyal officials with land and other bounties. This favoured the rise of a privileged class with links to the court instead of to the tribe. The change in the social base occasioned cases of conflict such as the encroaching by the new state officials on tribal property. The latifundia prospered but the small landholders and herdsmen were marginalized. Only a small upper class profited from the dynamics of economic growth. A new society was in the making, a society where the new ruling class was bent on wealth accumulation and on moneymaking. With the appearance of the prophets Amos, Micah and Isaiah, who acted as independent and critical elites, the thematization of justice entered on a phase of radicalization. The social and moral critique of Amos was vehement: 1 In Amos 2:6 the prophet stated that the upright and the poor were being sold into debt slavery for silver, or worse still, for a pair of sandals. 2 Chapter 2:7 went on with the accusation that the small landholders were ‘oppressed’ and forced to sell their property under pressure from the upper classes ‘who had crushed the heads of the weak into the dust’. 3 The root of the problem was the absence of justice. With the rise of the new privileged class, equity had vanished: ‘they [the powerful] turn justice into worm wood and turn the rightness to the ground’ (Amos 5:7). 4 Against this demise of justice, Amos called for its restoration with a charming metaphor, in striking contrast to his usual rough language:’… but let justice flow like water, and righteousness like a never-failing stream’ (5: 24). In this poetic line the language of praise has turned into a metaphor of moral demand. With his stance in favour of the tribal traditions of frugality and egalitarian solidarity, and particularly with his invectives against commercial dealings and the social hierarchization that accompanies economic development, Amos was a man from the past. With the reassertion of the Covenant tradition of justice and of right behaviour in the new context, however, he gave these terms a new meaning. In his eyes the bonds of solidarity were no more the mythical bonds of a tribe, but the imperatives of justice. Taking into account the ongoing detribalization, this new ethics proved to be an historical innovation. The righteous were no longer identified with the top of society as in the patriarchal tradition, but with the small landholders and herdsmen, also with the original poor and needy. In unambiguous words, the message of Amos proclaimed that economic development fails if it widens social inequality and if it creates moral disorder. With Amos, social justice did not simply mean equal justice for all, but special justice for the poor and the weak. In clear language he demanded special attention for the oppressed and disinherited. The prophets Micah and Jeremiah,

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who spent their youth in the country and later went to Jerusalem, denounce the iniquity of the city and the misdeeds of those who covet the fields of others and seize them; they have become great and wealthy through wickedness, they have grown fat and sleek. While the forceful message of Amos was meant to startle and shock, the literary language of Isaiah developed its themes with genuine theological arguments. A number of biblical scholars consider Isaiah the first Israelite theologian to have founded a school, and it is to his disciples that we owe the transmission and development of his thought (Soggin 1983:257). In Isaiah 5.11– 13, the biblical word-pair mishpat and tsedaqah reappeared. While Amos worded his invectives against the wicked upper classes in defence of the oppressed, Isaiah’s writings possess the outstanding quality of a highly cultivated intellectual. Isaiah extolled not only the rulers but also the people to practice justice; not for earthly reasons but in order to comply with the will of Yahveh. Sin was seen to be unwillingness to recognize Yahveh’s divine sovereignty over all spheres of life. According to Isaiah this was exactly the case in Jerusalem where Your princes are rebels, accomplices of brigands. All of them greedy for presents and eager for bribes, they show no justice to the orphan, and the widow’s case never reaches them. (Isaiah 1:22–3) And Yahveh’s response gives once more an affirmation that he is the Lord of justice: I shall restore your judges as at first, your counsellors as in bygone days so that Zion will be called: city of caring justice, faithful city. (Isaiah 1:26) In his moral theology Isaiah stressed once more that Yahveh is the ultimate source of justice. Earthly authorities like judges and kings were only instruments. His thirst for justice found a resounding echo in the teaching of Jesus. In this most radical expression it became part of the early Christian tradition. However, it would be an error to view the prophets as social reformers in the modern sense; they were first and foremost inspired messengers of God. Their pleas for solidarity are theonomic (norms coming from God), rooted in religion. They proclaimed the law of Yahveh. The theological message and the geopolitical warnings of the prophets seemed to be of no avail. The superpowers, first Assyria, then Babylonia, followed by Persia, incorporated Judah and Israel into their empires. During the long contact with these more advanced Near Eastern civilizations, the ordering of the new theological themes matured and were textualized into a second law, better known under its Greek title Deuteronomy. Some major accents of Deuteronomy,

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however, come in a straight line from the pre-exilic prophets, worked over by scribes who had returned from exile. Compared to the great law traditions of the Near Eastern civilizations, the Israelite tribes and later their monarchy, did not stand out for the progressive character of their legal codes. For debt slavery the Hammurapi code, for example, required slave liberation after three years while the Hebrew law required a period of six years: see Exodus 21:2–11) and Deuteronomy 15:12. In a later period, however, Israel’s scribes were among the first to condemn the institution of slavery. The attention for the marginalized, with the ‘poor tithe’ of social solidarity, stands out as a rare example of that time: And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him; yea, though he be a stranger, or a sojourner; that he may live with thee. (Leviticus 25:35) The law required that the poor be supported so that they do not starve to death, but it did not stipulate that they be brought into the household, which would occasion too great a temptation to enslave the destitute. The provision of ‘gleaning rights’ is another example of specific attention for the poor: And when ye reap the harvest of your land thou shalt not wholly reap the corners of thy field, neither shalt thou gather the gleanings of thy harvest. Thou shalt leave them for the poor and the stranger. (Leviticus 19:9–10) And in another verse: When thou betest thine olive tree … when thou gatherest the grapes of thy vineyard, thou shalt not glean it afterwards: it shall be for the stranger, for the fatherless, and for the widow. (Deuteronomy, 24:19–21) From the standpoint of economic thought another subject, namely the question of interest on credit, has attracted a great deal of attention. Indeed, the Bible’s prohibition against lending for interest has influenced the later Christian and Islamic traditions. In the neighbouring Near Eastern civilizations there was in general no negative attitude toward interest on loans. In most cases the law foresaw only a ceiling on the permitted rate of interest. The radical injunctions stipulated in the Bible were in striking contrast with the traditions of its ancient neighbours. The biblical prohibitions, as practical applications of a moral theology, rested also on very different grounds to the theories formulated by the Greek philosophers. The explicit prohibition against lending for interest figures

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three times in the Bible. The first injunction was formulated in the Covenant Code, Exodus 22:25, and reads as follows: If thou lend money to any of my people, even to the poor with thee, thou shalt not be to him as a creditor; neither shall ye lay upon him interest. It appears for the second time, in Leviticus 35:37: And if thy brother be waxen poor, and his means fail with thee; then thou shalt uphold him: as a stranger and a settler shall he live with thee. Take thou no interest of him or increase; but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon interest, nor give him thy victuals for increase. Finally, it figures a third time in Deuteronomy 19:20: Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of anything that is lent upon interest. Unto a foreigner thou mayest lend upon interest; but unto thy brother thou shalt not lend upon interest; that the Lord thy God may bless thee in all that thou puttest thy hand unto, in the land whither you goest in to possess it. In Bible exegesis and also in the history books of economic thought, these passages have aroused an unending series of commentaries concerning their origin, their binding character, their impact on economic practice, their absorption by Christian and Islamic sources. These polemics have gone on for centuries. In the lands of Islam, learned controversy in relation to interest prohibition is still waging today. The most important results of the research findings may be epitomized as follows. The legal tradition of the Bible, like that of the other civilizations of the Near East, did not make a distinction between the regulations of the cult and those of civil life. In a certain way, all laws were sacral. In the Old Testament, however, they became still more sacred than those of neighbours; all violations were thus sacrilege. The prophetic movement had put a dam against the adaptation of traditional liturgy and cultic practices, but it had also functioned as a moral bridge in the transition from a tribal to a more complex society. It operated the shift from a Covenant based on mythical grounds to new norms of behaviour and solidarity based on ethical grounds. Instead of a relaxation of the tribal norm, this re-interpretation meant a radicalization. In this radical stand the prophets were followed by the authors of Deuteronomy, who formulated the prohibition in a stricter way than the traditional Covenant. For a better understanding not only the rule itself but also the literary mode of expression merits some attention. As already noted, the laws of the Near East and also those of the Bible were formulated in casuistic form. Unlike the later Roman

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tradition, they were not a set of general rules but rather a normative reference to concrete and practical ‘cases’. Most laws opened with conditional phrasing, like ‘if’ and ‘whenever‘ or ‘given that’. The most striking intonations in the biblical prohibition of interest were: 1 In Exodus: ‘to any of my people’ and ‘even to the poor with thee’. 2 In Leviticus: ‘money upon interest’, ‘victuals for increase’ and ‘thy brother’. 3 In Deuteronomy: ‘interest of anything that is lent upon interest’ and especially the distinction between ‘thy brother’ and ‘unto a foreigner’. These different intonations expressing varying degrees of absoluteness (‘thy brother’, ‘unto foreigners’, ‘interest of anything’) clearly indicates that succeeding formulations of the prohibition were rooted in different sources of law and originated in societies with different levels of social and economic development. The formulation in Exodus seems to be the oldest. It may express the clan solidarity of a tribal people. The Exodus norm was designed to prevent the poor of Yahveh from becoming the prey of their creditors. The message of solidarity was clear: treat thy clan brother as a brother. In Leviticus the social duty of clan solidarity or the love of ‘thy brother’ was enforced by a reference to the transcendental order: fear thy God’. The logic of economic matters had to bow to the sacredness of the law. The law of God was a sovereign law for man and society. The formulation in Deuteronomy offered a precise demarcation between ‘brother’ and ‘foreigner’, but at the same time it extended the prohibition considerably: ‘interest of anything that is lent upon interest’. Bible exegetes disagree over the date of writing of Deuteronomy, but the absoluteness of the prohibition may be due to the combined influence of the pre-exilic prophets and the elite that returned from exile. After the exilic contact with the higher civilizations of Babylonia and Persia, the relatively small group that returned home had become even more radical than the prophets. The homecomers were priests with their elitist faithful, who had the ambition to ‘purify’ the less fervent people and ‘grown waxen’ of the home country. Their pristine influence on Deuteronomy was substantial. The interest prohibition of the sacred law, instead of becoming more lenient, ended up more restrictive. The early Christian Church Fathers copied the already strict rule of Deuteronomy and made it still more absolute by narrowly defining the exceptions. Under the influence of Deuteronomy a legalistic or Talmudic tradition developed. In the Persian worldview a categorical dualism like light-dark, good-bad was manifest. This also became the case with the post-exilic notions of ‘clan brother’ and ‘foreigner’. In the Near Eastern law traditions ‘foreign’ was associated with potential evil. While most merchants were non-resident foreigners, Deuteronomy did not extend the rule of clan-brotherhood to dealings with these merchants. Dual ethics have been a common practice in most cultures.6 At the time that Deuteronomy was textualized, Israel’s economy had entered the stage of early

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capitalism, complete with trade and markets. The intelligentsia on return from exile enriched the ethical radicalism of the pre-exilic prophets with the transcendental spirituality of Persia. The moral rectitude before God with an extension towards ‘your neighbour’ became the absolute norm of Deuteronomic theology. In this theology of righteousness, social justice had absolute priority above the laws of economic life and above the acquisitive instincts of mankind. A couple of centuries later, the Socratic philosophers would textualize an equally restrictive economic ethic. The way they arrived at it, however, was very different. While the Bible took Yahveh’s will as the sovereign law of society, the Socratic philosophers derived their ethical norms by way of human, particularly rational reasoning. In biblical theology the functioning of the economy was subordinated to theonomic norms, while with the Socratic philosophers human intelligence gained absolute priority in the ordering of the polis. With Plato and Aristotle the idea of justice was equal to the social harmony between the vertical and the horizontal classes of the polis. Where the ethical radicalism of the prophets stressed the bonds of human solidarity and brotherhood, the elitist ethics of the Socratic philosophers held no brief for a privileged treatment of the weak and the poor. Half-way through the first millenium BC, Persia emerged as the new superpower of the Near East and conquered the territories formerly belonging to Assyria, Babylonia and Pharaonic Egypt. The Achaemenid dynasty created an international and multicultural empire, in which a number of regional satraps tempered the power of the centre. With a rare tolerance and openness for the religious and cultural traditions of their multicultural state, the dynasty of the Achaemenids ruled the entire Near East for more than two centuries. Cyrus the Great and the kings who followed, assembled a sort of ecumenical law tradition. This law collection functioned as a legal superstructure over the local laws and customs of the Empire. Inspired by Zarathustra’s ethical humanism, the Persian laws stressed the principles of justice and equity to an exceptional degree for Antiquity. The Persian impact on the rabbinical tradition has been recognized by several biblical exegetes. About a thousand years later the Persian tradition of law and economic management would also influence to a still greater degree the last religion of Antiquity, namely Islam. CONCLUSION The preceding sections illustrated the emergence of ethical norms from the second millenium BC onwards. In Egypt and in Mesopotamia the idea of justice evolved in the wake of material calamities, social upheavals and in the ensuing rupture of the collective consciousness. Initially very similar in worldview by the compactness of their central cultural constructs, the two civilizations followed a different path in the course of time. In Egypt the concept of maat took its definite form in the wisdom literature. By a process of interiorization, everybody was expected to comply with the

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binding character of its normative discipline. The blending of Egyptian humanism with the idea of final judgement in the world hereafter planted the seeds of a religion and of an ethics based on individual ‘conscience’. In Mesopotamia, as in the subsequent Assyrian and Babylonian civilizations, ethical norms were more externally but explicitly formulated in legal codes. On account of the widening of our historical horizon, Jasper’s thesis of axial revolutions has to be amended. The ethical and spiritual breakthrough in Israel, would not have been possible without the incubations of its pre-axial predecessors. The ethical awareness in Mesopotamia and Egypt was a product of the evolving legitimation of the hierarchical basis of the temple and palace complexes under varying historical impulses and spiritual inspirations. The biblical tradition was influenced by both civilizations, with the dialectic blend of its legal codes enriched by interiorized norms.

III THE CONTRIBUTION OF THE GREEK ESSAYISTS AND PHILOSOPHERS

THE EMERGENCE OF RATIONALISM AND SECULARISM Against the background of oriental wisdom, its laws and ethical norms, the Greeks were the first in Antiquity to initiate a theoretical discourse on the natural ordering of society. In this new type of dialectical discourse on society and its ethics, the pre-Socratic philosophers, the Sophists, the Pythagoreans, as well as a group of pamphleteers such as Isocrates, Demosthenes and Xenophon, were important. The most substantial push, however, came from the Socratic philosophers. In the course of time the Greek city-state or polis became a small and closeknit urban political unit, in which the citadel, the temple, the government building and the public meeting-place formed the core. The polis also included the inner town’s hinterland where agriculture and herding were practised. The city-state of Athens, for example, one of the most famous, comprised an area called Attica of about a thousand square miles. With a rising population and a resulting rural exodus, some city-states, especially Athens, proved unable to satisfy the food consumption by their own means of production. After the successful battles against Persia at Marathon and Salamis, Athens rose to maritime and political hegemony and gradually transformed its until then closed economy into an import-export economy. Between 750–600 BC, the population pressure had stimulated the colonization drive of the Greeks to settlements in Ionia and in the western part of the Mediterranean. As a result of this colonization drive, new social and economic classes entered the scene, which challenged the political authority and the value system of the aristocrats. The poet Hesiod was a spokesman for the mentality of the new social and economic groups in this transitional age. In his famous poem Works and Days his praise of peace and husbandry emerged as a new moral and intellectual theme. Against the aristocratic bent for war, Hesiod preferred the promotion of justice and of good government as an ideal for the community.

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Ordinary people like peasants and craftsmen should work for their own provisions and not expect earthly bliss as a gift of the gods. In the course of time these subtle inroads on the tenets of the traditional value system and its religion, radicalized, with the intellectuals of the new colonies of Ionia, Sicily and southern Italy in the lead. There, as a result of emigration, a kind of diaspora culture had developed which was characterized by religious syncretism and cultural relativism. In a situation of cultural contact with Persian wisdom, the Ionian philosophers shifted their intellectual attention from the phenomena of the natural world to the problems of man and society. This humanistic outlook on life represented in fact an onslaught on the irrational and superstitious elements in myth and in religion. It represented also a critique of the political and social hegemony of the aristocrats. The metaphysics of Parmenides, the rationalism of Xenophanes and the ‘doctrine of the flux’ of Heraclitus exercised a considerable influence on all later Greek philosophers. Influenced by Zarathustra’s dualism, Heraclitus viewed the dynamics of the cosmos and of social life in terms of opposites. Good and evil, light and dark, as well as other dichotomies were different qualities in the dialectic way of becoming. To every theory, he proclaimed, there is an opposite one. He conceived war, between the opposite qualities and forces of being, as the father of development. The god Polemos would lead the divergent forces to harmony and unity. As a convinced relativist, Heraclitus accepted these ‘polemics’ or the struggle between different opinions as an indispensable source of knowledge. In the transition from the sixth to the fifth century BC, the coastline of the Aegean was studded with an ever-increasing number of city-states. They all spoke the same Greek language and relished the same culture, they shared the same divine pantheon with Zeus as prime mover, but they were also attached to their local religious festivities. Most of all they loved political freedom. After the first major battle for freedom against the Persian aggressor at Marathon and Salamis, the Spartans and still more the Athenians nurtured the dream of becoming the future hegemonic leaders of the Aegean. In the fifth century, Athens took the lead in cultural development as well as in the formation of a maritime power. With the ascendancy of the nonaristocratic elements of the population, the social and economic structure of the polis underwent a remarkable change. The reforms of Solon had not solved the basic problem of change in the power basis. This left an urgent need for new moral justifications of the evolving untraditional polis. In interstate relations, the scene was set by the chauvinistic nationalism of the major city-states like Athens, Sparta, Thebes and Argos. The lust for power and supremacy which inhabited them all, escalated the leading rivals, after years of brinkmanship, into the Peloponnesian war. This war brought the shortcomings of the Greek city-state into the open. The publicists of the fourth century started to focus their attention on new themes, in which geopolitical and economic issues appeared as novel topics.

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For Athens, the lost war against the Lacedaemonians and their allies resulted in the dissolution of its empire and in the dwarfing of its maritime fleet and sea power. Athens lost her overseas possessions. This withdrawal of the former hegemonic power from the Hellenic scene, triggered off an internal conflict. Things started to unravel when the poor citizens used political power to extract material benefits from the wealthy and from the ruling class. The fourth century in Athens was a period of rapid urbanization and of expansion of production by artisans. The intensification in production by craftsmen as well as of trade, and the emergence of a bristling entrepreneurial spirit, brought a change in traditional values and also in the power relations between the establishment of the well-born and between the nouveaux riches, who elicited the sympathy of the poorer citizens with welfare benefits and public performances of plays. The ‘new democracy’ was designed on the principle that all people are potentially competent for government and that all free citizens have the right to share this responsibility. In the social conflict that resulted from this redistribution of power, the traditional polis idea withered away. The Peloponnesian war had provoked an irretrievable disruption. The aristocratic ideal and the traditional religious values found themselves harassed and challenged by the postwar generation who urged for reform on the basis of new ideas. In the generation gap that widened, the call was heard in favour of radical democracy. Against this radical trend, the traditional elite gathered forces for a conservative reaction, huddling together in favour of their idealized state of the good old times (patrios politeia). The conservatives denounced radical democracy as a scurrilous regime, replete with unpunished crime and lawlessness, with demagoguery and stasis, or with crisis from within. However, not all the research findings concur with this dark picture of social and political paralysis. On the contrary, some sources underline the positive achievements of the direct democracy in Athens and its exuberant economic development.1 Historical research on the social and economic evolution of fourthcentury Athens has been marred by the ideological bias of the historians covering this period: between modernists and traditionalists, between Marxist and conservative, between the history writing inspired by anthropology and that of the market-oriented neo-classical economists.2 In some publications the ideas, the problems and the conflicts of our own age are fought out in the contextual setting of that time. The intellectual scene entered also into a period of innovation and ferment. The secularizing stance of the philosopher Democritus (460–370 Be) toward the Promethean myth, was characteristic of the new perception of the origin of technology and the arts. For Democritus the arts (technai) were not a gift from heaven. In his view, human and societal needs lay at the origin of technical and scientific know-how. For the satisfaction of their most basic needs, mankind and society had, by necessity, ‘invented’ and developed the arts. His view introduced the concept of need (chreia) into Greek texts.3 This secularized and utilitarian vision of the development of the arts, of the economy and of culture matured

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concomitantly with the intellectual impulses of the Sophists into a dominant theme. Democritus of Abdera and the famous Sophist movement explored the transition from mythosto logos. Most Sophists came from the Italian colonies and may have absorbed elements of the – for that time – Zsecula and humanist Etruscan civilization. They were at the forefront of a movement to make mankind, not the physical world, the centre of intellectual debate. Protagoras, one of the most influential of these itinerant philosophers, considered mankind not only as the centre of the universe, but also as the measure of all things and as the subject of all knowledge. The Sophists have rightly been called the initiators of the first secular Enlightenment in history. In the footsteps of Democritus they were particularly interested in the origins of human society and civilization. Against the mythological view that the skills and the arts of people (technat) were a gift of the gods, they taught that human need (chreia) lay at the origin of civilization. This conscious choice of the term chreia in order to rationalize the different stages of technical development and cultural progress opened new perspectives for the later ‘theories of stages’ in the history of civilization. In the first stage of development, early humans were spurred on by their basic needs for food, clothing and shelter to invent the corresponding basic technai; skills like hunting, agriculture, herding, taming animals, medicine, etc. In the second stage of development, humans invented their societal and political skills. In order to avoid constant war of everyone against everyone, the same utilitarian motive of basic need inspired people to live in groups regulated by moral and social codes. In the Sophist’s view the individual was guided by enlightened selfinterest to form a society. This did not constrain people and society to live with the same customs and religious beliefs. Pressed by different needs and aspirations they were free to develop different cultural norms and societal values according to time and place. As a consequent Sophist, Protagoras reasserted the Heraclitean paradigm of the opposition between the categories of being, which resulted in conflicting theses or contradictory logoi. This implied that there were at least two sides to every question raised in public or in private debate. A clever rhetoric or publicist should be able to argue both sides of a case and persuade an audience to accept the most potent view. Since everything in life and thought depended on changing circumstances, knowledge could not be absolute. Like Heraclitus, the Sophists accepted the contradictions of life with all its tragic intensity. As early pioneers in the sociology of knowledge, they stirred conservative audiences by declaring that all knowledge and the power that rested upon it, was relative. In politics the Sophists were radical democrats in the sense that they held all citizens to be entitled to participate in decision making. Moral ideals and political norms were not so much subjects of theoretical knowledge than of opinion. Like ethical norms and customs, opinions were relative and dependent upon the evolution of the material, social and cultural context. The Sophists were also the first to conceive political science as a separate branch of study. In their

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worldview mythological and religious norms of civic rectitude were largely replaced by sociological or by secular standards of behaviour. The Sophists were wandering professors who engaged in teaching destined for the upper-class youth with political ambitions. In their educational curriculum, the art of opinion making, especially the art of rhetoric, of professional specialization and of vocational training, had precedence over abstract theories and speculations. In economic matters the same utilitarian and humanist standpoint prevailed. According to the Sophist’s paradigm, virtue consisted in living a materially and socially successful life. In religious matters they were an avant-garde in comparison with the traditional worldview of the masses, but in social and economic matters they expressed the prevailing opinion of their age in a more representative way than the Socratic philosophers. As keen observers of the new trends of the time, they offered novel insights into the problems raised by the transition from a city-state economy to the economics of empire. Against the traditional ethics, and its outspoken contempt for wealth accumulation, the Sophists came up with the teaching of a practical science or an art capable of improving efficiency in the administration of the house (oikos) and of the polis. Pericles and his successors, and also the historian Thucydides, viewed this Sophist Enlightenment with an approving eye. The new ideas of the Sophists and their teaching programmes on business administration, were hailed as an innovation by the upcoming ruling class of fourth-century Athens. They were hotly contested, however, as morally perverse by the traditional establishment, and more particularly by Plato. The mass of the population, however, was not exposed to the intellectual polemics of the elite. For the masses it was not the treatise literature but the theatre where the plays of the great masters functioned as an open teach-in on cultural change. The tragedies of Aeschylus, Sophocles and especially Euripides, who was by far the most militant rationalist of them all, made large audiences aware of the basic ruptures in the collective experience. In the great tragedies and also in some comedies of Aristophanes, the passing of a traditional society and the problems of modernity formed part of the show. ESSAYISTS AND PAMPHLETEERS IN FOURTHCENTURY ATHENS The intellectual scene In the Peloponnesian war the leading city-states had fought a series of fratricidal battles which dragged on for a quarter of a century. When it ended all the belligerents were exhausted. The Persians profited from the occasion and came to dominate the geopolitical scene of the Aegean. The imposition of the King’s Peace (386 BC), restored the Ionian littoral to Persian rule and placed the external relations of most Greek city-states under Persian control. For a maritime

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power like Athens this was a fatal blow, since it had to relinquish its hold on its overseas settlements, with a considerable loss of tributes. In the postwar crisis mood, a whole generation started to question the idea of the polis itself: its questionable narrow nationalism, its moral and political cohesion, the conflicting factors and forces which constrained the development of a more balanced society and economy. Besides the changes in the geopolitical, social and economic context, the intellectual influence of the Sophists should be taken into account to understand the intensity of the disputes between the different schools of thought. The Sophists had not only challenged the conservative ideas of the Athenian establishment, they had also shocked the religious traditionalism of the common people. The conflicting trends in worldview together with the changes in the social and economic context provoked an intensification of historical awareness. The conventional ideas and institutions which had served as supports for the polis in the past lost appeal and required new formulations and justifications. The ensuing wave of essay writing, however, was highly concentrated in Athens. In this intellectual centre also the thematization and textualization process was completed with the third stage of tradition building, namely its institutionalization. Three leading Athenian intellectuals took the initiative to create a school of their own. In 392 BC Isocrates opened a school for the teaching of political management; Plato started a rival Academy of philosophy and science in 375; Aristotle, after an internship of some twenty years in Plato’s Academy, created his own Lyceum in 355 BC. The school of Isocrates widened the horizon of its curriculum to the study of international relations and worked out a novel geopolitical stance. In the field of education and of rhetoric in particular, the school of Isocrates represented a milder and more policy-oriented form of Sophism. The pan-Hellenic platform of Isocrates Isocrates is not a familiar figure in the histories of economic thought. Looked at with a fresh and impartial eye, he deserves better. With a clear understanding of the menaces on the geopolitical front he was one of the first Athenians to be aware that the local patriotism of the polis had degenerated into sterile chauvinism. The new political virtue consisted in the fostering of the common cultural ties between the Greeks or the feeling of interstate homonoia. In Isocrates’ schema, a confederacy of Hellenic city-states was the only solution to survive. His school was set up to educate future politicians and administrators with this lofty ideal in mind. For Isocrates, the optimal policy measures could only be the result of bargaining between public opinion at large, but guided by the specialized advice of experts. His conventional ethics and pragmatic politics were more representative of the ideas of the mainstream citizen than the elitist asceticism of his rivals, namely the Socratic philosophers. Isocrates wrote the pamphlet Trapeziticus, which offered interesting details on money and finance.

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Like the Sophists he gives a rather positive evaluation of economic and financial activities. Against the vehement oratory and the patriotism of Demosthenes he proved to be no match in public audiences. His ideal of a Greek commonwealth, however, was more in conformity with the objective trend of history than the chauvinism of Demosthenes. The literary commentators of Antiquity rated Isocrates as one of the greatest publicists of his time, not only for his lofty prose, but also for his tidy philosophy of life. Three hundred years after his death, Dionysius of Halicarnassus estimated him as one of the most outstanding teachers of his time, not only of Athens but also of Greece as a whole. With unreserved praise Dionysius (1974) concludes his survey of Greek thinkers as follows: “The best possible lessons on virtue are to be found in the discourses of Isocrates’. Becoming almost a centenarian (436– 338 BC) Isocrates lived through all the epochal turmoils, from the Peloponnesian war until the moment that Philip of Macedon, as the new military star of the geopolitical scene, imposed himself as master of the Aegean. Isocrates’ most important treatises on pan-Hellenic themes were the following: 1 Panegyricus, 380 BC; this was a passionate plea in favour of a league between Athens and Sparta in order to fight the Persian king, the central idea being that a re-conquest of Ionia and the conquest of the western part of Persia would offer possibilities for colonization and thus diminish the population pressure in the Peloponnese. 2 On Peace, 355 BC, was a publication assessing the situation after the definitive loss of hegemony by Athens and the visible unreliability of Sparta. The peri eirene of Isocrates may be rated as one of the most judicious treatises on international relations ever written in Antiquity. With a rare grasp of events Isocrates realized that the dwarfing of the Athenian power required a reorientation: a reform of the polis together with new economic solutions, like a more efficient exploitation of its resources. With this programme he was in line with Xenophon’s revisionist pleas. 3 To Philip, in a first version in 346 and a revised one in 344 BC. In his Philip treatises Isocrates stated that only a strong man, untrammelled by democratic scruples like Philip of Macedon, would be able to unite the feuding Greek city-states. The idea of a koine eirene or of a peaceful commonwealth of Greek citystates had already been heard at Olympic festivals in the speeches of the Sophist Gorgias in 408 BC and also by the rhetors Andokides in 392 BC and Lysias in 384 BC. The idea of a peaceful commonwealth of city-states res-ponded to the need of political co-operation, including economics of scale, to safeguard the Hellenes from Persian dominance. The project of koine eirene covered the following programmes: a binding treaty of social and economic co-operation between the city-states, the development of a community of cultural and material

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interests (homonoia), the co-ordination of foreign policy and the pledge to renounce domination of other Greeks states. This ambitious programme invited the traditional polis to embark upon a new course. It required the re-thinking of old concepts like autarchy, local ceremonies and religious festivals. It required the restructuring of the polis on a supranational basis. To the nationalist party led by Demosthenes all this was anathema; worse still, it was a perversion of the sacred sentiments associated with polis patriotism. With an exceptional sense of historical awareness, Isocrates perceived the aggrandisement of scale as a pre-requisite for political survival. He conceived of the building of a supranational community of Hellenes around two poles: a common Greek culture and a common vested interest in the field of economic benefice.4 After the tutelage imposed upon Athens by the Persian King’s Peace, the groups favouring pacifist and cosmopolitan ideas gained more power. They could count on the support of the wealthy who were tired of paying for the costly wars. The constituency most in favour of imperialism was formed by the common people like impoverished peasants, craftsmen and the mercenaries who were professionals of war. To keep tabs on this increasing interventionism of the productive classes in the external as well as in the internal affairs of the polis, a conservative political theory held that the permanent meddling in another’s political affairs (polypragmosyne) would cause the ruin of the old-time democracy.5 In the traditional worldview of the establishment the combination of political with economic activities was perceived as pernicious meddling and plotting by common people. The conservative publicists of fourth-century Athens considered these busybodies as a manifestation of their lust for power and riches (pleonexia). In their view, the lust for power of the common people and the fickleness of the masses went hand in hand. The ruling classes dismissed the idea that men engaged in trade, crafts and money-business could be good candidates for government. Isocrates presented the colonization of Persian territory by a confederacy of city-states as a project of pacification, first in the external relations between Greek states and second as a means of betterment for the needy, which would ease the conflict between the wealthy and the poor. Isocrates was attentive to the aspirations of the people, but he was also convinced that the din of party politics would be unable to solve the social and economic problems of the city-state. He excluded the return to a regime of the past (patrios politeia) since this would openly challenge the will of the people. In several of his treatises he harks back to the project of colonization as an ideal solution, since this would satisfy the ranters on the people’s platform.6 Being a moderate conservative with a social and an economic vision, he specifically mentioned the betterment that his project would entail for the poor. Being a pacifist he perceived the colonization drive as the only ‘just’ war, since it would stave off the dangers of social conflict and radical democracy. Isocrates did not live long enough to see his plan realized by Alexander, one of the most brilliant military commanders in history. While the Athenian publicist had dreamed of a

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Greek commonwealth not based on blood ties but on a common culture, the ambitious vision of Alexander was to build a multicultural empire. Isocrates was not only an untiring advocate of new international relations, he was also director of a school of rhetoric and political sociology. The ideas which he professed in the fields of educational and political philosophy were published in two treatises: Against the Sophists and Antidosis. In these more analytical works he characterized himself as a cognitive realist, with an eye to the practical utility of learning. He saw no use in the teaching of mathematics and astronomy to people who prepared themselves for a political career. He poked great fun at the curriculum of Plato, his rival in teaching, who moreover had allowed himself to be stranded on the subtleties of metaphysics. Being a pragmatist he required that dispensed knowledge should be useful (chresimon) in practice. Probing deeper into epistemological questions, he came to the conclusion that the knowledge attainable by human mortals had limits. Those who are in search of absolute, theoretical knowledge in matters like politics and ethics engage in other-worldly speculation. These subjects have no relation to practical life; most people see in such studies nothing but empty talk and hair-splitting, at best they might serve as gymnastics of the soul. His social philosophy and his ethics corresponded to the ideals of an openminded gentleman, with a keen interest in the dynamics of the national and international scene. With his feet firmly planted in reality, Isocrates was more interested in the historical and concrete than in the theoretical generalizations typical of the Socratic schools.7 With his requirement of practical relevance for teaching and with his attention on the economically desirable results of politics, he stood at the side of Xenophon. Both had a bent for a pragmatic approach towards politics and both had a keen grasp of the geopolitical situation. But Xenophon was to become a publicist limiting himself to managerial advice, while Isocrates appeared as a man with a vision. In Panegyricus, he very proudly proclaimed that freedom of opinion and expression was a political and cultural achievement of Athens. These ideas and philosophy had helped to discover the institutions guaranteeing democracy and educated the citizenry for public affairs. ‘Philosophy was given to the world by our city; the name Hellenes no longer suggests a race but an intelligence…. The pupils of Athens have become the teachers of the rest of the world.’ The panHellenic dream of Isocrates did not materialize, but when Alexander conquered the ancient civilizations of Persia, Syria and Egypt, Greek culture became, indeed, teacher of the ancient world. Xenophon’s models of management In the political turbulence and the intellectual effervescence characteristic for his time, Xenophon (430–354 BC), as an exiled military hero with a prolific pen, occupied a peculiar position. In his youth, together with other Athenian scions like Plato, Antisthenes and Xenocrates, he had been a friend and for a short time

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disciple of Socrates. But it was not only the philosophy of Socrates that moulded his fate. The young man’s passion for adventure would orient his life in a new direction. In 401 BC he joined an army of Greek mercenaries formed by the satrap Cyrus against his brother, the king of Persia. When the troops were caught in a Persian trap, Xenophon took over military command. Revealing his gift for leadership, he steered the Greek army from deep in inland Persia back to safety. This heroic feat and his consequent backing of Sparta, aroused the suspicion of the Athenian rulers who banished the military commander from Athens. He retired in exile at Scillus, on an estate graciously offered by the Spartan king. In his Anabasis, Xenophon wrote a vivid account of his military adventures in Persia. Every student who leams Greek reads the story of the long march and comes to admire its author not only for his courage and leadership, but also for the limpidity and simplicity of his style. On his estate in retirement, he lived the quiet life of an intellectually active country squire. During his long exile in Sparta he proved to be a keen observer of people and events. As a gifted biographer, historian, novelist and essayist, Xenophon published his reflections on a great number of topics. As a treatise writer he went his own way. He initiated his own branch of practical philosophy on topics that the other Socratic philosophers neglected. Xenophon’s methodical and organized way of life left him ample leisure time to pursue his intellectual ambitions. A great number of his books are didactic works. Xenophon’s desire to educate is illustrated by his characters and the models of action, framed as archetypes of kalokagathia, or of virtuous and noble behaviour.8 In Antiquity, this practical philosopher enjoyed well-earned fame. Cicero translated some parts of Xenophon’s works into Latin. The Oikonomikos became a bestseller with generations of landowners, from Roman times until the end of the Renaissance. In a growing number of commentaries by classicists of modern times, however, Xenophon fared less well.9 The most critical commentators find his philosophy mediocre and in condescending tones accuse this former disciple of Socrates of wasting his talent with the writing of pedestrian texts on horsemanship, hunting, city finances and husbandry.10 Moreover, serious doubts are levelled against the authenticity of his philosophical discourses, since Xenophon failed to portray Socrates as truly Socratic, that is as Plato portrayed him. Since the founder of the movement himself has left no written accounts of his thought, which was only recorded by immediate followers with different interests and perspectives, scholarly opinion on the true or historical Socrates has been divided from the beginning. Admirers of the ascetic philosopher reject Xenophon’s picture as a metaphorical fake framed to give more weight to his own opinions. In complete contradiction to this line, other commentators argue that Xenophon’s Socrates is a more complete man than Plato’s, since he exhibits a far broader range of interests.11 In fact, Xenophon picked up some themes by the Sophists on professional education, on the administration of the polis and on the urgent economic problems of the state, but he moulded their ideas in a more moderate

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and contemporary spirit, acceptable to the party of the traditional establishment. Looked at from this angle, he was an innovative and perspicacious conservative. Following the death sentence on the admired master, the two rival disciples, Plato and Xenophon, independently wrote an apology defending the defiled honour of Socrates. After this common act of piety the careers and the intellectual trajectories of the two, went in very different directions. The Socrates of the Socratic discourses of Xenophon is rather different from the Socrates portrayed by Plato. Xenophon was a realist with a practical bent. In the growing interest in the economic problems of the Greek city-states he was the first in Antiquity to consider the art of management as an integral part of practical philosophy. His peri economias inaugurate a new branch of scientific investigation. Inspired by an almost unbridled idealism Plato, on the other hand, became the most anti-economic pupil of Socrates. Plato’s dialogues offered theoretical models of the ideal functioning of the polis ruled by ascetic philosophers. Xenophon’s Memorabilia were dialectical discourses expounding the worldviews and honourable rules of behaviour formulated by a pragmatic and knowledgeable estate manager. Between the pan-Hellenic platform of Isocrates and Plato’s Utopian schemes, Xenophon opted for management models ready for immediate realization. Moreover, his characters and models were viewed not from the outside but from the value orientations of those involved in action. Looked upon from the preceding literature of the Middle Eastern cultures and in comparison with Greek texts before him, Xenophon’s contribution represented a benchmark in the history of economic thought.12 He was the first to write specialized treatises on economic matters and on efficient management. A keen observer and an essayist trained in Socratic dialectics, he properly delineated his subject and reduced a problem to its essence. Inspired by the economic principle, Xenophon’s managers had the ambition to accomplish as much as possible, however small the resources. In defence of the traditional values of his class, however, he insisted on a management model with ethical constraints. Against the expanding practice of money-making by all means, our perfect gentleman insisted on surplus creation with honourable means. Xenophon’s age was a time of growing professionalization in the organization of the army, in the administration of the polis and in the running of all other enterprises. The Sophists had paved the way with the projection of a society model in which functions would be exercised by well-trained specialists and technocrats. Socrates picked up this challenge. On the issues of political philosophy, the education of public virtue and professional training he engaged in polemical discussion with the Sophist movement, which was continued in different directions by his disciples. In the rivalry between the school of Isocrates and Plato’s Academy over the personal and educational requirements for public office, Xenophon occupied a special position. As an alternative to the intellectual elitism of Plato’s ruler—philosophers he preferred gentlemen with practical knowledge. In response to the growing attention paid to economic problems by public administrators and political parties, he sided with

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the geopolitical and pragmatic approach of Isocrates. More than any other Greek writer of his time, he characterized himself as an educator and policy maker offering concrete solutions. In the academic milieu of Athens with its attention on methodological problems, a new branch of dialectic discourse evolved focusing on the systematic organization of knowledge and the classification of the different sciences and arts. In his exile at Scillus, in complete independence from the Athenian political and philosophical schools, Xenophon published his vision on the art of leadership. Xenophon’s biographies, especially Cyropaedia and Hiero, were designed to be different models of royal and political leadership. The Persian king Cyrus was depicted as a noble leader who was able to obtain willing obedience, while in Hiero he was brushed with the traits of tyrannical rule. Some of Xenophon’s economic ideas and opinions appeared in flashes and comments scattered over Memorabilia, Cyropaedia and Hiero, but the main thrust of his management vision was written down in his Oikonomikos. Xenophon preferred gentlemen with practical knowledge to rule the polis and to command the army, for the simple reason that these managers had already demonstrated the capacity to rule and the ability to put the right men in the right place. In order to confer more political weight on his ideal-type of manager (the Oikonomikos) and with the intention of putting him on an equal footing with Plato’s philosopher, Xenophon invoked some pertinent statements from the authoritative Socrates in favour of practical men. In one of his notorious quotes, Socrates admonished his interlocutor as follows: ‘Don’t look down on business men, Nicomachides, for the management of private concerns differs only in point of number from that of public affairs’ (Memorabilia, III, IV, 12). In his Oikonomikos, Xenophon illustrated in greater detail the identical root of authority for private and for public affairs. In his view both were integral to the ideal of the classical way of living, both were archetypes of gentlemanlike behaviour. In scholarly debates, Xenophon’s motives for writing a Socratic discourse on the manager have been analysed with reference to the historical context. For the French historian Delebecque, his discourse was a masterpiece of agricultural propaganda, written to back up the conservative party in its struggle against the rural exodus which aggravated the economic problems of Athens after the loss of its maritime hegemony. The usefulness of life in the countryside and the lyric treatise on estate management was meant to solve a macroeconomic disequilibrium created by the rural exodus (Delebecque 1972:235); Jaeger (1986). Inspired by a humanist view, he probes deeper in the didactic motivations and pictures Oikonomikos as the first work in Greek literature illustrating the full impact of the cultural conflict between city and country. Xenophon’s farming theme forms the main part of the discourse and the knowledge of its management is heralded to be the most suitable for a free

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citizen, in any case a nobler activity than the jostling and banausic trades of the cities.13 Scholarly discussions have also wondered over the fact that Xenophon opted for the dialectical discourse of question and answer as a literary medium instead of the prose of a straight treatise. In this choice, however, the author proved to be a true disciple of Socrates. In the new field of scientific management, in which there was not as yet a tradition to draw upon, the dialectical discourse, by its juxtaposition of different opinions, may be a surer way to reach sound conclusions and a more adequate didactic technique. The Socratic method suggests that the development of questions and answers is the ideal way of teaching, since on the basis of properly contrived questions, an open-minded person can be led into paths of knowledge that he possessed but was unaware of possessing. Xenophon, although influenced by the professional literature of the Sophists, takes issue with their main thesis that people can be educated by words alone. His standards are ethical ones and his chief interest is in character building on the basis of ideal-types of leadership which he values most highly. The Oikonomikos is in fact a dialectical discourse with a rather complex structure.14 In the first part (chapters I–VI) Xenophon relates a conversation between Socrates and a wealthy young man by the name of Critobulus, who wants to be instructed by the philosopher in the art of estate management. The first part explores the proper function of estate management, to the questioning of its scientific standing, to a lengthy demarcation of the subject from the other arts and to its ethical constraints. Since the first part concentrates on the moral and social aspects of management rather than on the techniques of farming, the philosopher takes the lead in the conversation in proper Socratic fashion, notwithstanding the fact that as a townsman and ascetic sage, he never touched a plough. The second part (chapters VII–XXI) contains another scenario, in which an experimenting gentleman farmer by the name of Ischomachus takes the lead in the discourse, on account of his unquestionable authority as a noble man and an experienced practitioner. By this ingenious device the author solved the problem of the historical Socrates, who could not possibly be portrayed as an authority on husbandry and agricultural development. Through the mouth of Ischomachus the reader is not only informed how Xenophon typifies the ideal gentleman but also how he would have liked to imagine himself in mature age. Critobulus might have been the young Xenophon at a time when he frequented the philosopher’s circle in Athens. Ischomachus expounds the ideas cherished by the same Xenophon, but now enriched by his experience as military commander, as privileged observer of the Persian context and successful estate manager. His multiple references to the Persian models of the kingly art, as well as his flattering biography of Cyrus, are in sharp contrast with the conventional wisdom of his time. This open-minded Athenian wrote also the first multicultural discourse on management.

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The work opens abruptly with the cardinal question as to whether estate management is only a practical art, or rather a branch of knowledge, and if so what could be its proper function. By his judicious choice of terms and his specific vocabulary, the author distances himself from the colloquial language concerning business matters. The ordinary Greek term for household and business matters was chrematismos, while Xenophon, in the title of his discourse, introduces a term only used by cultivated people: oikonomikos.15 The clear intention is to write a discourse on the science of management which he calls episteme tes oikonomias. The difference between a mere subsistence farmer (oikonomos) and a professional estate manager consists in the fact that the oikonomikos is inspired by a theoretical knowledge in the exercise of the art. He has become a professional man who efficiently runs an estate, whether it be his own or the possession of another proprietor. The efficiency of professional estate management depends on the creation of a positive balance, or a surplus over costs (Oikonomikos, 1.4). After this definitional and terminological starter, Socrates takes over the initiative with a discussion on the importance of material possessions and on the usefulness of their increase. In chapter II, Socrates declares he is uninterested in wealth ‘because, even if my property is small, it is sufficient to satisfy my wants’ (II.4). He continues by stating that his interlocutor Critobulus requires more wealth, since being what it is ‘it would not be enough to keep up the style you are living in and to support your reputation, even if your fortune were three times what it is’. The philosopher has smaller wants by his personal choice to lead the intellectual life of an ascetic sage. People who aim for a more worldly public and private life have socially conditioned needs to entertain their friends, to serve the city well and for luxurious sacrifices to the gods. This antithetical treatment between two models of life is interrupted in chapter IV with a discourse on agriculture and by the specific example given by the prestigious Persian king in efficient estate management. Although a townsman himself, Socrates deems it necessary to subscribe to the traditional Greek prejudice against the mere banausic trades. In one breath the moral and physical reasons are enumerated: they spoil the body, weaken the mind and those who exercise them are reputedly bad for friends to deal with. Husbandry on the contrary conditions men to a sounder way of life: ‘for it is as well a means of increasing one’s estate and of training the body in all that a free man should be able to do’. Husbandry is the mother and nurse of the other arts. The great king Cyrus appears as the supreme model in leadership and in noble behaviour since he surprises everyone in the efficient cultivation of the land and in defending it. Chapter VI is a recapitulation of the Socratic moral discourse on estate management. In order to explore in more detail the concept of the noble art, the philosopher interrupts his advisory discourse and consults a living model of the perfect gentleman, Ischomachus, who takes over the lead for the rest of the discourse.

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With the entrance of Ischomachus on the scene, and who is announced to be a model kalokagathos or perfect gentleman with management experience, the tone of the discourse becomes at once more technical and economic. In the second part Ischomachus himself becomes the leading teacher and Socrates is reduced to a sharp, but in fact less ironical, questioner than was the case with the young and inexperienced Critobulus. The message seems to be clear enough. In his mature age, Xenophon, after reading the works of Plato’s Academy, wanted to tell the Athenian world of party leaders and intellectuals that the Socratic movement needed a broader horizon in its study curriculum than metaphysics, political philosophy and mathematics. The pressing problems of the Greek city-states and of Athens in particular, required more attention for their urgent economic plight of rural exodus, over-urbanization, the din of party politics and the decadence of gentlemanlike rule and authority. As a former disciple of Socrates he musters his intellectual competence in the defence of practical philosophy, with the ideal of kalokagathia as a central theme of the discourse. But in the philosophy inaugurated by Ischomachus, the increase of wealth by honourable means is not only pleasant and socially useful, it also enables a man to honour the gods magnificently, to assist friends in their needs and to contribute to the adornment of the city. In the final chapters XX and XXI Ischomachus recapitulates his main arguments. 1 The art of farming cannot be reduced to the mastery of technical skills in material operations like sowing, reaping, threshing, winnowing, etc. They are a necessary but not a sufficient condition. 2 Efficient management requires careful human resource planning, in which the eye of the master is the prime mover. The excellent care with which the master supervises and rewards the work done by his wife, his stewards, his labourers and his slaves distinguishes the oikonomikos from a traditional oikonomos, 3 Xenophon conceives the ideal oikonomikos above all as an estate manager moved by the entrepreneurial spirit.16 It is interesting to note that Ischomachus refers to the example of his father to illustrate the entrepreneurial function. This conveys the suggestion that the entrepreneurial function was not a disgraceful novelty. The father of Ischomachus had taught his son that substantial profits could be realized by judicious investment decisions. This consisted in the acquisition of uncultivated land or of farms neglected by their former owners, and in selling this property with considerable gain after productive investment to improve its quality and optimize its market value. The argument of Ischomachus runs as follows: My father taught me that and proved it by his own practice. For he never allowed me to buy a piece of land that was well farmed; but pressed me to

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buy any that was uncultivated and unplanted owing to the owner’s neglect of incapacity. Well farmed land he would say, costs a large sum and can’t be improved; and he held that where there is no room for improvement there is not much pleasure to be got from the land…. There is so much money in this idea, Socrates, and it is so easy to learn. (XX.22–24) For Ischomachus, the entrepreneurial spirit of an ideal country squire taught by his father, consists in a combination of pleasure in work leading to profit. In this central passage Xenophon illustrated the two opposite poles of the Greek moral universe. On one side the typology of the ascetic philosopher who aspires to the divine by the limitation of his needs, on the other the oikonomikos who appears to be an incarnation of the emerging economics of growth. With this profile of the entrepreneur Xenophon comes nearest to the spirit of money-making, denounced as chrematistics by the leading Socratic philosophers. In Xenophon’s universe of values, however, money-making could not be achieved by any means available. The demarcation between mere greed and sound business ethics was that money-making had to be achieved by honourable means. Living in an epoch of socio-economic transformation, of cultural change and of political polarization, the country squire Xenophon, while adhering to the ethical code of his class, advocated a novel synthesis between traditional virtue and the upsurge of growth economics. In comparison with earlier Greek works on economic matters, as well as with the theoretical writings of Plato and Aristotle, his thematization of the oikonomikos appears to be an outstanding and innovative piece of analysis. Xenophon was a practical philosopher, with experience in military command, more interested in the operational aspects of political authority than the other disciples of Socrates, who specialized in conceptual creativeness and in the construction of theoretical schemes. The art of leading men and of efficient management is manifestly a gift of the gods, since it requires the power to gain the willing obedience of those you work with. To acquire these powers one must be possessed of natural gifts, moreover a gentleman needs an adequate education. A man who in military command or in estate entrepreneurship displays this power by motivating his people to willing obedience has a touch of the kingly nature (ethos basilikos) in him (XXI, 11–12). Xenophon’s discourse is more concerned with the superstructural aspects of management than with the mere operational skills of husbandry. Being an entrepreneur, Ischomachus is minimally involved in agricultural techniques and devotes all his energy and knowledge to strategic planning in order that the various parts of the estate work together as a harmonious whole ‘to swell the surplus’. Xenophon’s text is the first published ‘handbook’ on the planning of material and human resources inspired by sound business ethics. To all enterprising estate managers up to modern times, it offered a model for the combination of practical means and ends.

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Xenophon’s exceptional interest in economic matters flares up again with the publication of the Poroi, a small brochure on fiscal and budgetary policy, rendered in English with the title Ways and Means. In the debate between orators like Isocrates, Demosthenes and party leaders, on the best strategy for Athens after its loss of maritime hegemony, Xenophon sided with the peace party headed by Eubulus and his wealthy friends. The main concern of this party consisted in finding ways and means to create a stable stream of income for the city-state and to secure the return of Athens’ finances to a well-balanced condition. The drop in colonial Athens’ public finances risked a prolonged crisis with political stasis as aftermath (Cawkwell 1963:47–67). Following his outline for rural growth in the oikonomikos, the versatile country squire ventured onto the problems of public finances in 355 BC, which was to be the last year of his life. The text reads like a feasibility study written by a competent adviser in public finances with a clear grasp of the social, political and economic problems involved. The interested reader has an ample choice of texts of the Poroi, edited in different languages and introduced with insightful comments.17 In a number of scholarly debates, doubts were raised as to the author’s qualification to write on city finances, and some of the most critical analysts deny its authenticity, while they cannot imagine a country squire interested in the financial intricacies of city budgeting. Besides these denigrating remarks, a few commentators object to Xenophon on ideological grounds. A group of scholars have problems with the author’s plea that the city’s authorities ought to run some economic activities. But this is clearly the major theme of Xenophon’s project (Herzog 1914:469–80; von der Lieck 1933). In his introductory commentary for the Loeb Library edition, Marchant meets the problem of authenticity as follows: “The diction and the style are his, and there is nothing in the opinions expressed that renders his authorship impossible or even unlikely…. The sentiment is thoroughly Xenophontine’ (Marchant 1971). The main concern of the Poroi is to ensure social and political stability on the basis of sound fiscal practices, the requirement being that the relative burden sharing of the different groups of citizens does not need modifications which might endanger the already fragile situation. In order not to tax unduly the wealthy groups and to abstain from turning off the tap of welfare benefits for the less well off, Xenophon advocated a project of increased income for the state, generated by sustained growth in the commercial and industrial activity of the municipality and of the population at large. Against the levy of more taxes by a more progressive tax rate, Xenophon’s strategy consisted in active pump priming to increase the taxable product. In his Poroi, as in his earlier works, Xenophon proved to be an innovative conservative. As a conservative he advised that the wealthy classes be spared a higher tax burden; as an open-minded realist he was well aware that in order to avert a political crisis welfare benefits for the masses had to continue.18 The plan opens with the statement that Attica is able to exploit a natural potential for the expansion of trade and production, blessed as it is with a fertile

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soil and a central location for its harbour between two seas. The growth of production and trade will require the input of more manpower and the mobilization of investment capital. The first and easiest way for this consists in the attraction of more alien residents and to liberalize the administrative conditions under which the metics operate already. They have the necessary skills and will mobilize the needed capital inputs themselves. Moreover, the attraction of a greater number of alien residents engaged in trade and industry offers a guarantee of stability in the social and political order, because they are not citizens. Administrative initiatives for just and prompt settlement of disputes, so that import and export operations are not delayed, will attract more aliens from other states, leading to a corresponding expansion of imports, exports, sales, rents and customs. Other initiatives will be needed to enlarge the operational basis of foreign trade by an expansion of its infrastructure: ‘It would be a fine plan to build more lodging-houses for shipowners near the harbours and convenient places for exchange for merchants … they would be an ornament to the state and at the same time the source of considerable revenue’ (Poroi, III, 12–13). A more convincing plea for pump priming through public works than Xenophon’s development project had never before been published. The core of the argument of Ways and Means, however, is Xenophon’s thesis that the city of Athens itself ought to take the initiative in industrial entrepreneurship. In the foreign trade sector this could be done by public acquisition of merchant vessels and leasing them under a system backed up by securities. The second suggested line of state entrepreneurship is a big push in the industrial sector directly leading to more monetary purchasing power and budgetary revenue, namely a more active exploitation of the Laureian silver mines. In chapter IV the author unfolds an almost complete feasibility project in which the required capital has to be raised by a joint stock company and the needed manpower by additional slave labour. In almost Keynesian terms, Xenophon argues that these additional public initiatives are needed because the private entrepreneurs, operating at a level of low productivity with high risk, prove to be unwilling to meet the challenge. The increase of scale, made possible by a pooling of private and public capital funds and labour inputs, would increase the revenue and diminish the risk. Xenophon seems to be well aware that some of his conservative friends are averse to public entrepreneurship on such a big scale: there is no reason to fear that a public company formed on this plan will conflict with the interests of private persons, or be hampered by them. Just as every new adhesion to a new confederacy brings an increase of strength to all its members, so the greater will be the number of persons operating in the mines, the more treasury they will discover and unearth. (Poroi, IV, 32)

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While the orator Isocrates advocated his grand geopolitical design of a cultural and political confederacy between the Hellenes, to solve the impending social and economic problems of Athens, Xenophon suggested a macroeconomic solution with his industrial expansion project based on a new ‘confederacy’ between the private sector and the state. With a clear grasp of the different elasticities of demand in a monetary economy, Xenophon argues that a big push in silver production will not lead to overproduction, because silver cannot be compared to copper or iron whose demand proves to be relatively inelastic. Silver also serves as money: ‘No one ever yet possessed too much silver as to want no more; if a man finds himself with a huge amount of it, he takes as much pleasure in burying the surplus as in using it’ (Poroi, IV, 7). More silver means more money, since it is a universally accepted medium of payment and of purchasing power. In a proper mercantilistic twist of reasoning, Xenophon adds that more silver or more purchasing power is not only in strong demand but also quickens trade and may boost the luxury trade: ‘The men will spend money on fine arms and good horses and magnificent houses and establishments, and the women go in for expensive clothes and jewellery’ (Poroi, IV, 8). In the concluding chapter of his project, Xenophon, with the precision characteristic of a former military commander, recapitulates the goals to be attained and also the target groups who will benefit from the results: 1 The substitution of colonial tributes due to military conquests by increasing private and public revenues generated at home, will elicit more affection and glory for Athens by the other Greeks and secure more national security. 2 The people will be maintained in comfort and risk no more to be burdened by the expenses of war. 3 With a larger surplus from the estates, as well as from the urban trades and industries, the city will be able to celebrate the festivals with still more splendour, restore the temples, repair the docks and walls. Before the pressing societal problems of his time, in which major public opinion makers were only imagining solutions by political means, Xenophon came up with an original programme that would guarantee peace at home and abroad, combined with greater welfare for all the groups involved. Compared to his contemporary disciples of Socrates, who moved towards rule of the polis by philosophers and moral rearmament, he took decidedly another (and for his time an unusual) track with his thematization on rural and urban development. While Plato and his colleagues in the Academy oriented their research programme to the best cure of the city’s soul, Xenophon put the emphasis on the betterment of its material body. With his insistence upon balanced growth between the rural and the urban sectors this conservative gentleman originated a new branch of mercantilism.

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PLATO’S ANTI-ECONOMIC TRADITION The man and the philosopher Plato (430–347 BC) reached the age of twenty-five at the end of the Peloponnesian war. As a young aristocrat of a prestigious and old lineage he felt attracted by a political career and made a brief but unsuccessful stint in party politics. Deceived by the Athenian politicians, whom he despised as an opportunistic lot of public rabble-rousers and phrase makers, he devoted his time to the study of philosophy taught by Socrates. Although the teachings of his beloved master Socrates had an everlasting influence on his philosophical development, it is known that he kept in contact with the Pythagoreans. From this ascetic sect he took over the tenets in favour of a sober life and a bent for mathematics. His early acquaintance with the school of the Ionian philosophers, and more specifically with the idea of panta rei proclaimed by Heraclitus, left him permanently distrustful of any attempt to ground claims to knowledge on the evidence of mere sense experiences and perceptions. His great opponents, however, were the Sophists. Against their humancentred relativism Plato sided with the Eleatic philosophers in their search for an eternal, immutable and intelligible ground to knowledge and reality. After the death sentence on his master Socrates, he was so disillusioned with the base opportunism of practical politics that he decided to travel and to study by direct observation the functioning of the most typical city-states of the Aegean. Some biographers even mention a short stay in Egypt, but scholarly opinion has been divided over this question. More certain is that Plato greatly admired the hierarchical structure and the underlying value system of its civilization. In 387 he founded the Academy with the intention of offering a more thorough education in philosophy, political philosophy and mathematics. On two occasions, he journeyed to undertake political consultancy and a tutorship course on enlightened monarchy at the court of Syracuse. There he tried unsuccessfully to put his theoretical premisses into practice. The failures he met with in the practical application of his educational project could not dampen his enthusiasm. On the contrary, they spurred his intellectual ambition to deepen his thought and to publish his theoretical findings on a variety of subjects. With its more speculative and abstract approach to higher learning, the Academy entered in competition and rivalry with the more practically oriented curriculum of Isocrates’ school. Blessed with a creative mind Plato published one discourse after another, in which his mouthpiece Socrates changes ideas in his well-known dialectical question and answer style. In a mastery combination of nostalgic archaism, together with a keen sense of the coming cultural changes, acutely aware that the structural and functional context of his polis world faced a perilous stage of transition, he absorbed the wisdom of the past and at the same time opened new avenues of thought. His works are universally acknowledged to be bench-marks

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in intellectual history. Inspired by an almost unbridled idealism he set out on a relentless search for absolute knowledge, of its direct influence on a just society, of its ordering of social classes in a perfect state, of its arts and its material base. Last but not least, his search was animated by a burning desire to philosophize on justice and on the deeper meaning of human life. The impact of his philosophy on successive Mediterranean cultures has been enormous. In the Hellenistic culture that spread to the East, Platonism was exposed to the spiritual influences of the oriental mystery religions, in which a more ancient world came to light. At the very core of the GrecoRoman civilization, which overtook the Hellenic koine, Plato’s rational theology found a way of opening itself to a different religious mood, culminating in a Neoplatonic synthesis. At the close of Antiquity the Christian Church Fathers and the Islamic scholars transformed this classical symbiosis into a spiritualized version of Neoplatonism which, until the rediscovery of Aristotle, dominated the intellectual universe of the Mediterranean cultures. The many revivals of Platonism up to our times, illustrate its lasting intellectual and moral gist. A correct understanding of what the Athenian philosopher really stood for is not an easy task for contemporary readers of his complex oeuvre. The many shifts of emphasis and opinion between the exploratory exercises of his youth, the radical postulates of middle age and the amendments of maturity do not always cohere into a consistent whole. The inherent subtlety of the dialectical method of discourse in combination with the compactness of his thought, do not easily lend themselves to a systematic schematization. From Antiquity until today Plato’s dialogues have been commented upon, re-interpreted and transformed by generations of scholars with divergent cultural, philosophical and political outlooks. In this age-long process of attraction and rejection by commentators belonging to very different intellectual universes, Plato has been praised by some as an unprecedented system builder, as a reformer of education, as the founder of political philosophy. He has been rejected by others as a Utopian dreamer, but also as a conservative who put the early promise of metaphysics on the wrong track, as a dangerous revolutionary, as a Communist and as a fascist. The readings of Plato by the Christian Church Fathers, the scholars of classical Islam, the humanists of the Renaissance, by Hegel, Nietzsche, Heidegger and various contemporary philosophers abound with widely divergent perceptions of the man and his work. It has been argued that almost every contemporary textbook on philosophy and social science produced its own Plato.19 A parallel diversity of opinion reigns on Plato’s significance in the history of economic thought. Plato’s master Socrates initiated a more systematic and thorough application of philosophy to political and practical problems, like economic matters, to meet the challenge of the erratic Sophists. In the identification of pure ideas and knowledge with political virtue, Plato occupied a unique position. Socrates had proclaimed that knowledge of the good was man’s goal and his standard. Plato radicalized this theoretical stance by the methodological identification of ethics

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and of politics into one compact unity with knowledge and with being. In Plato’s view, the concept of the just society, of the ideal state and of its material base, is ontologically rooted in his theory of knowledge. This compact articulation of knowledge with virtue, or of metaphysics with the good, leaves no room for an autonomous structuring of practical philosophy on the basis of bodily sense experience and human practice. The elevation and the reduction of the ideal good to ideal knowledge leads automatically to the exclusion of non-intellectual man, of the conventional politicians, of the producers and of their (lower) passions. Only the philosophers are able to rule because they possess the knowledge to break out of the shadow world into the dispassionate world of wisdom. In accordance with Egyptian and Persian worldviews his Theaetetus (176 b) promises the soul, aspiring to the knowledge of the good, will approach the divine (omoioses theo) in the world hereafter. Plato’s dualistic view of reality leads to a radical bifurcation of humanity. The Republic offers the first and most fundamental systematization of Plato’s political philosophy and ethics. Its Greek title (Politeia) and subtitle (peri dikaion) clearly indicate the author’s intention to complement his former work on personal ethics, treated in Phaedo, with a dialogue on political and social justice. Unable to give a straightforward definition of justice, Plato illustrates its nature in Book IV, in which he correlates the three compartments, drives and virtues of the soul to the three corresponding functional classes of the ideal state. The nature of justice is circumscribed as the harmonious co-ordination between the structures and functions of the soul, with the corresponding structures and functions of the social classes in the polis. The concept of justice expresses the simultaneous harmony of its constitutive parts and of the whole. The core of the theme developed in Book IV may be summarized as follows: 1 The first part of the city consists of those who decide (to bouleutikon), called the guardian—rulers, whose dominant soul principle is reason, with wisdom as virtue. 2 The second part functions as auxiliaries (to epikouretikon) or as soldiersadministrators, whose dominant soul’s drive is spirit, with courage as their virtue. 3 The third part consists predominantly of people preoccupied with the commodity world (to chrematistikon) like artisans and traders, engaged in the material sphere. Their dominant aspiration is desire, with as virtue sophrosune, variously translated as temperance or self-control. The virtue of self-control ensures also the harmony of the parts to the whole in order that desire achieves no dominance over spirit, and ensures that both stay subordinated to reason. While sophrosune has to do with harmony, the cardinal virtue of justice refers to the structural prerequisite that one man performs only one social service to the state for which his nature is best adapted. Justice consists in the hierarchically structured division of labour in the soul and in the

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state, based on the basic principle of ta eautou prattein (Republic 433 a), which means doing one’s own business and not being a busybody. A few lines further it is stated that ‘if a man simultaneously undertakes different functions, this kind of meddlesomness will ruin the state (Republic, 434 b). The mutual interference and trespassing of the three structured functions and classes (polypragmosyne) results in disorder, which ends with the splitting of souls and the disruption of the harmonious whole. Plato’s exaltation of the rational mind as the ideal and unique quality of the ruler-philosopher demonstrates his low esteem for non-intellectual people, who live in a sensual and material world of trash and who become easy victims of lower passions like concupiscence. The values which belong to the world of intellectuals are more worth pursuing than the goals associated with desire. The uncontrolled desire of the productive classes ends with greed, or with the brood of the beast in their soul. The rulersphilosophers are invited to lead a sober life and to abstain from exercising economic functions. In chapters VIII and IX of the Republic Plato correlates political degeneration with a progressive corruption of the soul and with the corresponding lack of harmony and hierarchical structure of the whole. Power and the acquisition of wealth corrupt virtue. In an oligarchy the temptation is so great that even the guardians and auxiliaries actively engage in money-making; these corrupted tyrants are called philochrematistai. But this may also happen in a democracy: here they are labelled as chrematistai. Plato’s unbridled idealism places his practical philosophy at the antipole not only to the Sophists but also to Xenophon’s pragmatic approach. On the basis of his radical postulates, the founder of the Academy became also the founder of the most anti-economic tradition of the Mediterranean cultures. In the Laws, an authoritarian administration gradually takes over the initiative of the philosopher —ruler to regulate economic activities. There the inculcation of value orientations is seconded by an increase in administrative rule. Plato’s invectives against the productive classes and all other citizens who indulge in the increase of their estate, and his postulate of monastic poverty for the rulers, corresponded more to the ideal of the spiritual orders of the Middle Ages than to the Greek ideal of polis life. Justice requires a categorial distinction between the non-chrematistic rulerguardians and between the unpolitical chrematistai. Consequently, the art of politics has to be purified from the moral pollution, characteristic of economic activities. In the Laws this absolute antagonism between political and economic activities is put in a milder form. While in the Republic, the ruling class has to keep out of economic activity altogether, in his advanced age Plato accepts that rulers administrate an agricultural domain (Laws, 846 d). For a correct understanding of Plato’s theory on the functioning of an ideal (just) society and on its political economy, a reference to his philosophy of science, with its characteristic hierarchization of the arts, is necessary.20 The dialogues abound with lengthy digressions and discussions on all sorts of arts

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and sciences: medicine, building, shoemaking, weaving, navigation, flute production, etc. In some instances Plato compares the ruler to a captain navigator, in others to a weaver of textiles. The art of government may, indeed, be compared with steering the different groups of society and with weaving together the single threads (individuals) into a coherent and cohesive cloth (society). The essential difference, however, lies in the ends. It is the end of the arts and sciences that conditions their hierarchy: into first-order ones and into subordinated ones. Each art concentrates on a matter or domain from a specific perspective which is peculiarly its own. It then acts on this special matter to direct it to an end which belongs to a higher art. Thus, each art is conditioned by its own specialty and determined by a higher art, which provides it with an end. There is, furthermore, the difference between practical arts and fundamental knowledge of a higher order (episteme theoretike). In Plato’s tradition, political philosophy is situated on top, since it is concerned with the ultimate ends. It dictates the fundamentals or the essential premisses for all other sciences and arts. The productive arts as well as the other arts and sciences of the material sphere are perceived to be inferior and subordinated to political philosophy. In the Euthydemus the hierarchization of arts and sciences is clearly elaborated. Wisdom, nurtured by philosophical thought and discourse, represents the supreme good for mankind. Political science sets this supreme virtue on top of the state pyramid. Political science is the indispensable knowledge to ensure the whole of society is in harmony. As such, this science is supreme and commands all other arts. This techne politike, also called regal art (techne basilike), belongs to the rulers. The mass of the citizens may be very good craftsmen; but since they do not possess the supreme knowledge, they are incompetent to share government responsibility. The art of politics, rooted in ethics, is superior to the specialist knowledge of medicine or to the art of the craftsmen. More specifically (Euthydemus, 291 d) political science is related to the ultimate ends and labelled directive (archousa). The subordinated arts are qualified as (demiourgoi) or only applied to specific craftsmanship. In the Statesman, 260 b, Plato recapitulates the directive arts theme in relation with the science of politics. The political knowledge of the philosopher-ruler commands all other matters and professions, since it is overarching (epitaktike). For Plato, this commanding art is the same for the administration of the household and for the government of the city-state. The oikodespotes, being an illuminated patron of the household, practises this overarching art on the smaller scale of the oikos, with the same authority as the ruler of the polls. There is no qualitative difference between the two, only one of size. In his philosophy of science Plato reacts against technocratic ideology, which conveys the conviction that human and socio-political problems may be solved by technical arts on the basis of practical efficiency. A just society requires more than social engineering; its functional prerequisite is the intellectual and ethical hegemony of a science oriented towards ultimate ends. This philosophical tradition comes as a challenge to the professionalism of the Sophist movement,

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and to the treatise writers of his time who looked for the solution of political problems by practical expedients. In Plato’s view, ordinary people were not capable of curbing their passion; his leading theme is the hedonistic bent of the masses. The intervention of the ruling elite was needed to control the brood of the beast or the greed for wealth and power. Indulgence in luxurious-need satisfaction and in wealth acquisition, leads ordinary people and society astray. This results for all citizens in moral damage to the soul (Laws, V, 743, a—c). Plato’s contempt for worldly desires had a far-reaching impact on the social and economic thought of early medieval times. The monastic orders of the Middle Ages came to a near approximation of Plato’s ideal state; the difference being that their ultimate ends were not earthly political ideals, they were inspired by divine norms and ideals. The genesis of the state and its economic origins The material base of society21 In the intellectual climate of that time, three different theories on the origin of society were in the running: 1 The Sophist movement had formulated the social contract doctrine on the proviso that consensus (homonoia) could be achieved by public discourse and compromise. The political allegiance of citizens was to be amalgamated by rhetorical technique. 2 For Aristotle, society is the product of an innate social impulse; mankind is a zoon politikon. 3 For Plato, the origin of social cohesion is the result of a multiplicity of mutual needs: “The origin of the city … is to be found in the fact that we do not separately suffice for our own needs … we being in need of many things, gather many into one place of abode as associates and helpers, and to this dwelling together we give the name city or state’ (Republic, II, 369, b-c). Since people are not self-sufficient, society is the response to the premiss of mutual need (emetera chreia).22 As such, the primitive state is a solidarity community, free from the tensions engendered by a luxurious state. The natural state was created by a group of people who co-operate on the basis of division of labour, specialization, reciprocity, exchange limited to the basic goods and services, all this in a spirit of social self-sufficiency (autarkeia). In the frugal state, political problems and problems of the soul resulting from functional disharmony were thought to be well-nigh inexistent. Production of goods and services was organized for immediate use only, and the exchange of these basic necessities between farmers and craftsmen took place on the basis of use value.

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The moral and social crisis of the opulent state In an incisive dialogue, Plato’s brother Glaucon enters the scene and disdainfully labels this frugal condition of mankind ‘as a state of pigs’ (Republic, 372 d). He projects himself as the demiurge of growth and development in true Xenophontean style. Against the frugal state, Glaucon pleas for more comfort, for more and better manufactured goods and for specialized services, like music, the arts and the sciences. All this requires more production and trade by which markets develop with shopkeepers and dealers in longdistance or maritime commercial exchange. For Plato, the result of this developmentism ends not only in a luxurious but also in a feverish state, in which the acquisitive desire is let loose and in which avidity and cupidity are constantly lurking around the corner. Indeed, the drive for more comfort and opulence disrupts the social harmony characteristic of the frugal and virtuous state. When the entrepreneurial spirit, stimulated by insatiable desire, takes hold of the people and pulls the lever of accumulation, civic virtue ebbs away from the traditional mould. Sooner or later, this pernicious development towards luxury will sow the seeds of conflict between the better off and poorer citizens. Appalling material inequality elicits social strife, ripping society apart. In several books of the Republic, Plato is harking back to the essential interpretative theme of the dialogue: the loss of traditional virtue and the ensuing breakdown of social cohesion. As a result, the polis may slide into institutional sclerosis, or worse, into acute crisis. This is characterized by class war between rich and poor (Republic, VIII, 551 d). In this diastasis, the city falls apart into two cities, plotting against one another. In a vivid exchange of opinion between Socrates and his questioners, two types of social disruption are analysed: 1 When a situation evolves in which certain demands will be excessively satisfied at the expense of others, social strife will develop between those who have and those who have not. 2 When all desires are satisfied to excess, a state of luxury and indolence ensues, with as a result inevitable moral and political decline. The commonest degeneration of the soul results from greed, in conflict with the conventional supposition that appetites are only satisfied by unrestricted gratification. In Plato’s ascetic tradition, moderation yields more satisfaction, since there is always ‘more’ to be desired. In Plato’s value system, the restraint of consumption dictates the production process. Once consumption exceeds the level of normal or basic needs necessary to keep body and mind healthy, the propensity to consume is to an increasing degree propelled by avidity and cupidity or by pleonexia (Gorgias, 490 a; Republic, II, 359 c, IX, 586 b). Pleonexia refers not only to excessive consumption of goods and services; cupidity extends also to the desire for domination. The luxurious state’s need for political rule by philosophers is founded on its moral inferiority in comparison

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with the frugal community. A materially more developed society, stimulated by the insatiable appetite of the productive classes, needs a state run by ascetic philosophers to survive. Moreover, the development of an opulent state requires increasing quantities of raw materials which an autarchic city cannot provide. In a first phase of development, external exchange and maritime trade brings an economic or technical solution to meet this problem. When the desire for more growth has reached its technical limits, the feverish mentality of the opulent city sets loose the spirit of war with other city-states, with the aim of colonization. In Plato’s tradition, the limits to population growth and to opulence are clearly set on the theme ‘small is beautiful’. In his later, so-called more realistic works, Plato comes back to the theme of population control (Laws, 740 c—d). Once more he proclaims the playing down of the wealth motive as the best avenue to a stable society (Laws, 74le–742c). The social division of labour After the discourse on the origin of society and the analysis of the different development stages, Plato opens the discussion on the social division of labour. He postulates that a just and stable society is only possible on the condition that one man practices only one techne. This principle of oikeiopragia or of performing only one’s own social function, is opposed to a situation of polypragmosyne. In such a situation citizens mix up different functions which are, from the standpoint of the social division of labour, incompatible (Republic, IV, 433, a–b and 434 c). Wisdom dictates a rigid hierarchical structuring of functions.23 The occupational structure is analysed from a triple standpoint: natural capacity, technical know-how and political virtue. As gold is better not mixed with bronze, so the ruler-philosophers are better to keep out of economically productive occupations. In a democracy and still more so in an oligarchy, this combination ends with corruption. In a lofty passage of ascetic exaltation, Plato prescribes the socialization of goods, services and family for the rulers and guardians (Republic 415e–417b, 420a–421c). The bronze social classes are incompetent to share political responsibility with the classes of gold quality. This mixture is characteristic of a radical democracy. In such an egalitarian regime, the principle of isonomia produces in fact a situation of equality of unequals (Republic, VIII, 563 b–d). For the sake of justice it is necessary to maintain or to organize a hierarchical order, on the principle of a functional division of competence according to merit (Laws, VI, 557 d). Production and trade Economic-history writing on fourth-century Athens underlines a marked swing from a system predominantly supported by gentlemen farmers and by auxiliary

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artisans, towards an urban-based import-export economy. The emergence of a growing number of city-dwellers who had little attachment to the land and to the values which it represented, created a novel social consciousness with more emphasis on individual aspirations and rights. Then, the traditional community sense of the polis, a world once so tidy and governable, suffered an irretrievable disruption. Against the mounting wave of hedonism and mercantilism, Plato never tired of proclaiming that only a curbing of the acquisitive desires by moral restraint, can solve the decline of the polis. Although the arts of the material sphere have no directing end by themselves, and thus are classified as subordinate and inferior, several discourses offer a detailed description of the various productive activities. If we leave aside the textual overlapping, these arts are classified in two categories: the productive ones (poietikai) by which something new is produced, like in agriculture, and the acquisitive (ktetikai) which only transform what already exists. A typical example of the second category is trade. Agriculture creates a real surplus value and is, according to Plato, the only suitable economic activity for a gentleman. The artisans are already put on a lower social scale. Traders, especially the peddlers (kapelot) are singled out as scapegoats. In trade activity, the already existing goods are pooled together by people who specialize in commercial exchange in the market-place. Traders act as intermediaries to bridge the gap of time and place. By this activity of commercial intermediation, tradesmen canalize and smooth the flow of goods from producers to consumers. In some instances, Plato clearly recognizes the utility of trade, especially of overseas commerce. Maritime trade, institutionalized in the emporia, provides the city with the raw materials and end products it lacks. In any case, the supply of necessary goods by import trade is viewed as morally superior to acquisition by military means or by conquest. After this anti-militaristic stance, our Athenian philosopher embarks upon a more detailed analysis of the import-export trade. The first consideration has to do with the political ideal of self-reliance. A city too dependent upon foreign trade, loses its self-reliance. Against the pamphleteers of his time, who came out for a deliberate strategy of export led growth in order to solve the city’s social and economic problems, Plato endorsed the traditional policy of optimal autarchy. Moreover, the volume of exports should be kept in check, lest the entrepreneurial drive diverts an increasing number of citizens from the required temperance in business dealings. Exports have only a utility as a counterpart to cover the necessary imports. In a conceptual scheme in which ‘user value’ dominates ‘exchange value’, the valuation of exports is derivative. In Plato’s conceptual world, the exchange value of exports is determined by the user value of imports. A just reward for the effort of those engaged in these activities is justified, since overseas trade permits the acquisition of necessities by pacific means. In order to keep the development of a mercantilistic spirit within acceptable bounds, a careful regulation is necessary. The discourse on retail trade illustrates with still greater emphasis Plato’s aristocratic prejudice against the mercantilistic arts. In his view, the practice of

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retail trade more than any other acquisitive art, tempts the citizen into a morally degrading commercialism, stimulated by the profit motive (misthotike techne). In the Republic he proclaims that only inept people or citizens in a weak bodily condition engage in peddling. In the discourse of his advanced age, his denunciation of petty trade becomes more vehement. Any citizen who engages in ungentlemanly peddling should be punished with imprisonment. Only resident aliens and foreigners are permitted to practise this vile art (Laws, XI, 920 a). In Plato’s view, the acquisitive arts are deemed useful only to the degree that they satisfy the mutual needs of the community. These are essentially based on the ideal norms of reciprocal trust and group solidarity. When the acquisitive arts enter the feverish stage, they deviate from their traditional subordinate position to become an end in themselves. From the standpoint of his political philosophy, where justice rests on the principle of every art in its right hierarchical place, Plato was not interested in an analytical deepening of the mercantilistic production and exchange relations. As a conservative, he viewed the intensification of production and exchange beyond normal or traditional standards as morally wrong and politically disruptive. With a keen sense of ecological consciousness, he reproached the feverish economic growth ethos of his time to be a waste-motor of natural resources. A thoroughgoing analytical elaboration of the production equations and of the terms of trade in exchange was deemed superfluous, on account of his categorical reprobation of mercantilism. Only a generation later, Aristotle, who shared Plato’s anti-chrematistic stance, introduced for the first time in history this new theme. Money As a result of the division of labour, the barter relations of the original subsistence economy were becoming too complex. With the development of trade and markets, a neutral medium of exchange was introduced. Money is defined as ‘a token’ for the purpose of exchange: nomisma sumbolon tes allages heneka (Republic,II, 371 b). The terms nomisma and sumbolon clearly indicate that Plato defines money as a conventional instrument of exchange, which has no material value in itself.24 In Laws, V, 742 a–b and XI, 918 b, the functions of money are further elaborated. Money is perceived as a medium of exchange and as a common denominator of value: 1 In the home city, money is a legal tender, but it is valueless abroad. This, again, underlines the conventional character of the exchange medium. 2 Money is also a common denominator of value, since it permits traders to perform their intermediary function properly. By the power of money, tradesmen are able to render ‘even and symmetrical’ the distribution of any kind of goods which before was ‘uneven and unsymmetrical. When traders

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restrict their acquisitive art to this intermediary function, e.g. when they are not tempted by the profit motive, Plato departs from his usual contempt for traders, and even confers the title ‘benefactor’ (Laws, X, 718 b). A monetary medium and standard that has no intrinsic value was in accordance with his anti-chrematistic value orientation in general. The conception of money as a nominal symbol of exchange without material worth like the other chremata, e.g. by putting a seal on the coin, had two consequences. First, it permitted the administrative authorities to keep a tight rein on the creation of money and credit. Second, the fact that money could not become a valuable asset but was only an instrument, discouraged the citizens from accumulating nomisma for its own sake. The intrinsic sterility of money was an instrumental limit to the acquisitive desire. Conclusion With his projection of an ideal state on the sole basis of logos, in which the idea of the supreme good for man is ontologically rooted in fundamental knowledge possessed by philosophers, and where justice is identified as the harmonious structuring of the soul and of the polis, Plato built a system without precedent in the intellectual history of mankind. However, his radical depreciation of public opinion and the elevation of knowledge to the sole source of virtue, opened theoretical avenues for un-democratic rule by self-appointed intellectual masters. The majority of the citizens, belonging to the productive classes, did not recognize themselves in the picture of the greedy mass and even Xenophon, the conservative country squire, reacted to Plato’s unbridled idealism. Aristotle was the first to criticize the exclusion of practical experience as a valuable source and reference for some branches of practical philosophy like politics and applied ethics. He followed the path opened by Xenophon with his separate treatment of political and practical ethics. While Aristotle opened new theoretical horizons and proved to be the more realistic, his work suffered a sudden eclipse after his death. Platonism, on the other hand, transformed into a spiritualized Neoplatonism, became the inspiring model for the Christian Church Fathers and Islamic scholars. In the monasteries of the Orthodox and Latin Churches the call to approach the divine was heard. And in the sober lifestyle of the monks, Plato would have recognized an historical embodiment of his philosopher-rulers.

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ARISTOTLE EXPLORES THE ECONOMY The man and the scientist Aristotle (384–322 BC) was born in Stagira, a small colonial town of Macedon, the then rising superpower of the Aegean. His father had been physician at the king’s court and the son would also enjoy lifelong friendly relations with the conquerors of Greece. At the age of seventeen the young Stagirite moved south to join Plato’s Academy where he was to stay for twenty years studying, researching and lecturing. In 347 BC Plato died and in the struggle for succession, the brilliant disciple missed the nomination as head of the Academy. Invited by Hermias, tyrant of Assos, who had been a student and co-disciple at the Academy, Aristotle left Athens for Ionian Greece to assist the young monarch as a scientific consultant. After a research trip to Lesbos the respected scientist, now in the full possession of his intellectual powers, was appointed tutor to Alexander, the future conqueror of Persia. Supported by his Macedonian sponsors he returned to Athens in 335 BC to found his own school, the Lyceum. Twelve years later Alexander died and the Stagirite left Athens, for fear of persecution by the anti-Macedonian party. Only a year later he died in Chalkis. While his former pupil was still battling to forge an empire in which Greek and oriental wisdom would flow together into a Hellenistic symbiosis, Aristotle and his research team at the Lyceum explored the intellectual and physical universe of mankind along new methodological lines. They handed to posterity an intellectual monument, impressive by its versatility and depth. Plato’s metaphysical virulence, with its reduction of human affairs to an imperfect copy of the divine, had landed philosophy at the antipole of real life. In this idealistic scheme, the efforts of Isocrates and Xenophon to offer some leeway for an autonomous practical philosophy, were regarded as anathema. Aristotle, although a conservative himself, stayed loyal to the basic tenets of his master’s worldview, but his realistic esteem for the knowledge gained by empirical research and experience, as well as his belief in human potential, moved him to redirect theoretical knowledge and practical science towards a more promising synthesis from the operational point of view. In his mature age he rejected Plato’s metaphysical identification of the ideal ‘good’ with pure knowledge and initiated the differentiation of ethics and politics as autonomous fields of practical philosophy.25 In the first book of Nicomachean Ethics (I, 5) the inductive method correcting Plato’s compact metaphysics is justified as follows: No doubt it is proper to start from the known. But the known has two meanings: what is known to us which is one thing, and which is knowable in itself, which is another. Perhaps then for us at all events it is proper to start from what is known to us.

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In the conclusion of this argument, Aristotle states that for the study of the Right and the Just or for the topics of politics and practical philosophy in general, the inductive method is preferable to Plato’s non-differentiation between knowledge and virtue. Human affairs cannot be reduced to mere copies of the divine; mankind has to work out its own model. This laicization of Plato’s transcendental and impersonal idea of the good acknowledged the process of humanization initiated by the Sophists, but his analytical mind and immanent approach offered a deeper understanding of human potential. The emancipation from Platonism did not result in straightforward rejection, but rather an ambivalent mix of rejection and acceptance. Scholarly research has shed new light on Aristotle’s struggle to escape from Plato’s influence and on the gradual evolution of his own corpus of thought (Jaeger 1968; Nuyens 1973). His first move was to pick up the thread of the neglected tradition of the Ionian philosophy of nature. Less obsessed than Plato with the unreliability of sense impressions and the pluralism of diverging opinions, he shifted emphasis from the Utopian dream to the more earth-bound ideal of human potential and excellence. His practical mind moved him to deal with the interrelated subjects of practical philosophy, like politics, ethics and the related economic questions, more extensively, more directly and more incisively than any other Greek thinker. Since Aristotle’s texts on the economy represent only a minor part of his writings, they cannot easily be studied in isolation. The significance of the basic concepts and claims of explanation used in these texts are defined and elaborated in his theoretical works on metaphysics and physics. The terse language, the abrupt style, the concise and often elliptical development of the argument in his treatises on Ethics and Politics have led many a reader astray. The lack of clarity and the sometimes clumsy ordering of the argument stand in striking contrast to Plato’s elegant prose. The imperfect state of the Aristotelian corpus is due to historical circumstances. Most of Aristotle’s extant works were not written by himself. They are compilations of discourses dealing with different aspects of a subject put together and edited by his disciples on the basis of lecture notes. In his lectures on ethics and politics, Aristotle could assume that the audience was familiar with the general frame of his thought and with the basic concepts used in his theoretical treatises. The dialectic discourses written by himself, praised by commentators in Antiquity as superb literature, are irretrievably lost. A schematic presentation of the Aristotelian structuring of thought and of its key concepts, may be useful for a better understanding of his economic texts. Aristotle subdivides and categorizes human knowledge into three clusters along the following hierarchical order: theoretical sciences, practical and productive (Topics, VI, 6, 145b15 and NE, 1139a27). 1 The theoretical disciplines like theology, metaphysics, logic, mathematics and the natural sciences pursue knowledge for its own sake, with sophia as

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the leading principle. Logic is considered apart as a scientific instrument or method. 2 The practical sciences analyse the functional relationship between ends and the means to achieve them. In a well-ordered praxis (euprattein telos) the means are subordinated to the ends, with prudence (phronesis) as the leading principle. The subject matter of the most important practical sciences like ethics and politics is not the acquisition of knowledge about action, but rather the teleological or intentional dynamics of human action itself. For modern readers the term ‘ethics’ may be misleading, since it does not carry the moral connotation conferred on it by the Christian worldview. The transliteration of ethika gives ‘ethics’; a better title for Aristotle’s treatise would be ‘on the excellence of character’, since its dominant topic refers to arete. This basic concept is variously translated as virtue, excellence and goodness. Politics and ethics indicate the ends and means to make a success of human life in a well-ordered society.26 3 The productive arts teach us how to make things. They have to do with the production of new goods and with the manipulation (for example, trade) of already existing goods on the basis of an art which itself results from trial and error, ending up in experience (empeiria). The understanding of the interrelation between a problem of need (chreia) and the problem-solving art matures into a techne of a higher theoretical order or into an episteme. The comprehension of Aristotle’s frame of thought may be facilitated by brief reference to his work on Physics (Book II), where he treats nature as the intelligent artificer (demiurgos) and the intentional planner of the natural world and of its development, as well as to his text on Metaphysics (Book V), where he studies the ontological tension between being and becoming. Aristotle’s worldview on the cosmos, the natural development of the species and of human associations (the family, the village and the polis) is firmly ideological, which means that each type is explained as a structured whole or form, in terms of its function, of what it is for. In his view, nature and natural development are moved and directed by ideologically oriented form rather than by primary matter. Natural growth and development is not a process determined by the primary material or human association from which it arose, it is rather an immanent flourishing, pulled by the completed form to which it tends. The Greek words telos and teleios do not stand only for the end as a temporary goal, but also refer to the completed or final form. Nature is the inner principle of change directing the physical world, its biological species and human associations from their potential (dunamis) to maturation in actual reality (energeia). Nature orients the physical, biological and human organisms to the perfect realization of potential (entelecheia), this means to a situation of autarcheia in which ‘the wherefore’ is attained or completed. Once it has achieved its final end, the development process comes to rest. In Aristotle’s ideological view, nature always aims at the best. This means

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that a departure from this best direction leads to an artificial state of development or to misdevelopment. In Aristotle’s dynamic approach, biological as well as human organisms pass through a series of development changes, towards the desired end, in which the steps followed towards the terminus are dependent on the means. A course of natural development requires the subordination of the means to the ends. In straight Platonic fashion, Aristotle concludes his general argument on natural development with the thesis that the ends of the superordinate sciences are more desirable than the ends of subordinate arts. This clearly prepares the ground for his thesis put forward in his treatises on practical philosophy, that the single best end for mankind (eudaimonia) is the supreme goal of an architectonic art like political science. Aristotle was the first Greek organizer of research on a grand scale. The themes developed in his treatises are carefully supported by a mass of empirical detail. In his works on ethics and politics he not only developed his own arguments on the basis of personal observation, he also confronts them with evidence and opinions advanced by others. As a starting point to his enquiries he usually quotes the endoxa or the most authoritative and reputable opinions held by others on the matter. To avoid the casuistry of the Sophists, he first quotes the claims and opinions of other authorities on their own merit and then proceeds to demonstrate the empirical and logical inconsistencies they contain, or, on the contrary, the contribution they offer. On the basis of this falsification and verification test, Aristotle may be called the founding father of the scholastic method. In the first book of Nicomachean Ethics Aristotle calls Politics an architectonic (architektonike) and the most authoritative (kuriotate) in the order of practical knowledge. Its leading principle is phronesis or prudence. Kuriotatos is clearly the superlative of kurios (master, lord), which means that politics is a pre-eminent master-craft. In other places the demarcation of the boundaries appears to be less clearly fixed. The author treated the subjects—ethics and politics—in separate treatises, although the texts offer ample evidence that in his eyes they constituted related enquiries with eudaimonia as a central focus (Betbeder 1970:453–88; Aubenque 1980: 211–21). In the Aristotelian worldview the supreme good for man, defined as a political animal, can be achieved only in the most complete political society, that is, in the polis. Consequently, the coherence of the whole social and political matrix was labelled politics, with ethics as its directing principle for the individual. Since the polis represents the completed form and end of the ideal human community, every departure from this final end leads to a deplorable degeneration, ending in decadence. The upsurge of the commercial classes and their chrematistic practice upsets the architectonic subordination of economics to politics. In a similar way, the aggrandizement of scale on the creation of a cosmopolis (empire) erodes the polis ideal by a transgression of its basic norms of the limit.

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The discourse on politics The Politikon is an assembled survey of Aristotle’s research findings and lecture notes on the political systems of the Aegean world of his time.27 The fact that the author, a foreigner without citizen rights in Athens and a friend of the Macedonian party, idealized the Greek polis while witnessing its agony and its subsequent incorporation into the Hellenistic Empire, has puzzled many commentators. The inadequacy of the model for operational use explains its sudden eclipse in the intellectual scene after the author’s death. From Antiquity, scholars respected the philosopher, but they showed only a polite interest in his systematization of the (by then) historically bypassed Kleinstaaterei. In Aristotle’s view, the polis represented the culmination of a natural process of state formation in which the community building of families into several villages had come to an end, since it was large enough to be nearly or quite self-sufficing. Aristotle, in accordance with Plato, claims that the process of state formation, with its correlated economic activities, originated in the bare needs of life. When its full natural potential is attained, not only for life, but for the sake of the highest good in life (eudaimonia), the political society (koinonia) and its economic activities have achieved their optimal ends and limits. Some commentators have downgraded the Stagirite as a nostalgic social scientist out of touch with the social and economic trends of his time. This contextual evaluation ignores the epistemological framework of the Aristotelian approach, emphasizing the demarcation between ‘being and becoming’. It also belittles his fundamental thesis on the ‘natural and unnatural’ state. Aristotle’s philosophy is first and foremost a ideological philosophy focusing on the physical and human processes in their final or completed phase, whose natural being or essence can only be known or theorized in its ultimate stage of completion.28 The first book of Politics epitomizes a paradigmatic model, in this case the methodological matrix of the Lyceum, rather than a phenomenological description of concrete situations. The genetic approach, based upon the study of things in their first growth and origin, may offer a clear view on the development process (Politics, 1252 a 24). The ultimate evaluation, however, depends upon the natural functioning of the completed end form, since the whole ‘it is for’ has precedence over the constituent parts. Thus, the city-state is prior to the individual, the household, the estate and the constituent villages, since each of them is not quite self-sufficient (Politics, 1253 a 24–25). For Aristotle, both the chrematistic upsurge of commercial dealings and the battling together of a multicultural empire were artificial outgrowths of unlimited desire. They had a disintegrating effect on the natural community of the polis. The Stagirite’s links with the Macedonian conquerors may be the reason that he focused his critical analysis on the economic misdevelopment of the polis, deliberately passing over the problems raised by the construction of an empire. The first chapters of Book I, open with a discussion on the basic difference between politike, or the art of politics, and oikonomike, or the art of household

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management. Aristotle’s awareness that the scale, radius and difference between the target groups of authority are important for its quality and competence is clearly revealed in his polemical outburst: Those then who think that the natures of the statesman, the royal ruler, the head of an estate and the master of a family are the same, are mistaken; they imagine that the difference between these various forms of authority is one of greater and smaller numbers, not a difference in kind. (125 a) This criticism is clearly directed against Xenophon’s and Plato’s compact concept of authority, but it is also a veiled disapproval of Alexander’s cosmopolitan ambitions. Ruling over family members, slaves, barbarians of foreign countries and free citizens of a polis is not the same. In the lengthy discussion on slavery that follows this introductory statement, Aristotle, himself a native from the periphery, does not shine in humanity with his categorical thesis that slaves are, by nature, mere tools or instruments. Slaves are assimilated to sub-human beings unable to direct their own destiny, and like cattle or other property they depend entirely on the will of the master. This thesis casts a dark shadow on the otherwise humanistic approach of the philosopher. In Aristotle’s ideological and dualist scheme of metaphysics, slaves are categorically excluded from the dynamics between being and becoming; eudaimonia is beyond their reach. The rest of Book I, especially chapters 3 and 8–11, offer a penetrating discussion on the stages of development from an economy based on the natural art of household management (oikonomike) towards an acquisitive system stimulated by the profit motive (kapelike chrematistike). These two forms are qualitatively distinct from the pursued end. These passages are a striking reminder of Plato’s juxtaposition of the frugal community and the luxurious state, with the introduction of exchange on the basis of money as the villain in the piece. In well-chosen words, the author sharpens his critical arrows directed at Xenophon’s thesis on the increase of the estate: ‘Now it is clear that wealthgetting is not the same as household management, for the function of the former is to provide and that of the latter to use’ (Politics, 1256 a 10). In a following passage, however, he states that the art of acquisition (techne ktetike) belongs to the art of the household manager, as long as the goods are useful for the satisfaction of the natural ends and just needs (phusei dikaion). As well as Xenophon, even the prestigious Solon is criticized on account of his statement that unlimited acquisition of goods can be the end of a subordinate art like household management. With this unusual critique of a towering statesman, who in other Aristotelian texts is regarded as an authority, Aristotle makes clear from the beginning that the acquisition of goods for use or to live well, belongs to the category of chrematistics according to nature (chrematistike kata phusin), while the management oriented towards limitless increase of the

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estate and of riches, automatically deteriorates into artificial growth or unnatural chrematistics. The art of acquisition according to nature develops into chrematistics contrary to the nature of the individual, of the household and of the polis, when the wealth-getting is pursued with a certain skill or art for its own sake. This happens when it becomes an end of living instead of being a means at the service of living well. Hereafter, Aristotle opens a new perspective, with an analysis of the historical transition from the autarchic estates of primeval times to a relatively differentiated system. This is based on reciprocal needs satisfaction by the practice of barter, because people had more than enough of some things and less than enough of others. Therefore, barter on these lines is not contrary to nature since it came into existence for the replenishment of natural selfsufficiency. Yet, out of these natural exchange relations the practice of artificial business, motivated by the realization of mere profit, arose in due course. This was greatly enhanced by the introduction of money in commercial dealings. In the transition from autarchy towards an open and specialized network, goods qualify for a double use: on the one side their proper (oikeia) use, linked with the oikos, and on the other their use of exchange, in order to obtain goods from other estates by means of barter. The intensification of barter (allage) causes also a gradual differentiation in the barter process itself. Commodities originally conceived to be chremata for own use, undergo a qualitative transformation, while a growing quantity of the production will be used for exchange. This conscious differentiation in the perception of user goods and goods destined to be alienated or disposed off to acquire barter goods from others, is signalled by the introduction of a new vocabulary. Instead of allage Aristotle introduces the more dynamic term metabletike or conscious transformation; this also hints at the change in motivation of the partners engaged in exchange. In the process of barter, the goods undergo a sort of metamorphosis: besides the proper use of commodities in a situation of autarchy, goods are destined for different uses in a more open system. This process of transformation is not against nature, however, as long as the barter transactions stay within the limits of proper need satisfaction of the partners engaged in metabletike. Aristotle analyses with remarkable subtlety the successive stages of the development in household management from a closed subsistence economy with production and acquisition of goods, towards a more open system with natural barter to replenish the self-sufficiency of the estates. The process of barter (allage) means an alienation of part of the goods (by means of exchange) to a party from another estate. The term is derived from allos which means foreign. With the intensification of this alienation–acquisition process, all goods gradually become candidates for barter. This transformation from potential (dunamis) to actuality (energeia) is expressed by the term metabletike where barter is gradually transformed into trade (kapelikon). When the production and the acquisition of goods for trade becomes more frequent, by means of an acquired skill or art, the art of natural acquisition (ktetike) develops

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into unnatural or pure commercial exchange (Politics, 1257a). This anticipation of commercial chrematistics is expounded upon in later passages, after the discourse on the genesis and the evolution of a money economy. The introduction of money as an independent medium of exchange betokens a qualitative jump from the barter economy. The monetarization of the exchanges may result, and in Aristotle’s view has resulted, in a pernicious process of kapelike chrematistike, where money-getting becomes an end of exchange. Thus, the monetarization of exchange enhances a corrupt mentality. This occurs when money, by nature a neutral and limited instrument (plouthos organon), gradually evolves into the essence of wealthgetting itself (plouthos nomismatos). The introduction of money permitted the logic of natural exchange to deteriorate into the vicious circle of profit seeking. In the first stage, money was a useful commodity (chresimon), easy to handle like iron, silver and gold. Its worth was evaluated by size and weight. Later, a stamp (charakter) was put on as a token of amount. In the course of time, this token money evolved into a generalized medium of exchange, legitimated by convention. On the basis of this conventional norm, money came to be called nomisma. Aristotle’s condensed analysis of the genesis and evolution of money lies at the heart of intense and controversial debate between scholars defending metallism against conventionalism and between the determinists and historical evolutionists. Since Marx, who proved to be an assiduous commentator on the Stagirite’s economic texts, the expression kata logon has been understood by his followers as an almost mechanical logic or an historical necessity for money to develop into a universal value concept, while the author of Politics argued that money, although mistakenly perceived to be the equivalent of wealth, could only be an instrument of great utility. Being a mere medium of exchange, it could never claim to become itself a good of limitless and universal value. The tradition of metallism found in Schumpeter is its most prestigious advocate. However, Aristotle’s thesis that the token of amount may be changed by collective will, offers a weighty argument in favour of Aristotle’s thesis of a medium on the basis of convention. In a much celebrated passage, immediately linked to the discourse on money, Aristotle brusquely reopens the discussion on the formerly anticipated differentiation between natural and unnatural chrematistics. This forms the kernel of his argument: So when currency had now been invented as an outcome of the necessary interchange of goods, there came into existence the other form of chrematistics, namely the kapelike chrematistike, which at first no doubt was practised in a casual way, but later became more highly organized as experience discovered the sources and methods of exchange that would cause most profit. (Politics, 1257b 1–5)

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Here different steps are formulated in a synthetic way, which are outlined in greater detail in a number of overlapping reformulations. In a series of elliptical rewordings, assembled in the form of discrete and schematic discussions, Aristotle is harking back to his central theme. The stages of development, with the natural steps like autarchy, barter, exchange and, finally, the artificial outcome of trade for a pure commercial purpose, are repeatedly linked with the transformation in the perception of money as a source of wealth. Originally instituted as an instrument of exchange, it gradually evolved into a symbol and source of wealth, whose acquisition became an end in itself. The monetarization of the exchange relations had a qualitative impact on the motivations of the economic agents. As long as the production of commodities, and the acquisition through barter and exchange, proceed on the basis of natural use, its forms and principles of exchange are compatible with the forms and the ends of the polis. A qualitative rupture into artificial chrematistics occurred, when the development of the pure commercial form of exchange started to be animated, almost predominantly, by the profit motive.29 With a reference to his general theory of ‘change from being to becoming’, Aristotle introduces another cause of the (by him) rejected bifurcation of natural and unnatural chrematistics, namely the development of a certain experience (empeiria) and art (techne). Good household management flourishes as long as the experience and the expertise in the acquisition of commodities through production or exchange correspond to natural needs satisfaction; the artificial (technikooteron) brand only becomes manifest when profit maximization becomes the motor and the end of commercial exchange. The author repeats his argument by the statement that in the artificial form of chrematitike, the naturally subordinated means come to predominate over the ends, so also this wealth-getting has no limit in respect of its end, and its end is riches and the acquisition of goods in the commercial sense. But the household branch of wealth-getting has a limit, inasmuch as the acquisition of money is not the function of household management. (Politics, 1257b 30–4) Moreover, the bifurcation of the two forms is a result of a confusion (diathesis) in the mind which mean that greed (epithumia) or the unlimited desire for riches takes hold of reason. Aristotle realized all too well that in a number of Greek poleis, the chrematistic practice was well on its way to becoming generalized and socially accepted. Not only the retail-traders or kapeloi, who were predominantly foreigners, but also a growing number of estate managers, for which Xenophon’s Ischomachus had acted as a prototype, were actively engaged in trade and monetary dealings for profit. These people use all their energies and all their faculties in business-means of providing wealth, in the belief that wealth is the end and that everything must conspire to that end. In Aristotle’s view, these

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chrematisomenoi were digging a grave for the Greek polis. The challenges from within, like the temptation in the productive and commercial classes to give way to the profit motive, presented a greater danger for the polis than any outside conqueror. In chapter 10 of Book I, Aristotle analyses the ultimate phase of chrematistics, leading to the most vicious and unnatural form of trade (malistapara phusin), namely the trade in money itself, on the basis of interest (tokismos). When the medium is conceived as an end, usury and greed lurk around the corner. Money came into existence as a medium of exchange, but interest (tokos, which literally means offspring) increases the amount of money itself. Interest is money born of money: tokos ginetai nomisma ek nomismatos (1258b 5–10). Since this practice involves people taking things from each other, it amounts to usury (obolostatike). Consequently, this form of chrematistics is of all forms the most contrary to nature. The philosopher’s categorical stance against tokismos, following Plato’s negative evaluation of it in the Laws, stands in contrast to the general practice of financial dealings in maritime trade. It contrasts also with the more lenient position on moneylending and interest-taking advocated by influential orators like Isocrates and Demosthenes. These leading figures defended interest-taking as a prerequisite of commercial development, on condition that business be regulated by law to prevent usury. This pragmatic stance, more than the philosopher’s condemnation, should be accepted as representative of Athenian public opinion on this point. In chapter 11, the author brusquely changes the perspective of his discourse from the microeconomic view of estate management to the macroeconomic problems confronting the administration of the polis. This discourse sounds very much like an echo of Xenophon’s pragmatic approach in the Poroi. The structure of the text is different from the preceding chapters and the argument abounds with historical anecdotes and bizarre, not to say ambiguous, metaphors. The most typical is certainly the anecdote in which the Ionian philosopher Thales of Miletus enters the scene as an astute businessman. On the basis of his astronomical observations the philosopher had been able to speculate, with great profit, on the yearly variation in olive crops. The use of this technical device by a philosopher in need, reminds the reader of the gospel parable in which the children of the light are extolled to be as practical as the children of the dark. The anecdote on Thales helps Aristotle to the conclusion that the business administrators of the polis may be led to use financial experience in order to keep the city budget in equilibrium. For the preservation of the required stability in the polis, the Stagirite seems to be less categorical in his condemnation of chrematistic practice than in the preceding chapters. In Book I, chapters 8–9 of Politics, Aristotle analyses the transformation of the oikonomike into chrematistike from a triple standpoint: as an historian, as a methodologist drawing sharp demarcation lines between a subordinated art of acquisition ending up as a final goal in itself, and as a master of a philosophical school constructing a political paradigm. With a remarkable concentration of the

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attention on the successive development stages in the multiple uses of commodities, the treatise expounds these different steps apparently in separate passages, while it is the author’s clear intention to construct a theoretical unity. Chrematistics came into existence by a deplorable confusion in minds between ends and means, and it cannot be considered to be a natural and subordinated art like household management. In Aristotle’s view, things without a limit cannot be an object of independent scientific study. Household management and trade practices with economic laws of their own are anathema, since they do not conform to the architectonic predominance of politics over economics.30 In Politics, the development process is looked at from two angles: first from the standpoint of the different uses for goods (for proper use or for barter and sale), and second from the standpoint of the mentality, the motives or the intentions of the economic agents (exchange in order to diversify consumption against commerce for financial gain). The successive historical forms of the use of goods and its corresponding social relations are subjected to a paradigmatic analysis of the driving telos inherent in its form. The historical aims and forms are tested on their compatibility with the natural ‘being and becoming’ of the polis. The ultimate end of the polis is not the organization of material life, but the realization of the good life. The upsurge of the chrematistic spirit moves the productive classes to challenge the natural hierarchy of values. In Ethics, the subordinate place of wealth making is clearly emphasized:‘the life of money-making is a constrained kind of life, and clearly wealth is not the good we are in search for, for it is only good as being useful, a means to something else’ (NE, 1096a 6–9). The assertive flourishing of a new class of estate managers and traders begets a commercial society predominantly animated by the profit motive, which betokens the passing away of harmony in the polis. Several commentators on the Politics have sketched the developmental stages of the change process along the following schema: 1 The first, primitive form of natural exchange, both historically and logically, is barter, resulting from the fact that some have more commodities of a certain kind and others less than suffices for their needs. This stage is symbolized by the predominance of the barter of commodity for commodity; or of C–C. 2 The second form of exchange is a development of the primitive barter situation, which became difficult to handle after the segmentation in separate villages and with the expansion of maritime trade. A more complex form of exchange evolved mediated by money as a conventional instrument. The barter process underwent a transformation in the use of commodities (metabletike), with as a first step the alienation of goods for money (C–M) and as a second step the acquisition or purchase of other goods through the medium of money (M–C), or in the completed form C–M–C.

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3 With the intensification of exchange mediated by money, the partners engaged in it acquired a certain skill or expertise and, above all, they were induced by the profit motive to concentrate their energies on these business transactions. With the shift of the aim of the exchange operation from natural replenishment of the household (natural chrematistics) to the unlimited desire for gain, the process deteriorated into its pure commercial form of unnatural chrematistics, with as its goal the accumulation of money wealth. A commercial society developed where people go to the market not to sell what they have produced or to buy what they need to live, but rather to buy and sell for a profit. This artificial evolution can be symbolized from the viewpoint of the goods: goods for natural use (C) and good for unnatural use (C'). Then the exchange relation changes from C–M–C to C–M–C’.Looked at from the money side, money can be seen as a mere instrument in exchange (M) or as an end in itself (M'). The change to a money-getting mentality is symbolized by M-C-M'. 4 The ultimate logic and worst phase of this process of commercialization consists in lending and hiring money on the basis of interest (M-M'). When people take away from each other on the basis of pure commercial dealings and usury, community spirit, or the sense of koinonia essential for the social reproduction of the polis, withers away. The assertive development of commercial society confirms the death sentence on the polis. The discourse on justice From the time of the Latin scholastics till today, Aristotle’s discourse on justice, social distribution and commercial exchange, assembled in Book V of the Nicomachean Ethics, has had pride of place as a piece of pioneering analysis. His overall treatment of ethical questions has come down to us in different but overlapping textbooks: the Eudemian Ethics, the Great Ethics or Magna Moralia, and the Nicomachean Ethics. Scholarly research has spent much energy in the controversial debate on the evolution of Aristotle’s thought.31 Some parts of it were written as a member of the Academy and in these passages the influence of Plato’s ideas is clearly noticeable. In his mature age, as master of the Lyceum, the Stagirite gradually constructed his own epistemological system, in which ethics, belonging to the branch of practical wisdom (phronesis), was more clearly separated from theoretical knowledge (sophia). Most scholars consider the Nicomachean Ethics to be a composition of Aristotle’s maturity and as such the most ‘authoritative’ source of Aristotle’s own ethical theory (see Hardie (1980: 5).32 Although he treated the political and ethical problems resulting from the rise of a commercial society in two separate texts, a joint reading of Politics I and of NE V may offer a better understanding of the unity of thought in these two texts. The core of the problem was the same: the reaffirmation of the traditional virtues in relation to the ultimate human end of eudaimonia, the correct ordering of the

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subordinate and the architectonic arts, the maintenance of a correct social matrix in the distribution of honours and wealth, the insertion of private exchange relations in the political fabric of a polis based on harmony and justice. In Politics I, these questions were analysed from the developmental point of view, looked at from the dichotomy of natural/unnatural, while in EN V, they are treated on the basis of another criterion, namely just/unjust. Aristotle’s discussion of justice (dikaiosune), variously translated in the wider meaning of righteousness in general, or in the narrower sense of excellence of character in relation to others where gain or loss was involved, is much more elaborate than that of any other virtue and occupies the whole of NE V. Right from the start, justice is defined as the virtue based on the observance of the mean. The application of the doctrine of the mean to different situations forms the dominant theme of the discourse. After a few introductory remarks on the difference between justice and law, the author turns his attention to the questions relating to the affairs of particular justice. In this more restricted sense, just (dikaios) becomes the equivalent of a fair or equal (isos) share in giving and receiving. The leading principle of particular justice is isonomia: the unjust will take a larger share than their due, motivated by the desire for unjust gain or greed (pleonexia) (NE, 1129b 1–10). The Greek term pleon-ektes means literally to desire more. Following these terminological distinctions, which according to Aristotle are needed to clear up some ambiguities prevailing in public opinion, the author distinguishes two kinds of particular justice: justice in the distribution of divisible goods (dtanemetikon dikaion, later translated in Latin by justitia distributiva) and the justice which plays a rectifying part in transactions between man and man (diortetikon dikaion, in Latin justitia directiva). Corrective justice is again subdivided into voluntary, private or contractual transactions like buying and selling (which the Latin scholastics translated as justitia commutativa) and involuntary obligations requiring restitution (justitia correctiva). After the demarcation between these two sets of particular justice, in which one kind refers to the distribution of honour, wealth and other divisible assets of the community, and the other to the corrective principle in private transactions, Aristotle comes to grips with the norm of justice applied in the two different regimes. As is often the case in Aristotelian texts, the author tacitly invites the reader to pick up the threads of arguments which were elucidated in earlier passages. Since the virtue of justice has to do with the observance of the mean, the cardinal question ends with the search for the best mean. In his introduction on methodology (NE, I, 3) and again in NE, II, 2 the author had warned his readers that the subject matter of practical philosophy is concerned with the study of human conduct; this study can only offer an outline of guiding principles, it cannot achieve an exact system like the theoretical sciences. He advises that only experienced scholars should enter the field. Matters of conduct have nothing fixed or invariable about them. This explains why ethical theory cannot be an exact science (NE, 1104a 5–10).

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Since the best mean corresponds to a fair part, it should be correctly situated between the two extremes of too large and too small. This general outline, however, still leaves open the important question: is the fair mean to be evaluated in accordance with ‘things’, which is a material criterion, or, on the contrary, evaluated ‘relative to us’, which is a personal criterion? In anticipation of the more detailed discourse in NE, V, 5 Aristotle clearly distinguishes two regimes: By the mean of the thing [pragmatos meson] I denote a point equally distant from either extreme which is the one and the same for everybody; by the mean relative to us [meson pros hemas], that amount which is neither too much nor too little, and this is not the same for everybody. (NE, 1106a 30–5) Virtue in general consists essentially in the observance of the mean relative to us; it is a correct state of mind or an excellence of character (NE, 1107a 1–5). Distributional justice is regulated according to this general principle, while rectificatory justice corresponds to the mean related to the thing; it thus forms an exception to the general norm. In NE, V, 3–4 Aristotle expounds on the difference between the two regimes in more detail: All are agreed that justice in distributions must be based on desert of some sort, although they do not all mean the same sort of desert; democrats make the criterion free birth; those of oligarchical sympathies wealth, or in some cases birth; upholders of aristocracy make it virtue. Justice is therefore a sort of proportion. (NE, 1131a 30) The just distribution in public office, wealth or other things between all those who participate in the upholding of the community, should be regulated according to proportion (analogon). This requires that the respective shares are in proportion with the merit (kat’axian) of the parties involved. Mathematicians call the corresponding proportion to this principle, a geometrical proportion. The domain of corrective justice, on the other hand, is regulated by another regime. In private transactions the parties are treated as equal partners with the result that the equal proportion is defined as an arithmetical proportion (NE, 1132a 1–5). Aristotle’s discourse on distributive justice offers a detailed reflection on the functioning of the political institutions of the Greek polis in which he lived. It points out unambiguously that a fair distribution of honour and wealth should be regulated in accordance with the deserts of the claimants. The qualification for merit will be determined by the constitutional form of the polis or by the concrete political system in force. In his ethical texts, Aristotle does not adjudicate between the distributional norms used, since they are supported by the

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claim that ‘all are agreed that justice in distribution must be based on desert of some sort’. The egalitarian ideology of modernity stands in sharp contrast to the norms prevailing in Antiquity, where inequality was rooted in the concept itself of the hierarchical society. In a schematic way the cultural divide between Aristotle’s ethical-political paradigm and the ideology of modernity may be summed up as follows: 1 In the holistic conception of the Stagirite, the community has a categorical priority over individuals. Citizens are viewed as participants (koinonoi) in the whole form, whose ultimate end transcends the constituent parts. 2 From an axiological point of view, the criterion of socio-political merit has pride of place as distributional norm. Equality or inequality of the shares depends on the equality or inequality of the parties involved. The personal position in the polis hierarchy, more than the quality or quantity of the things, dictates the norm of proportion. Since this norm corresponds only to a general guideline, it cannot be compared to the exact principles of the theoretical sciences. Thus, their concrete precision and demarcation may occasion differences of opinion and even social strife. 3 Aristotle’s economy is clearly a political economy, with the arithmetic proportion initiated in the domain of private commercial dealings entailing a departure from the traditional polis tradition. In the domain of corrective justice, applicable to private transactions, the parties are treated as equals. In these cases, justice is done when the litigant parties ‘get their own’ or their equal part by way of the arithmetical proportion, defined as a mean between the more and the less. The mathematical illustration used by Aristotle brings more confusion than clarity, but in the passage immediately following, the author clearly brings home his argument. In private law cases the parties expect to get their equal part; in tribunals the mediating function—to find the mean (mesidios) between the more and the less—is exercised by a judge. In commercial transactions, however, losses and gains may occur, since in these transactions of voluntary exchange take place outside the sphere of customary law. The notions of loss and gain have a commercial origin, while the private law courts operate on the principle of the equal. To quote: The terms loss and gain in these cases are borrowed from the operations of voluntary exchange [ekousion allages]. There, to have more than one’s own is called gaining, and to have less than one had is called losing, as for instance in buying and selling, and all other transactions where the law leaves a free hand [adeian dedoken o nomos]; while if the result of the transaction is neither an increase nor a decrease, but exactly what the parties had of themselves, they say that they have their own and have neither lost nor gained. (NE, 1132b 13–14)

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Just when ekousia sunallagmata (free, voluntary transactions) appeared as a separate but not unusual practice in the commercial centre of Athens, is not clear. According to Dirlmeier (1969:406) Aristotle is the first to use the term as a distinct category in the realm of associations. Finley (1977:143) poses a still more fundamental question Under what conditions did Aristotle envisage an injustice, an unjust gain, in a voluntary transaction, especially in a sale? The answer is, I think, beyond dispute that he had in mind a fraud or breach of contract, but not an unjust price. An agreement over the price was part of the agreement or transaction itself, and there could be no subsequent claim by the buyer of unjust gain merely because of the price. The commercial exchange relations evolved as a transactional regime which tended to emancipate itself as an autonomous process, immune (adeia) from customary law. This development of commercial exchange relations outside the customary sphere of the polis is seen as problematic for social harmony and prompted Aristotle to reaffirm his own political and ethical view on the terms of exchange. Justice in exchange NE, V, 5 analyses the terms of trade in the exchange of goods and services, but this time on a different plane from the Politics, where the emphasis was put on the demarcation between natural and unnatural exchange. In Ethics the major concern is how different kinds of goods and services, offered by producers of unequal status, can be rendered commensurable in order to establish a relation of proportional equality in exchange; taking into account the political framework of the polis, where the duties of the members are defined by their social roles in the community. In line with his usual doxographic method, Aristotle opens the argumentation with quotations of authoritative opinion; this time the Pythagoreans, who proclaimed that reciprocity is the fair norm in cases of corrective justice. He also refers to the rule of Rhadamanthus, which permits him to engage in a polemical discussion as a preamble to his own thesis. The Pythagorean principle of reciprocity (to antipeponthos) is in fact a mathematical expression of the old lex talionis: an eye for an eye. This quantitative reciprocity cannot be applied in all cases. In Eudemian Ethics(1242b 20–5) Aristotle had developed the idea that a multiplicity of concrete forms of reciprocity could be envisaged, this in relation to the ends pursued and according to the concrete form of society. In a hierarchical society composed of heterogeneous elements (families, ethnic groups, household chiefs, craftsmen and commercial intermediaries) constituting a community (koinonia) with chreia as its binding element, this concrete form was proportional reciprocity.33 Aristotle announces this general principle, which

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situates the whole discourse on the just terms of trade in the political context of his ideal polis, as follows: ‘But in the interchange of services Justice in the form of reciprocity is the bond that maintains the association; reciprocity, that is, on the basis of proportion, not on the basis of equality’ (NE, 1132b 32–4). The Greek version, en tais koinoniais tais allaktikais, expresses the author’s paradigm in clearer and more authentic terms: koinonia is the central concept of the polis, and the norms regulating all associations, including the exchange relations, have to be seen in the framework of the polis community. People find their identity and meaning, and are able to flourish only within a community based on mutual interest and co-operation. This bond on which the polis is built can only function properly and be maintained in an orderly, just way if the exchange relations are conceived and realized, not on the basis of equality (kat’isoteta), but on the basis of proportional (kat’analogian) reciprocity. Since Aristotle is thinking of ethics in a political universe, where duties and social roles are hierarchically defined, his political economy refuses to conceive exchange relations outside the community sphere. ‘For the very existence of the state depends on proportionate reciprocity’ (NE, 1132b 34–5). After this statement of principles the text proceeds with the question of how justice in exchange relations can be achieved in a universe where different and unequal partners exchange heterogeneous services and goods. On account of the differences in value of goods and services, and the unequal quality of the producers who deserve dissimilar rates of reward, the theoretical challenge consists in finding a comparable standard in order to solve the problem of commensurability. If like were exchanged with like, for instance medical services with medical services, there would be no problem. In reality, however, people have a multiplicity of needs, and following the division of labour some became carpenters, others builders and still others shoemakers, etc. They expect different things from each other, and exchange relations originated in response to the need for mutual sharing in each other’s capacities. The different kinds of products and producers must be able to be compared and measured in some way. As the first in history to tackle this problem, Aristotle has the curiosity and shows the amazement, or should we say the bewilderment, of a pioneer who explores the novel ramifications of a theoretical puzzle. His analysis repeatedly changes direction, from the genesis of exchange and its subsequent monetarization, to the logical argument raised by the terms of trade in question. Since justice in exchange is not only based on the different quality of the products, but also on the mutual estimation of the status of the exchangers, the required proportional reciprocity can be illustrated, mathematically, by a diagonal conjunction in which the objects of exchange stand in inverse ratio to the producers: ‘It is required that the builder shall receive from the shoemaker a portion of the product of his labour, and give him a portion of the product of his own’ (NE, 1133a 7–10). In this diagonal equation with four terms (two products, two partners) the reciprocation has to be jointly equalized: ‘according to products and according to partners’ (NE, 1133a 14–16). In other words, a fair deal

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requires that both partners receive an equivalent counterpart from each other in quantity as well as in quality. In his search for a common standard or measure (eni ti panta metreistai) to solve the problem of commensurability, Aristotle develops in three successive passages his prime theory on the terms of trade. These three versions may have been lecture notes in which the master expounds with growing detail and additional nuance the same argument over and over again. In the conceptual world of our polis theoretician, it is the common need (chreia) which has logical priority in making exchanges of goods and services commensurable. But as he often does, Aristotle opens his reasoning with a reference to the genesis and development of monetarized exchange, in which money, according to the conventional wisdom of his time, has become a common measure of value. In order to meet the requirement of comparability and measurement, men have introduced money: Money constitutes in a manner a middle term, for it is a measure of all things [panta gar metrei] and so of their superior or inferior value, that is to say how many shoes are equivalent to a house or to a given quantity of food. (NE, 1133 20–4) Following this interwoven digression on money as an accepted measuring rod by public and authoritative opinion alike, Aristotle hastens to reaffirm his own paradigm that in reality chreia or common need is the standard of commensurability. For, if the mutual sharing of goods, services and capacities ceases or changes, exchange will no longer continue or will be on different lines. In the next step of the argument, Aristotle opens a new perspective on the nature and the functions of money. Although mutual need is the ultimate link of comparability and measurement in exchange, chreia has come to be conventionally represented by money: hupallagma tes chreias to nomisma gegone kata suntheken (NE, 1133a 29–30). The Greek term hupallagma is a combination of hub (in Latin sub) and allage, which literally means a surrogate of common need in exchange. Money is a medium (meson) and also a conventional measure (metron) of exchange, making things measurable (summetra). Moreover, money serves as a guarantee of exchange in the future. Money does not exist by nature but by custom. In the following line (NE, 1133b 17) the author states that money is liable to fluctuation like all other commodities. From a metaphysical point of view the fluctuation of the measuring standard presents a problem. A fluctuating standard cannot serve as an intrinsic measure of commensurability, since the exchange relations would end up in complete indetermination. As an arbitrary medium and surrogate measure of exchange, money has no inherent value by itself. It does not belong to the natural order of things, and obtained city rights only by agreement (sunthetike). This monetary nominalism is in accordance with the views expressed in Politics. There, the (value) sterility of

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money lies behind the condemnation of interest. Moreover, the conventional acceptance of money as a measure does not by itself create commensurability, since before the introduction of money, the proportionate exchange was practised in the barter situation. At the end of several attempts on a high level of abstraction, Aristotle’s discourse on the terms of trade ends in a decrescendo, in compliance with his discussion in Metaphysics Book IV on the incommunicability of the genres, and Metaphysics Book I on the principle of measurement. His stance on summetria in Metaphysics (1052a–1053b) is that things ought to be measured by units of the same species. In ethics, where different commodities are to be measured he declares somewhat discouraged: ‘In principle it is impossible for things so different to become commensurable in the strict sense, but chreia furnishes a sufficiently common measure for practical purposes’ (NE, 1133b 19–21). While the problem of commensurability was seen to be unsolvable in theory, in the framework of the polis community, chreia in the first place and money as its surrogate in the second place, offer the only practical and just solution. This is in fact a confirmation of the argument that different societal forms achieve their proper ends and have their own standards of reward in the exchange relations. In Aristotle’s practical philosophy and in his polis ideal, there was no conceptual place for autonomous laws of the economy and its exchange relations. His penetrating analysis of chrematistics in Politics proved his awareness of the fact that the ongoing autonomization would challenge and threaten the social fabric of the polis. In the discourse on justice Aristotle formulated an ‘impossibility-theorem’: outside the framework of the community and its binding factor chreia, there exists no just standard of commensurability for commercial transactions. A great number of people took money as the most obvious and normal standard, but in Aristotle’s view, nomisma is only a conventional and, up to a certain point, an arbitrary surrogate of chreia. In Politics I, Aristotle proved to be a first-class economic sociologist, and in NE, V, 5, he formulated in a most abstract and original way, as political philosopher and moralist, the social matrix of exchange relations. Aristotle’s concept of political economy had its roots in the intellectual elitism and the moral spirit of the Socratic tradition. Its pronounced prejudice against the market-place and commercial dealings was not a mainstream current of thought in Athens, nor was it representative of conservative opinion. The economic essays of Isocrates and Xenophon were more in tune with Athenian practice and with the ambitions toward cosmopolis of the Hellenistic commonwealth than the theoretical exercises of the peripatetic schools. But their intellectual constructs on political and ethical determinants delved deeper than the Greek historical context. Since their analyses were a search for the universal aspects characterizing the passing of Gemeinschaft to Gesellschaft, their concepts, locked into a philosophia perennis, developed far beyond the seeds from which they sprang. The Aristotelian discourses on practical philosophy followed another

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historical route to Plato’s, but in the guise of multiple renaissances they would live on in several parts of the world. Today’s readers of these texts have a rich crop of interpretative literature at their disposal. The commentaries accumulated through the ages, by scholars from different cultures and intellectual traditions, offer a variety of interesting insights. The complexity of the Stagirite’s thought and the subtlety of his arguments left some leeway to the transmitters to interpret his texts from their own intellectual, or their society’s ideological or political, concerns. The Aristotelian tradition ramified like a river flowing in several beds. This explains why the upstream search for the authentic Aristotle continues to be a challenging endeavour.

THE HISTORICAL TRAJECTORY OF ARISTOTLE’S ANALYSIS After his death, Aristotle’s political and ethical works suffered a long eclipse. The rival schools of Epicureanism and Stoicism gained the favour of the intellectual elite. Key elements of Aristotle’s political and moral analysis entered into circulation by means of indirect sources and intermediary transmitters like Polybius, Cicero, Seneca and Boethius. The major contribution of the Romans consisted in the development of a legal and jurisprudential approach to the regulation of commercial transactions. The scholars of the Hellenistic world and of the Roman Empire were impressed by Aristotle’s encyclopedic genius, but showed only a polite interest in his theoretical constructs. The hostility of the early Church Fathers for this ‘pagan’ philosopher is well known. For his contemporaries Cicero translated and adapted the Greek literary and philosophical legacy in an admirable and persuasive Latin style. Possessing unique powers of expression, this rhetor with practical experience in high public offices passed on to later generations the best of the ancient world. In his political philosophy, expressed in works like De republica, De legibus and De officiis, the metaphysical speculations of Plato and Aristotle were transposed into an ideal of humanitas in tune with the practical mind-set of the Roman world. In completing the theoretical models, written in the lecture halls of the Academy and the Lyceum, he gave more attention to the lived ideals of the ‘whole man’ than Plato and Aristotle had done in their school texts. On account of his religious sensibility, Cicero’s work became an important ingredient of Christian thought. In the new mood of the rising urban and commercial centres of the late Middle Ages Cicero’s pragmatic civic virtues and humanism gained ascendancy over the arid Aristotelianism commentaries of the scholastics. From the eleventh century on, Christian scholars in Constantinople and philosophers of the Muslim commonwealth renewed interest in the almost forgotten texts. The commentaries of Islamic scholars, more particularly those of Ibn Rushd, stood out as a medieval bench-mark in Aristotelian scholarship. By

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the middle of the thirteenth century the new developments in Latin scholasticism led to a full-blown Aristotelian renaissance. Almost all the great masters felt obliged to comment upon his major works, including the Politics and Ethics. Due to the imperfection and terminological ambiguities of the Latin translations, and to the transplantation of his ideas into another conceptual universe and different socioeconomic context, the Aristoteles Latinus deviated in some important respects from the Athenian philosopher. In their search for a Christian doctrine of the just price, the Latin scholastics used the Stagirite’s discourse on exchange relations as a basis for their value theories. Since the late Middle Ages, Aristotle’s intellectual heritage has met with high tides and with ebbs. In the last quarter of the nineteenth century an intense controversy over value theory flared up between Marxists (labour theory of value) and neo-classical marginalism (subjective utility theory of value). Both sides took Aristotle’s discourse as a source for their conflicting theses. In Catholic circles the current known as Neo-Thomism, produced its own (corporatist) synthesis. In the ensuing intellectual debate, Aristotle’s heritage, or what it was alleged to be after an age-long line of commentaries, moved centre stage again. In most handbooks on the history of economic thought, the Athenian philosopher figures as a prestigious ancestor. In his monumental study, Schumpeter (1954:57) stirred the serene atmosphere with his blast that Aristotle’s performance as an economist is ‘decorous, pedestrian, slightly mediocre and more than slightly pompous common sense’. In fact, Schumpeter was, erroneously, looking for an ancestor of modern economic analysis but concluded, rightly, that Aristotle was a moral philosopher: ‘primarily concerned with the natural and the just as seen from the stand-point of his ideal of the good and virtuous life’ (Schumpeter 1954:60). A few years later Polanyi published his research findings on the ‘embeddedness’ of the premodern economies in the social matrix of the Greek community of the polis (Polanyi 1957:64–94). According to Polanyi and his followers, the ‘formalist’ approach of Schumpeter and his disciples, took the wrong track by evaluating Aristotle’s discourse from the perspective of modern economic analyses. A ‘modernist’ approach either belittles the pioneering value of Aristotle’s work, or it runs the risk of seeking questions in his writings which the author could never have asked, looked at from its historical context. On the sidelines, an ideological controversy developed in which opponents endeavoured to appropriate Aristotle as the founding father of their own, contemporary view on the market economy, on its value theory and on its price-mechanism, or, on the other hand, how regrettable it is that this genius neglected the ‘universal’ laws of allocative choice and wealth maximization (Lewis 1978:69–90; Kern 1983:501– 12; Worland 1984:107–34; Lowry 1987). In the last two decades philosophers and social scientists have shown a renewed interest in Aristotle’s practical philosophy (Berti 1988, 1989). Moreover, the broader methodological perspective, by which the painstaking

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philological and philosophical analyses of his texts have been enriched with anthropologic research findings, produced a series of illuminating studies (Will 1954:209–31; Polanyi 1957:64–92; Finley 1977:140–58; Meikle 1979: 57–73; Natali 1980:99–122, 1990; Koslowski 1979; Viano 1982:291–330; Ruggiu 1982: 49–117; Berthoud 1981; Pellegrin 1982:631–44; Samuel 1983). In my own field work on the transformation of the subsistence economy of the feudal kingdom of Burundi in the context of the developing urbanization and monetarization of its capital, Usumbura, I became interested in Aristotle’s probings on commensurability and just terms of trade. It was a situation where the traditional barter norms were juxtaposed with the growing practice of monetarized exchange relations based on modern market principles. In the search for the standards which regulated the two different regimes, the barter norms of a hierarchical subsistence sector and the exchange relations of the urban economy legally free from the traditional community sphere (Usumbura was called centre extra-coutumier), Aristotle’s analysis proved to be an illuminating guide (Baeck 1956). It was of great interest, not because Aristotle had found the solution to the commensurability problem, but because he formulated the theoretical questions in a most profound way. In modern welfare economics, the methodological debate over measurement and commensurability of the individual and social welfare functions is still going on. Arrow’s ‘impossibility-theorem’ may be called a modern version of Aristotle’s prime discourse on the terms of exchange. Since the norms regulating commensurability are neither free from ideological options nor from the historico-concrete forms of society, the controversy may go on for ever.

IV THE ECONOMIC THOUGHT OF CLASSICAL ISLAM AND ITS REVIVAL

ISLAM AS A FORCE IN HISTORY From the third century AD onwards, the Mediterranean region was in the grip of a geopolitical conflict between the Roman Empire and the neighbouring oriental superpower, Persia. Moreover, in reaction to the endless Christological controversies, the Aramaic world was set to assert its political and spiritual freedom from the veneer of Hellenistic culture grafted on Mesopotamia since the conquest of Alexander. The Sasanian aristocrats, who were adepts of a chauvinistic version of Mazdaïsm in religion, mobilized Iran’s forces to shed the last remnants of Graeco-Roman influence. This reassertion of Iranian culture drew on traditions that reached back to the Achaemenids. The westward move by the Middle Eastern powers was later intensified by the expansionary drive of the Arabs. In the cultural background to this geopolitical change, the theological controversies between Aramaic and Greek Christianity and the Iranian spiritual revival worked as catalysts. In this climate of spiritual upsurge, Islam, the latest religion of Antiquity, entered the historical scene. The transformation of an Arabian sect, proclaiming a new experience of the divine into a mobilizing creed, resulted in a commonwealth of believers which rapidly grew into an empire. Long before the advent of the new religion, the Arab merchant princes of Mecca and Medina had commercial contacts with the high cultures of the neighbouring regions; but it was with Islam that they became a world power and the guiding light of a large part of the Mediterranean. In the transition from Late Antiquity to the emergence of the Latin West in the twelfth century, Islam was at its apogee and played an eminent role as a marker of Mediterranean culture and history. In the beginning of the seventh century, the prophet Muhammad gave birth to a spiritual and social revolution in Arabia. Islam was a religious and social response to the crisis in clan society and to the primitive ethics of the desert people in the Hijaz. The eroded social fabric of the polytheistic and feuding clans was filled in by the new religion with a binding element of a higher order, namely the umma, or the spiritual link of believers in Allah. The new creed stood in stark

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opposition to the latent polytheism of the Christian world (the doctrine of the Trinity, the veneration of the saints) as well as to the cosmic dualism of gnostic Mazdaïsm in Persia. The new religion was a radicalization of monotheism and defined Allah as one and indivisible. The triumph of Islam marked the resurgence of an ancient theme, namely the ideal of a totally religious culture. In the new empire nobody was a citizen in the Greek or the Roman sense. Early Islam betokened the victory of the religious community over the classical idea of the state. In the eastward pull of Islam, age old traditions of the orient, with its theocratic ordering of society and the state, came to life again. In the space of barely one century, Islam, driven by a holy zeal for Allah and lust for booty, would conquer an area stretching from Persia to Morocco and up to the Pyrenees in Europe. The first conquests of the Arabs were made in lands which had been the home of urban civilizations for thousands of years, that is the river valleys of the Nile and the Tigris-Euphrates. With the conquest of the old centres of culture like Syria, Egypt and Persia, the new religion went through a process of spiritual, cultural and political deepening. A magnificent civilization developed, centred first on Damascus, followed by Baghdad, and with a western centre in Al-Andalus. From 750 to 1250 Islam was the hegemonic power in the Mediterranean, in the cultural as well as in the material domain. In the eastward move to Damascus, under the Ummayad caliphate and more so to Baghdad with the Abbassid dynasty, the non-Arab influences made themselves felt. After the death of Muhammad a vicar or Khalif presided over the community of believers. According to the ideal model set by the rightly guided leaders of primeval Islam, the caliph was the supreme spiritual authority who served also as the temporal ruler and judge. In the course of time the religious supremacy of the caliph was contested and the theocracy of the caliphate gave way to more earthly power relations. Sultans and emirs took over political power while spiritual guidance was gradually monopolized by the interpreters of the revealed message and of sacred law. At the end of the tenth century Turkish commanders of Asiatic invaders pushed the Abbassid dynasty from the throne. With the extinction of the caliphate a process of political fragmentation followed. In this vacuum, spiritual guidance and canonical jurisdiction shifted completely towards the ulema and the great jurists. Islam, like other religions based on transcendental revelation, sooner or later faced the problem of interpreting the significance of the message for succeeding generations of believers. In early Christianity the messianic sayings of Jesus rapidly spread to the diaspora of the Hellenistic world. The Hellenized disciples expressed in Greek gospels the message originally told to Galilean Jews. This meant that it met with the challenge of Greek philosophy as well as with its interpretative spirit and metaphysical subtleties. Muhammad’s message spread to the heartland of oriental cultures which, under the push of the Iranian revival, had recently shed their Hellenistic influences. They had a natural tradition of worshipping God and proved to be less prone to dissect the nature of the Almighty with Greek hermeneutics. However, the reassertion of the oriental

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mystery religions challenged primeval Islam in another way. In its expansive outburst to Syria and Mesopotamia the new religion suffered a lasting rift between Shi’ites and Sunnites. The latter claimed that the Prophet’s message represented the final seal on revelation, since Muhammad, being the last prophet, had definitively closed the prophetic cycle. The Shi’ites held that the ‘hidden’ significance of the Qur’ n had to be explained by spiritual leaders. In the first three formative centuries, theological controversies over the cultural refinement and the adaptation of the original message to new historical contexts resulted in factional strife within the theological establishment. The Mu’tazilites elaborated a set of doctrines which left a margin of personal interpretation and independent reasoning. They professed a theory of knowledge supported by a confident trust in the powers of the human intellect. The opposite theological school of the Ash’arites mistrusted human reasoning about God and the world altogether. They accepted only the revealed scriptures as authentic sources. In this orthodox stance they were supported by the fundamentalist law doctors. With the extinction of the caliphate Islam, unlike Christianity, had lost its central religious authority or synodal canonicity. The community of believers had to depend on the principle of consensus (ijma) to define orthodoxy. In the course of time the theological controversies were kept in bound by the practical bent of the community and by the gradual ascendancy of its legalist tradition. The shariah or the sacred law evolved as the most effective binding element in the moulding of the community towards consensus. Consequently, the study and the practice of law became the master science of the Muslim world. For the Muslim legists the shariah was the embodiment of the ideal ethics (makasim alakhlaq). Although the orthodox establishment of law doctors and theologians held the metaphysical subtleties of Hellenistic philosophy at bay, part of its scientific methodology proved to have its effects. The answer of the law schools and theologians to the adepts of Greek science resulted in the sharpening of their logic of argumentation and in the development of their dialectic method of reasoning and disputation. As the methodology of the law became an institutionalized practice, analogical reasoning (qiyas) and the search for consensus were recognized as independent sources which stood in a dialectical relationship with each other. Systematic and original thinking (ijtihad) used qiyas as a method in the formation of the different law traditions. The process of law formation was based on the relationship between knowledge (ilm) with the correct understanding (fiqh) of the sacred texts. In the course of this process, decisive authority was ascribed to the rulings of the great jurists (Schacht 1950). Muslim law more than theology developed the scholastic method as a technique of argumentation and a way of thought. Several scholars (Makdisi 1974:640–61; Van Ess 1976:23–60; Gardet 1981) familiar with Muslim religious law and theology as well as with the medieval tradition of the Christian world, traced the origins of the scholastic method in the Islamic schools (madrasas). The techniques of disputation (munazara; in Latin disputatio) and of analogical reasoning (qiyas, in Greek analogia; in Latin aequiparatio) had been used in the

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Islamic law schools long before they were absorbed by the Latin West. Just as canon law was to become a significant initiator in the development of Latin scholasticism, the study of Islamic law has played a major role in Islamic culture. The revealed texts (Qur’ n and Prophetic tradition) endured immutably throughout the centuries, whereas their interpretation was subjected over the ages to changes in internal and external historical conditions. The real foundation of Muslim legal science lay in the art of interpretation, which determined the method of correctly utilizing the sacred texts. The developments among the Shi’ites have often followed a course different from that of the Sunni community. For the analysis of their different systems of thought, the French scholar H. Corbin (1971) is a classical reference. The Hellenization of Christianity and the Iranization of Islam constituted one of the most significant religious and cultural developments of Late Antiquity. THE SOURCES AND THEIR INTERPRETATION The Islamic religion and its concomitant socio-political order rest on the divine message revealed through the prophet Muhammad, codified in the Qur’ n. This is first and foremost a sacred book of religion, with only a few suras on economic matters. The social and economic guidelines of the Qur’ n and of the prophetic Sunnah are by nature religious and ethical norms; they are commandments, exhortations and prohibitions. Since the source of the shariah is of divine origin, it is only its human interpretation, with reference to the changing historical and economic conditions, that can be characterized as the social and economic thought of Islam. The imperative norm of justice (adl) is the prime objective of the shariah; as such it is external to historical contingencies and universal. The Qur’ n places justice ‘nearest to piety’ in terms of its importance in the Islamic faith. Thus, the Islamic tradition refers to human attempts at the interpretation of justice and its practical application; this in regard to the changing spiritual climate and material conditions of the various regions and epochs of the Islamic culture. Since law and jurisprudence play a prominent role, some orientalists have called the Islamic culture a ‘nomocracy’; others stress its ‘common religious values’. Consequently, the commentaries on the original tradition, the evolving principles of jurisprudence (usul al-fiqh) and its understanding (fiqh), as well as the literature on commercial regulation (hisbah), offer a mine of sources for the student of Islamic economic thought. For our study, three suras from the Qur’ n deserve special attention. 1 A first prescript illustrates the social vision which comes to expression in zakat, a community tax for the benefit of the poor. From the context it is very clear that it is a tax levied not only on income, but also on property. Thus, the very well-to-do must, in fairness, make the greatest contribution. We are left in the dark as to whether within the Islamic community other taxes

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may also be levied. During the development of Muslim society into a complex urban civilization, this question would lead to divergent views within the interpretative schools. In fact, the taxes for financing general public spending were originally levied on the groups in the population that did not belong to the umma: i.e. on the Jews and the Christians. 2 A second injunction relates to the prohibition of riba (i.e. financial interest on money loans) which was regarded as usury. The Qur’ n refers to interest, in four citations, namely in suras XXX, 39; III,130; II, 275–76 and IV, 161. Riba, literally translated, means ‘offspring’ or multiplication, like the Greek term tokos. On this point the Qur’ n accords with the view held by the Greek philosophers that money is a neutral instrument of exchange, which in itself cannot create any surplus value. 3 The third specific commandment relates to inheritance law. Although the Qur’ n recognizes the right of private ownership, the free disposition of an estate by bequest is limited. Bequeathing an estate to the advantage of a single recipient is regarded as conflicting with the general social views of the Islamic community. Only one-third can be distributed by free choice in a will. For the remaining two-thirds, the Qur’ n prescribes the distribution of an inheritance according to a formula regulated by custom. This sura was meant to put a brake on the accumulation of wealth through the fragmentation which results from the customary distribution of an inheritance. It is clear from the above-mentioned commandments that the Qur’ n presents specific norms in a few areas only. The text, being a moral and religious revelation, contains no comprehensive economic doctrine. As a consequence of the conquest of an extensive empire with an intense flow of trade among its great cities, the young religion was confronted with the challenge of coming up with a more complete and specific economic doctrine. In working this out, the scholars and leaders of the umma in the Golden Age would draw their inspiration from the different spiritual cultures and law traditions of their empire. In the first formative centuries, four major schools of law and jurisprudence developed. The major difference between them lies in the acceptance of human reasoning and the principle of analogy, or, on the contrary, the more or less strict adherence to the text of the scriptures. Here follow some specific characteristics, looked at from the economic perspective: 1 The first legal school was founded in Baghdad by Abu Hanifa (699–767) who emphasized human values and personal reasoning, with a special concern for the poor and the weak. 2 The Medinian school, whose champion was Malik Ibn Anas (712–96), stressed the idea of social utility (maslaha). In this he was later followed by a great number of jurists and religious reformers. The Malakites produced many disciples in the area of western Islam, especially in Al-Andalus.

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3 The third school was founded by Abu Shafi’i (767–820), who may be called a theological fundamentalist who defended the thesis that the entire law is to be derived from revealed, sacred sources, namely the Qur’ n and the prophetic tradition. Analogical reasoning was only accepted to apply the divine law to local customary traditions. This school focused its attention on the economic responsibilities of the rulers and on the canons of an equitable system of taxation (Kitab al-kharaj). 4 The fourth great school, initiated by Ahmad Ibn Hanbal (780–855), was a traditionalist reaction against speculative innovations, like the emphasis on pure rationalism and on analogical deduction under the influence of Greek logics. The Hanbalites rejected analogical reasoning in the most radical way. In economic matters the Hanbalites professed a moderate mercantilism and discussed more deeply than the other schools the necessary harmonization between individual and social welfare and utility, as well as the freedom to pursue these objectives as far as they are not prohibited by the shariah. From a socio-political and economic point of view, Ibn Taymiyyah (1263–1328) is without doubt the most influential Hanbalite jurist. More than his muhtasib colleagues he elaborated a circumstantial analysis of the market mechanism, with a theoretical insight unusual in his time. His discourses on the welfare advantages and disadvantages of market regulation and deregulation, have an almost contemporary ring to them. From the methodological standpoint, the four major schools of law and jurisprudence followed more or less a common procedure. The relevant quotations from the Qur’ n and the Sunnah were cited in the first place. After these quotations from sacred sources, the jurists would discuss and evaluate the economic activity or contract in the concrete context of the time; with due regard to the principle of justice, as well as considerations of social utility and public interest. When the methodology of law became established, it evolved out of ijtihad (systematic, original probing) on the double basis of qiyas (analogical reasoning) and of ijma (consensus of the community), which was later reduced to the opinion of the most influential scholars and doctors of law. As time passed, controversial casuistry evolved, in which conflicting opinions were confronted. LAW, JURISPRUDENCE AND HISBAH Zaid Ibn Ali In the voluminous jurisprudential literature, the discourses on usury (riba) have pride of place. In order to give the reader a flavour of Islamic case law, we quote Zaid Ibn Ali (699–738), one of the most eminent jurists of Medina, who may be considered as a trend-setter in case law. According to the Qur’ n, usury occurs when the deferred price is put higher than the cash price: ‘except when it is trade

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among you with mutual consent’ (IV: 29). In his discourse on the matter, the author strikes a clear balance between deferment of payment (of commodities) where solidarity excludes riba out of necessity, and transactions with the purpose of trade where commercial custom applies. In the case of pure money-lending however, the strict rule of riba applies. Zaid Ibn Ali states: Trading activity is based on sale on the basis of credit. It is imperative in order that commercial activities continue that traders gain from it, and such gain is part of trade, not riba. Consent is established in this case as one who sells on credit does so for promoting his business. It is a willing response to a demand, not an act out of necessity. The seller (on credit) is seeking the difference between prices at different points of time. One who takes possession of something without paying for it in cash gets a productive asset capable of giving benefits, and it is a case of trade. The difference between the cash price and the deferred price which the seller gets is the price for these benefits… . The case is different from that of money loans. One who secures a loan gets an asset whose price does not change with time as money is the standard of prices. Money in itself does not produce anything. (Zahra n.d.) Money invested in commercial operations is perceived as productive capital. On this basis, the interest received on a commercial loan is a legitimate remuneration for its productivity. The prohibition of riba applied only to pure money loans. Tadbir al-madina The literature on the tadbir al-madina or city regulation is important for the study of the evolving economic thought in Islam. Each city had one or even several market sherifs who were supposed to keep watch over commercial transactions. The sherif, who was nominated by the government, carried the title of sahib al-suq or, literally, master of the market and the merchants’ guild. This was an Islamicization of the Byzantine market officer (agoranomos). His responsibility was to make sure that markets functioned in a fair and orderly way. Above the market sherif was the head of the commercial court, who was called muhtasib (in Spanish, almotacén). He worked in close contact with the religious authorities. The literature on tadbir al-madina was produced by jurists and civil servants who wrote on the basis of their experience as market sherifs or chairmen of the commercial court, and who thereby completed and made explicit the simple norms contained in the Qur’ n. In these rather tedious texts, the reader occasionally comes across flashes of economic insight into the market mechanism. It is not possible to give a complete overview of the hisbah literature. Its volume is enormous. Also, different traditions developed in the

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various cities of the Islamic world: Damascus, Baghdad, Aleppo, Cairo, Kairouan and Cordoba. To a certain extent, economic thought is a product of intellectual reflection and regulation in concrete circumstances. The great cities of the Muslim world formed urban centres with great concentrations of population, surrounded by relatively underdeveloped rural communities and bedouin settlements. Supply for the urban centres was a permanent problem which became more acute in times of harvest failure or natural disasters such as floods, or of extreme drought. In view of this situation, it was to be expected that the perspective in the field of commercial and economic thought would concentrate on the market mechanism. In the Qur’ n itself Muhammad is favourable to the free market. The complexity and fragility of the urban supply lines, however, occasioned regular price fluctuations. These encouraged the religious and administrative authorities to control and regulate occasional excesses. The muhtasib played a central role in the supervision of the orderly functioning of the market. It was his duty to keep watch over the speculative gyrations in prices, as well as over the standards of weights, length measures and over the money exchange rates in the financial markets. Most price rises were seen by the urban poor as the result of manipulation by greedy merchants hungry for speculative profits. From the point of view of the central authorities, the muhtasib had not only a religious and economic supervisory function. He also fulfilled a social and political role. This was to keep social protest—or revolt—under control in times of scarcity and famine. Ibn Taymiyyah Ibn Taymiyyah (1263–1328) a conservative theologian of eastern Islam, was first and foremost a devout adherent to the strict observance of the sacred law of justice. His major work, Al-siyasa al shari’yah, or ‘government based on divine law’, is moreover a treatise on political science and made a profound impact on orthodox thought in his time. It also offers influential inspiration in the fundamentalist revivalism of our time1. The work reveals a model for government, social order and the economy based on the strict application of the shariah. The observance of divine law is a necessary condition for the realization of God’s will and His sovereignty on earth. This is imperative for a just and legitimate social and economic order. The author devotes an incisive chapter of his treatise to the social function of religion: legitimate need satisfaction for the individual, welfare of the community and just care for the needy. The realization of justice guarantees stability and prosperity in this world and salvation in the next. With a pronounced anti-establishment mind-set he showed more than usual interest in the problems of the low-income classes of the urban centres and had harsh words for the unlawful rulers and powerful who exploited the poor. Ibn Taymiyyah’s endeavour represented a nostalgic revival of primeval Islam and an idealization of the rightly guided companious (salaf) of the beginning. This

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stance landed him more than once in prison, since in his time unlawful sultans had usurped power. The scriptures of this Hanbalite teacher and jurist have also been analysed from the standpoint of economics by a number of scholars (Laoust 1939; Chalmeta, 1973; Islahi 1988). More than his muhtasib colleagues, Ibn Taymiyyah carried out a theoretical analysis of the market mechanism and with his discourses on the advantages and disadvantages of regulation and deregulation, he merits the label of pioneer. His work contains a detailed description of the law of supply and demand. In his analysis of the supply side the author makes an important distinction between local production and supply from abroad through imports. Moreover, he discusses the respective price elasticities of goods and services in different market situations and constraints. In his study of the demand side, he mentions the important determinants of demand, such as the number and the purchasing power of the (potential) buyers, the degree of scarcity or abundance in the market, the socio-psychological condition of the buyers, and the assessment of their utility (indifference) functions. In the hierarchical society, he muses, the factors of prestige and status play a considerable role in the trade of luxuries. In stratified societies, the social prestige factor demonstrated in ‘conspicuous consumption’ works as stimulant. He very nearly reaches a symbiosis of the later developments between the objective and subjective theories of value. In a normal market, merchants and artisans ask for the coverage of their cost price plus a surplus for their risk. This looks like an early version of the present-day mark-up theory. In a more speculative market situation (i.e. one dominated by scarcity, or in contrast, by abundance), the subjective evaluations of the market participants play an important role in price formation. His descriptions and analyses are based on concrete observations of local market activities. In his function as muhtasib, writes Ibn Taymiyyah, he acquired much practical experience as to the manner in which surplus value originates—for example, in the processing of raw materials by artisans, or with merchants, money changers, renters of public baths, etc. In the debate between the supporters of the free market as presented in the Qur’ n and the proponants of official price setting by the central administration, Ibn Taymiyyah opts for an intermediate position. In fact he is an advocate of an ad hoc market regulation on the basis of concrete situations. Occasional intervention by the central authorities may be helpful to ensure the fulfilment of the basic needs of the people. Thus, he is a proponent of control for the purpose of curbing speculative peaks that hurt the poor, but he rejects general price setting by market guilds or by the authorities as being inefficient. In Ibn Taymiyyah’s lifetime the debasement of money became a frequent practice which was frowned upon by the Muslim jurists, since it was contrary to community ethics. The merchants and the people deplored this state of affairs but could only mutter their misgivings against this public fraud. Ibn Taymiyyah analyses the monetary development of his time in the lucid way of a privileged

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observer and radical critic. The works of this great jurist and muhtasib influenced the critical evaluation of guild practice of the upcoming towns in Spain. In the Latin West, scholastics like Buridanus and Oresme would in a later time formulate similar standpoints. With regard to the social and economic responsibilities of the Islamic state, Ibn Taymiyyah reformulates the primeval concept of government as a trusteeship, bestowed on the ruler by Allah. The prior duty of the ruler is the comprehensive welfare of the ruled, with emphasis on the state’s responsibility to ensure fulfilment of the basic needs of the people. Moreover, the state should enforce the Islamic code of conduct in order that producers, traders and other middlemen (like money changers) adhere to honest and fair dealings. Government should ensure that the market is free of practices based on monopoly, coercion and other exploitation of the weak and the needy, and that markets function on the basis of fair competition between equals. Against the ascetic movement and its mysticism, originated by the Sufi, Ibn Taymiyyah professes a more worldly economic ethic. The ascetism and mysticism of the Sufi movement, influenced by Christian monachism, encouraged what he calls ‘social desertion’; this has to be stopped. In his view, agricultural, commercial and industrial activities are a prerequisite for the fulfilment of basic human needs. As such, they are considered to be a social obligation. In money matters the Hanbalite jurist took up the classic Islamic line, also defended by the Shafi’i and Maliki Schools, in favour of justice in exchange and of a stable measure of value. In this matter, however, his disciple Ibn alQayyim offered an interesting elaboration. Ibn al-Qayyim Ibn al-Qayyim (1292–1350) lived in the Mameluke period at a time when Cairo had grown into the intellectual centre of eastern Islam. By then, debasement of coins was common. He claims that this results in a corruption of commercial transactions and in an artificial loss of purchasing power suffered by the community. Money cannot be considered as an ordinary commodity and the dirham and dinar were not created by Allah to channel undue wealth to princes. The following passage from Ibn al-Qayyim appears in Islahi (1984): The secret behind the prohibition of unequal change of the same kind of precious metals, like dirham (silver coin) and dinar (gold coin) is that their purpose of moneyness [thamaniyah] will be destroyed. And the exchange of goods and services is the backbone of the whole structure of the economy. For this purpose the stability of money—a medium of exchange and measure of value—is necessary. Dirham and dinar are names of prices or measures of merchandise. And price is the standard through which values of goods are known. So this standard should be fixed and stable; it should not fluctuate. For, if the measure of prices rises and falls like other

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commodities, there would be no correct way to evaluate the goods; they would become mere commodities. It is people’s social common need to have a universal measure of price through which they can measure the value of merchandises. The text of this fourteenth-century muhtasib clearly formulates the monetary theory professed in the schools of law and jurisprudence of his time: 1 Dirham and dinar have been created by Allah for the common benefit (maslaha ammah); they correspond to the common need to have a universal medium of exchange and a measure of value (price). 2 Their stability in value is a prerequisite of thamaniyah. In Islamic literature Ibn al-Qayyim offers one of the clearest prerequisites of the moneyness of good money, namely the requirement of intrinsic stability. Al-Maqrizi In the same vein, we should mention al-Maqrizi (1364–1442), a jurist who lived in the period when the systemic crisis of Islam had set in. Al-Maqrizi held the position of muhtasib in Cairo under the dynasty of the Mamelukes. He left behind a large body of work, of which only two texts are of importance for the history of economic doctrines: a ‘Study of the Famines’ and a ‘Study of the Monetary System’. Although Al-Maqrizi opens up interesting perspectives on the economic problems of his time, he has only recently been rediscovered (Oulalou 1976). Study of the Moroccan scholar is very illuminating. In the appendix the author publishes long passages from al-Maqrizi’s ‘Study of the Monetary System’, from which we translate and quote. Al-Maqrizi investigated the causes of the ‘system crisis’ with great penetration and laid bare its sociopolitical determinants. Scarcity and famine, according to him, are the result not only of natural disasters such as the fact that the Nile in certain periods brings too much irrigation water and in other periods too little. A problem thus created by a natural factor can always be solved through human organization. In the Golden Age of Islam, and even in the time of the great Pharaohs, hydraulic problems with the Nile were solved by efficient management. Al-Maqrizi located the cause of the crisis in the socio-economic failures of the regime. The country was saddled with a feudal class which skimmed off surplus production by excessive taxation and oppressive corvées on the people. A second method of skimming off the income (buying power) resulted from disorder in the monetary sector. In Egypt there were three types of coin in circulation: the golden dinar, the silver dirham and the copper fals (plural foulous). In order to fill the national treasury, the rulers of the Mameluke dynasty put more and more of the lower-valued foulous in circulation. In fact, this was a

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disguised devaluation or a currency fraud. To protect themselves, the wealthy classes began hoarding the more valuable dinar and dirham. In later economic literature, this substitution would become known under the name of ‘Gresham’s Law’. In contrast with Gresham, who only formulated this substitution (bad currency drives out good), al-Maqrizi went deeper into the mechanism of substitution. In his explanation he goes beyond the mere monetary dimension of the crisis with his reference to the global religious and social context. He saw the debasement of money as a symptom of a general crisis in values. The rule of the Mamelukes, rife with corruption in public administration, had become socially and morally inefficient. Al-Maqrizi formulates it thus: ‘the inefficient administration drove out the good. The feudal top classes were squeezing out the masses. The fair distribution of burdens and duties had given way to fraudulent rule, with a disregard of the guidelines contained in the Qur’ n.’ As a Muslim economist, al-Maqrizi associates money as a standard of just value (namus al-adil) with the law of the Almighty, the namus al-Akbar. The monetary system can be reorganized only if the overall socio-economic and political system is put in order, i.e. by applying the guidelines prescribed by divine law. With a lofty religious zeal he wrote, Almighty, inspire our sultan to apply himself to the recovery of our umma so that the dirham once again will become the standard of value for all other (also foreign) currencies, just as Allah is the absolute standard of value for both the governors and the governed. The inflation of prices caused by currency manipulation was for al-Maqrizi not only a monetary phenomenon. For this devout analyst, a sick currency is the product of a (morally) sick society. From the beginning, Islam, in comparison with the early feudal Latin world, had a more positive approach to trade and to economic activities in general. Also, in monetary matters, this commercial civilization opened new horizons. In its double function of medium and of measuring standard, money was perceived to be sterile or without intrinsic value. However, when invested in productive transactions, money is transformed into capital which bears a legitimate remuneration. This early view of Zaid Ibn Ali will be repeated, with regional historical variation on the theme, over and over again by the later jurists. The Shafi’i and Maliki schools professed from the beginning a firm stand in favour of stable money. THE PERSIAN TRADITION In addition to these pure Islamic sources, the early tradition has been enriched by the oriental wisdom of Persia. In the eighth century, with the move to Persia, followed by the establishment of the ruling dynasty of the Abbassids in Baghdad, the conquerors were confronted with a more highly developed culture

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and with an oriental (authoritarian) administration. The Iranization of Islam inevitably brought in its wake a greater depth of doctrine relating to political and economic problems. Thus, a symbiosis was achieved between the socioeconomic commandments contained in the Qur’ n and the ideas offered by Persian culture in this field. This symbiosis found its literary expression in the writings of scholars and viziers who, in the name of the public interest, presented an ideal of just and efficient government to the rulers. The administrative elite of the courtier-gentlemen (the dekkan) created a literary genre which formed a blend of stylistic preciosity and political professionalism, in the form of letters to the prince. These open letters are known as the ‘mirrors for princes’ literature or ‘mirror-books’. Ibn al-Mukaffa and al-Biruni are the first prominent figures in this didactic prose. In the mirror literature, justice and equity are not conceived as absolute moral values and commandments, but more as political devices useful and necessary in the interest of state and governors. An efficient ruler applies the sound principles of raison d’état by blending power (political realism) with popularity in order to obtain the willing submission and support of his subjects (Rosenthal 1962; Hourani 1985). The mirror-books abound in discussions of public administration, the fiscal system, the efficient organization of commerce and just government. The last is held up as an ideal before the prince. AlDimashqi, the most economic of the mirror scribes, even formulated what modem economists would call a price theory. In this theory, he makes a distinction between normal periods in which market prices are based on cost of production, as opposed to periods of scarcity or over-supply, in which the speculative drive manifests itself. Al-Dimashqi’s work is in fact a didactic handbook of commerce in which he sketches the ideal merchant and his social role in contributing to the common good of the community. He views the merchant as the link between supply and demand in the market, or between parties who have, respectively, a surplus (supply) or deficit (demand) in certain products. The social function becomes optimal when the merchant manages to refrain from speculative profiteering, as well as from the urge to accumulate riches. AlDimashqi does, however, regard a normal profit as being the fair wage for the labour and the risk premium of a merchant. In an entertaining style, full of anecdotes, al-Dimashqi offers a coherent and complete formulation of the market mechanism. Moreover, he clearly sympathizes with the merchant. In a notable passage he cites a Persian author, alShaybani, who in his book Kitab al Kasb (or the ‘Book of Merits’) professes that making money as a merchant is of greater value for the community than earning an income as a bureaucrat or in the military. Al-Dimashqi’s work was clearly written as a plea for the benefit of the merchant class, which formed an up-andcoming and influential group in the Abbassid Empire (Ritter 1917). This was a development which the fundamentalists looked upon with scorn. Most mirror authors proclaim the ethic of the golden mean, in which the exaggerated urge to accumulate and the speculative impulse are condemned. Equity is heralded as the supreme norm of an efficient public administration and of a just economic order.

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The ‘mirror for princes’ literature produces discourses on the delicate combination of authoritarian rule with a Machiavellian ear for the public interest, enriched by the utilitarian ethics of the Khurasanian rulers. This Persian form of enlightened despotism, tempered by ethical standards, conforms to an operational and logistic approach towards economics, formulated in the Arthasastra tradition of neighbouring ancient India. KALAM AND FALSAFA The osmoses between Greek philosophy and other religious cultures like Christianity and Islam, with at their core a religious worldview nurtured by transcendental revelation, aroused the outrage of the adherents to orthodox tradition. The Islamic world, unlike Christianity, proved more able to keep tags on the Hellenizing influences, with the result that they produced only ripples in the milieu of more or less isolated intellectuals. However, on account of the confrontation between two different worlds of thought, the scene was clearly set for a major dispute between the initiators of Hellenistic philosophy (falsafa), and representatives of apologetic theology (kalam), supported in this by the orthodox jurists. The first wave of Greek philosophy that reached the centres of eastern Islam was the Neoplatonic synthesis of Late Antiquity, epitomized by notorious representatives of this school like Plotinus, Porphyry, Proclus and others. This brand of Neoplatonism was characterized by pronounced spiritual and mystical leanings, as well as by a Stoic other-worldliness. While Ibn Sina, known in the Latin West as Avicennes (980–1037), transmitted and adapted the Neoplatonic version to the Islamic context, his predecessor al-Farabi (873–950) had already opened new horizons. With his comments on works of practical philosophy like the Republic of Plato and the Ethics of Aristotle, this philosopher of Turkish origin initiated a revival of political philosophy. His major work in this field is Al-madina al-fadila or ‘the perfect (ideal) state’.2 This treatise was the first theoretical construction in the Muslim world of a just and well-ordered state achieved by human reasoning; this is independent of the conception of the ideal state derived from the revealed sources (the Muslim siyasa diníya). But al-Farabi wrote in the historical context of a multinational commonwealth which was quite different from Plato’s Athenian polis. In a masterly reconstruction he adapted Plato’s model to the prerequisites of a monotheistic state. His ideal state, with at its head a philosopher-king, formed a rational underpining of the caliphate, which was in al-Farabi’s time already on the decline. In line with the Plato of Classical Athens, al-Farabi departs from the concept of an egalitarian umma to defend a strict hierarchic societal order. According to al-Farabi this is also in conformity with nature, where inequality and geometric justice is the rule. Al-Farabi’s venture in the cultural heritage of Classical political philosophy was the first step in the Muslim philosophical milieu towards a rediscovery of the antique masters

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free from the Neoplatonic accretion. The Andalusian philosopher Ibn Rushd would complete this upstream renaissance. Some philosophers endeavoured to reconcile the two conflicting worlds of thought in a scholastic synthesis.3 But in the interplay of cultural dynamics, the law doctors and the orthodox theologians triumphed over falsafa. The legists and the orthodox theologians insisted on perfection in morals; the Hellenizing philosophers insisted moreover on perfection in knowledge and understanding as well. As far as hermeneutics and methodology in disputation is concerned the scholars of Islam preceded the Jewish and Christian scholastics who, on this point, learned much from their forerunners. From the economic point of view, Abu Hamid al-Ghazali (1058–1111) and Ibn Rushd (1126–98) are important masters. They exemplify two different approaches. The first militates for Islamic reform (islah), that is for a return towards the primeval purity of the faith; the second is by occupation a jurist. He was recognized in the West as one of the ablest commentators on Aristotle’s philosophy of his time. Al-Ghazali’s attack on Greek philosophy (Tahafut alFalasifah) produced a stir in the world of the Hellenizing philosophers. His major publication, however, is a four-volume discourse on the revival of religious sciences (Ihya Ulum al-Din). It is written in a limpid and forceful style and also expounds his ideas on a just social and economic order. Abu Hamid al-Ghazali The social and economic teachings of this great master may be synthesized by a succinct quotation of his: ‘The major objective of the shariah is to promote the welfare of the people, which lies in safeguarding their faith, their life, their intellect, their posterity and their wealth’ (al-Ghazali 1937: 139). Unlike the Greek perception of eudaimonia, the Islamic concepts of the good life (hayat tayyibah) and human well-being (salah) underline the basic relationship between the material and the spiritual needs of all human beings who are collectively seen as a brotherhood. Of the fourty chapters of the Ihya, chapters IV and XIV are of most interest for the historian of economic thought. Chapter XIV bears the title Kitab al-halal wa-l-haram, ‘book of the Licit and the Illicit’, in which the scholar offers a theological rationalization of just social and economic behaviour for the pious Muslim. After his death in 1150 his works were publicly burnt by the authorities, who frowned upon his mystic leanings as a dangerous exaltation of divine frenzy. The economic quotations of this scholar have been analysed in some detail (Ghanzanfar and Islahi 1990; Gardet 1981). A basic and recurring theme in Ihya is the social welfare function. All goods and services are evaluated in terms of their being masalih (utilities) promoting social welfare or, on the contrary, mafasid (disutilities). In a classification reminiscent of the Aristotelian tradition, he classifies the utilities in three categories: necessities corresponding to basic needs, conveniences or comforts, and refinements or luxuries. The material

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ordering of the world, or the fostering of the social utilities, is part of the divinely ordained plan, and as such a religious duty. If this were not fulfilled, worldly life would collapse. Al-Ghazali’s lines on obligatory social duties and on the desirable efficiency in their pursuit, were directed against the Sufi schools with their otherworldly asceticism. In the evolving controversy he was himself accused of being too soft on the mystically inspired groups. Being a devout Muslim, he nevertheless professed a manifest voluntarism in social and economic affairs. Al-Ghazali’s effort was devoted to work out a syncretic blend of Ash’arite theology with the Shafi’ite legal system. This was meant to be a correction of the rational determinism inherent in the Socratic tradition. His works like those of Ibn Taymiyyah, became very influential in classical Islam. Al-Ghazali’s voluntarism is manifest in his discourse on the historical evolution from a barter economy to a social system based on exchange, with money as an intermediary. In this he emphasizes the mutual social benefits that necessitate specialization and division of labour. In a passage of Ihya (4: 119) that became the celebrated example in later texts on specialization, he writes: ‘even the small needle becomes useful only after passing through the hands of needlemakers about twenty-five times, each time going through a different process’. Although he stresses mutual co-operation in the pursuit of the social utilities, alGhazali does not ignore and even accepts the motive of self-interest that drives human beings. Motivated by the participant’s selfinterest, the exchange economy leads to the specialization of profitmotivated middlemen or traders. A market economy belongs to the natural order of things; it evolves as a product of selfmotivated desires to satisfy mutual social and economic needs. Normal profits are viewed as a reward for risk and uncertainty. His moderate mercantilism is kept in bound by the canons of justice, enforced by the local state authorities. In his discourse al-Ghazali clearly distinguishes between the intrinsic value of goods or services and between their value of exchange. In this distinction, money presents a special case. In a commercialized economy, no exchange can effectively take place without equivalence; however, such equivalence is only properly evaluated when there is a common medium and measure. In Ihya (4:91) he states that dirhams and dinars are not needed for themselves. They are created (as a bounty of Allah) to change hands and to establish rules for exchange with justice and usefulness. Money can be exactly linked to other things although it has no particular form or feature of its own; for example, ‘a mirror has no colour but can reflect all colours’. Adhering to the Islamic doctrine of the invariability of stability in measures, he declares debasement of money not only an individual sin, but also a social fraud: ‘counterfeit money is something that affects many who use it in transactions for a long time’. He seems to tolerate an exception to this rule, however, when the mixture of metals in coins is state-authorized, with the provision that this is known to all users. In his discourse on the role of government and on the state-authorities in the fostering of social and economic welfare, he warns them sternly against practices

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of bribery and corruption, especially in the administration of justice. He advises the emirs to be always equitable and fair by placing themselves in the position of their subjects. In the already established hisbah tradition of his time, he comes out for fairly regulated markets. Ibn Rushd Following the path-breaking work of al-Farabi in his effort to remove Neoplatonic influences, the Hellenizing philosophers of western Islam developed a whole cycle of commentaries on Aristotle. In the turbulent transition from the eleventh to the twelfth century, Ibn Rushd (Averroës) and his predecessor Ibn Bajja (Avimpace) became the glories of the Andalusian peripatetic school of thought. The Parisian Averroists of the thirteenth century hailed Ibn Rushd as their privileged interpreter of Aristotle and channelled his ideas into the Latin tradition of scholastics. In the Islamic world he was a controversial figure whose influence dwindled as his rationalist profession of faith and his juridical revisionism of the Maliki tradition suffered reversal while he was still alive. Ibn Rushd’s work formed part of the politico-religious reform movement initiated by the Almohad rulers of Moroccan Berber origin, against the Almoravid dynasty in Spain and against its fideist doctrines inspired by alGhazali’s eastern syncretism (Urvoy 1990). Cordoba, the intellectual centre of alAndalus, where the ancestors of Ibn Rushd had occupied influential posts under the Almoravid regime, moved to the forefront of resistance to the traditionalist outlook. In the beginning of his career he enjoyed the favour of the emir and was nominated kadi of Cordoba. The opposition to the reform movement triumphed and Ibn Rushd, who had openly sided with the Andalusian falsafa of Almohadism in Cordoba, retired in exile to Marakesh. In his philosophy, Ibn Rushd’s basic approach followed the model set by the Greek editors of Aristotle’s work, like Andronicus of Rhodes and his successors, who by an effort of systematization transformed the Stagirite’s complex body of thought into a synthetic construct, with emphasis on its rationalism. In the political, religious and intellectual conflict between the rationalist trend of Almohadism and the traditionalism of the Almoravid dynasty, Ibn Rushd adapted the Aristotelian corpus to his own framework of thought and to its methodological avenues of investigation. Scholarly opinion is divided over the question of Ibn Rushd’s originality. Some commentators regard him as an independent thinker, while others are inclined to reduce his work to a slightly modified Aristotelian system, with only a meagre helping of Ibn Rushd (Peters 1968; Jolivet 1978; 1982). In the field of practical philosophy Ibn Rushd wrote commentaries on Aristotle’s Nicomachean Ethics (the text of Politics was not in his possession) and on Plato’s Republic. In his work on Plato’s Republic he analyses in some detail the conflict of interest between the classes engaged in politics and the money-making classes. In his view, the development and outcome of the power

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struggle between the socio-political and economic constituencies of the state are a determining factor for the type of regime. Under democratic rule the moneymaking groups are more controlled and subdued; when they gain more power, the regime may end up in a tyranny.4 In his commentary, the Andalusian master proves to be more in sympathy with democratic rule than Plato. The reading and the interpretation of the commentary on the Nicomachean Ethics presents a problem since the original Arab text is lost. Ibn Rushd completed his Middle Commentary together with an Alexandrian Summary in 1177. This manuscript was translated from Arabic into Latin in 1240 by Hermannus Allemannus. Herman the German also translated the Alexandrian Summary in 1244, which was also rendered into Old French (Langue d’Oc) in 1267 by Brunetto Latini. A Hebraic version came in circulation together with the Constantinoplean commentaries.5 A comparative reading of the Greek text and the Latin version of the commentary reveals that the Andalusian scholar exposes Aristotle’s discourse on ethics rather faithfully, but in a more synthetic way than the original. The Stagirite had not taken the time to rewrite his complex arguments into a compact text. In the effort of systematization Ibn Rushd was a notable exponent, followed in this by his disciples in Latin scholasticism. In some important parts of the discourse on the terms of exchange and on money (NE, V, 5), the glosses of the Cordoban interpreter part company with Aristotle’s original text. In the passage (NE 1133 b 18) where Aristotle, on metaphysical grounds, admits ‘the impossibility for products so different to render commensurable in the strict sense’ Ibn Rushd elucidated the problem somewhat by an interpolation of his own. In his metaphysics (105 2b 20) the Greek philosopher had stated that each object to be measured ‘should be measured by a unit of the same species’. The Arab philosopher inserted an important interpolation; his line reads: ‘by the smallest unit of its kind sui generis minimo’.In the analysis of the exchange relations, where the pegging towards equivalence around a mean value may lead to a bargaining process of plus and minus, the perspectivation of measurement in ‘the smallest unit’ could have opened the door to an explicit formulation of marginal calculus. The Islamic world, as a highly developed commercial society, had accepted the intermediary function of money long since, and the Andalusian didn’t elaborate also any further on barter marginalism, although he has provided a latent clue to it. In the Stagirite’s discourse, money had only a footing in the exchange relations as a convenient but artificial medium. It was considered to be no more than a surrogate (in Greek: huppalagma). The Andalusian scholar, who lived in a civilization where the monetarization of exchange relations had become an evident and accepted practice, had not the same moral apprehensions against the development of commerce and its mediation by money as the Greek philosophers. In a clear style, the three functions of money are described in neat paraphrases: money is a medium of exchange (instrumentum conegociandi), it is a standard measure of commensurability between different things (cognitio

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coequalitatis inter res diversas) and it is also a reserve of purchasing power for the future (tanquam fidejussor supplendi necessitatem futuram). While the Greek philosopher professes a monetary nominalism based on pure convention, the Arab scholar recognizes the mediating function of money in exchange relations as a legitimate and acceptable practice. The German historian of monetary thought, C. Miller, was to my knowledge the first to discover Ibn Rushd’s omission of Aristotle’s line (NE, 1133 b 17) ‘that the money standard itself is fluctuating like other commodities, since its purchasing power varies at different times’ (Miller 1925:70). Aristotle’s line is in fact an ambiguous statement, for in that context he perceives money as a ‘commodity’ with changeable worth. How can a commodity with fluctuating value be a standard measure of commensurability? The Arabian scholar removes the ambiguity by his opting for an immutable standard. Instead of the Aristotelian locus on the fluctuating nature of money, Ibn Rushd’s paraphrase simply states that with the Greeks, money was liable to change according to convention and law: ‘Et quum ista inveniatur in denario expone ut sit nomen legis apud grecos denominative sumptum a positione, nominatus est denarius in lingua greca nomine denominate sumpto a lege’ (In Moralia Nicomachia Expositio V, E: 241). The Arab scholar, living in a commercial civilization where the stability of the medium of exchange was an absolute prerequisite for its thamaniyah or moneyness, could neither subscribe to the Stagirite’s hint of fluctuating commoditymoney nor to his monetary nominalism. As a kadi he stayed loyal to the Maliki tradition in favour of absolute stability of all measures, as well as monetary standards. From the metaphysical point of view a fluctuating or changeable standard cannot serve as a measure to make things commensurable, because exchange relations would end up in arbitrariness and indetermination.6 Aristotle may have realized this well enough, and this was probably the reason why he downgraded money to a surrogate medium. In Ibn Rushd’s world it figured as a fully-fledged medium. From the twelfth century onward, the princes of the Islamic world and of the West intensified the practice of debasement when in need of more financial liquidity. This fraudulent practice elicited a whole cycle of essay-writing on the subject, which resulted in a deepening of monetary theory. The Muslim scholars, Ibn Rushd included, should be considered forerunners and critical incubators of the debasement literature of the fourteenth and fifteenth centuries. THE GLOBAL VISION OF IBN KHALDUN By the second half of the thirteenth century the Golden Age of Islam was in decline. The umma was in a state of strife and social disruption. Persia had been conquered by the Seljuks, followed by the advance of Mongol conquerors bursting out of the Asian steppes. In Spain the reconquista by the Catholic princes of Aragon, Castille, Navarra and Asturia was pressing the Muslims onto the defensive. The consequences were loss of territory and intensification of

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internal disputes. The Sitz im Leben of thought, including economic thought, became one of system crisis. For the period in which decline set in, the following authors are of importance: Ibn Khaldun (1332–1406) and the already discussed al-Maqrizi (1364–1442). The two are historians of fame, who direct their attention to ‘developmental problems’. They attribute the decline of Islamic civilization to the unsound social and economic policies of the rulers. ‘Unsound’ in their context is not only a technical concept, it is also a moral category. Ibn Khaldun was born in Tunis in the year 1332 to an aristocratic Moorish— Andalusian family. In 1242 the Catholic princes conquered the city of Seville and the surrounding region, so that the Islamic lands in Spain were limited to the emirate of Granada. The Khaldun family emigrated to North Africa where our author led a busy life as a higher-level civil servant, as a jurist and as an historian. His master work is a global vision of the historical development of societies, with the title Kitab al-ibar. The long introduction, or Muqadimmah, is a synthesis of his theory on socio-economic evolution. (F. Rosenthal (1969) produced a translation of the work and N. Dawood (1981) an abridged version.) Although he had little response from his contemporaries, Ibn Khaldun has recently attracted more attention in the West than any of the other Islamic authors. The secondary literature is impressive. In some contemporary commentaries (Nassar 1967; Laroui 1987) he has been hailed as the first Arab social scientist with a definite positivist inclination. Like the nominalists of the fourteenth century in the Latin West and the upcoming humanists (he lived only a generation later than Petrarch) he eschewed abstract concepts and schemes in favour of inductive logic. Thoroughly familiar with the political philosophy of Plato, Aristotle, al-Farabi and Ibn Rushd, he nevertheless distanced himself from their approach. In his eyes the virtuous state of the Greek philosophers and the madina fadila of their Hellenizing Muslim disciples, were too far away from the concrete aspirations of humans and offered only an elitist and idealized analysis of social reality. Their constructs derived essentially from the world of ideas and were more concerned with Utopia than with the complex dialectics of historical societies. They had more to do with ethics than with politics in the real sense. In the Socratic tradition, ethics is too much a derivative of metaphysics and rational knowledge. With the Greek pioneers and with the Hellenizing philosophers of Islam, Ibn Khaldun agreed that the discourse on human action can be rationalized, but he rejected the hypothesis that human action itself is rational. By nature, humans are not only endowed with human reason, which anyway may go astray; they are also inhabited by a more or less uncontrollable will and by domineering instincts. With this sober realism (he has been compared to Machiavelli) our author embarks upon the study of concrete, historical dynamics (ilm al-umran) to unveil its eventual repetitious trends. Up to a point he initiates the Verstehende Methode with ideal-types and contrasting dichotomies, such as city-rural, civilizedbedouin, tribal and impersonal solidarity. He is also the first medieval author to give so much consideration to material and economic factors in the functioning and the

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historical development of societies. The economic value created by human labour and productive enterprise is particularly stressed. Ibn Khaldun was the first Muslim author to produce a global picture of the economy. He analysed the production process, formulated a theory of distribution and studied the influence of public financing on both. He was very conscious of the cyclical character of economic phenomena. His price and value theory is based on labour costs but is scantier than the more nuanced analysis of Ibn Taymiyyah. His demographic analysis is original and pioneering. And since he lived in a time of financial crisis, the fraudulent nature of money debasement by the princes became a topic in his work. Central to his theory is the idea of group cohesion (asabiyah) as the motor of welfare or, in its absence, of decline. According to him, tribal cohesion is strongest in bedouin society. In the cities, by contrast, with the passage of time asabiyah weakens. This inevitably leads to decline. The cycle of socioeconomic regeneration is then only possible when new dynasties, supported by the bedouins with their healthy community spirit, conquer the decadent cities and begin a new cycle. Since time immemorial, the perpetual movement between the desert nomads and the urban centres as well as between settled cultivators and the bedouins presented a perpetual menace. The positive effects of trade relations functioned as a bridging element between the two different worlds, which were frequently interrupted by wars and invasions. The trade activities of the caravan-cities depended upon the co-operation and the specialized knowledge of the desert nomads on account of their acquaintance with waterholes and their experience in the material organization of camel-trains. The collective solidarity between the urban settled people and the nomads profited both parties and lay at the core of Arab society. Idealizing the bedouin clan-ethic, Ibn Khaldun hails the nomad as the ever present new force in history. Sooner or later city life corrupts and historical development has to be recycled with a takeover by unspoiled nomads. Their asibiyah is a cement in reserve against the corrupting forces of civilization. In the Muqadimmah, a piece of work which was ahead of its time, Ibn Khaldun probes the social, economic and institutional factors which influence the course of history. He can be labelled as a political scientist, a sociologist and an economist. Some make him out to be a Marxist economist. In our view, this is going too far because, on the one hand, Ibn Khaldun invokes social solidarity, religious conviction and political power—or the decline of political power—as explanations of economic phenomena, but on the other hand, he clearly opts for a market economy. Besides theoretical analysis, part five of the Muqadimmah contains a detailed description of the different professions of that time. The theoretical part refers constantly to the Qur’ n and he clearly recognizes the superiority of divine law over the natural ethics of the Greek thinkers. His masterly synthesis introduced various innovative concepts which are brought together in a coherent and dynamic construct. In the first place, there is the theory of production. Production, according to Ibn Khaldun, is a human activity which is organized socially and internationally.

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Man produces in order to be able to provide for his necessities and in this he makes use of his labour, which is at the same time the most important factor in production. Because man as an individual cannot himself provide for all his needs, specialization and division of labour come into being in social co-operation. The result of this is, however, that on an individual level more is produced than is necessary for survival. The surplus thus produced can be traded. The value of each product, according to Ibn Khaldun, is equal to the amount of work put into it. It is not the dimension (volume) of the currency reserve which measures the prosperity of a country, but the degree of specialization among the inhabitants. The reason for this is that a greater specialization or division of labour results in greater production, a larger surplus to be traded and thus higher profit and more prosperity. Ibn Khaldun’s monetary conceptions are extremely primitive. He regards gold and silver as the two natural, God-created forms of money. According to him a religious institution should be responsible for controlling the weights of the coins and their value. The prices of gold and silver should not change. They are the standards of value. The prices of all other goods and services may, however, fluctuate according to market conditions. With his theory of distribution, Ibn Khaldun approached in an intuitive manner some national accounting concepts. He saw the price of a product as being composed of three elements: the compensation for the labour producer (wages), the compensation for the risk of the merchant (profit) and the compensation for the services offered by the authorities (tax). The important point is that he recognized that the payment for each of these three elements is influenced by the demand for and the supply of the elements in question. On the one hand, supply and demand itself is determined by the number of producers and consumers; for example, by the size of the population and their will to produce and to consume. On the other hand, it is also influenced by the tax policies of the government. These two determining factors are, according to Ibn Khaldun, subject to a cyclical movement. Regarding population, his reasoning goes as follows: the more people there are, the greater the specialization that is possible and the greater the prosperity. This great prosperity allows the growth of the population, which in turn stimulates the process of specialization and accumulation. Richer regions see their cities grow and become more prosperous, and the poor get poorer. The cumulative growth process cannot, however, go on without problems, because urban migration will provoke two insoluable bottlenecks. First, cities grow too large and social disorder elicits deterioration. Second, the flight from rural areas brings about a decrease in agricultural production. The results of rural exodus are famine and disease and, ultimately, a decrease in the population. With regard to the national budget, Ibn Khaldun outlined the following cyclical movement: originally the power of the state is limited, the rate of taxation is at a relatively low level and fiscal proceeds are normal. In a following generation the will to consume and to produce is stimulated and the rising production brings with it a growing tax revenue for the government. In this way,

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the power of the state is strengthened. This results in a rise in the tax rate, which causes government revenues to rise even more. Ultimately the tax rate reaches such a burdening level that it leads to a fall in production and consumption. This will reduce the aggregate state revenues and paralyse the authority of the state. Ibn Khaldun maintained that, at some point in this process, there will exist an optimal relationship between the volume of income generation and the level of taxation. If this optimal level of taxation is exceeded through the fiscal exactions of the ruler, the social fabric will sooner or later break and will be brought to the brink of revolt. Rulers who proceed to excessive tax pressure break the norms of wellordered government, with the result that a vicious spiral of fraud and tax evasion sets in. As a conclusion we can state that Ibn Khaldun formulated the advantages of the division of labour long before Adam Smith, that he invented a population cycle theory before Malthus and that in terms of fiscal economy he formulated ideas which are comparable with those of supply side economics. The Muqadimmah is well written and enjoyable for a reader of our time. It constitutes a strong and balanced argument addressed to the rulers and to the establishment of his time. The text aims at a renewed community spirit and efficient government to give Islam a new developmental impulse. He reminds his contemporaries of Islam’s splendid past achievements. With a sharp mind and with nostalgia, he analyses in detail its system crisis. During his lifetime, however, Ibn Khaldun had no success with his blueprint for reform. Since Ibn Taymiyyah the high tide of Islam’s interpretative power had come to a close. Ibn Khaldun, like his Western contemporaries, the humanists, opened new vistas enriched by a methodology of logical empiricism. This bore no intellectual fruit after him. In the beginning, however, Islam’s theology and still more so its legalistic schools had demonstrated a remarkable degree of pluralism. In the absence of a central synodal structure, the flexible construct of consensus formed a delicate synthesis between the normative injunctions of the canonical scriptures and the practical bent characteristic of the Muslims. This facilitated adaptation to a multicultural context and to its historical evolution. The spiritual, intellectual and material achievements of Islam were impressive. In contrast with historical reality, the periodization used by Western historiography, where the passage of Late Antiquity to the Middle Ages is filled with darkness, leaves the splendour of Islamic culture in the background. In most handbooks on economic thought the contribution of the Islamic scholars finds no place. Looked at from the classical Greek and Roman level of economic commentaries and insight, the works of the Muslim masters represent a quantitative and qualitative bench-mark. The functioning of markets and the analysis of its mechanisms, the harmonization between individual and social utilities, the value of labour and the role of money, the insertion into the economy of moral and religious constraints, are for the first time in history spelled out by authors belonging to different legal and theological schools of thought.

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The fact that the most notable scholars in Islam had become very familiar (as kadi or as muhtasib) with the daily functioning of the economy, confronted them with a great variety of empirical material. Being devout Muslims they had, like the Christians and the Jews, an open eye for the basic needs of the poor. A good deal of the writings expound on the Qur’ nic injunctions with reference to obligatory social transfers through charity and the giving of alms. TRANSFER CHANNELS AND IMPACT IN THE WEST The translation centres The intellectual trajectory of Islam is an interesting case of the historical osmosis at work in the transfer, absorption and transcultural evolution of ideas: 1 In its development towards the East during the eighth to eleventh centuries, Islamic culture entered into contact with the Syriac heritage of Mesopotamia and with the oriental wisdom of Persia. 2 Since these lands had been formerly Hellenized, their Christian and Jewish intellectuals transmitted Greek philosophy and science, at first from its Neoplatonic offspring. 3 In the eleventh to the thirteenth centuries the Islamic symbiosis with the culture of Iran, enriched by Greek and Judaic elements, started to infiltrate the Latin West. In its classical period (eighth to thirteenth centuries) this symbiosis of Islamic culture was superior to its Greek and oriental ancestors; intellectually as well as in the material field. Its prestigious urban centres accumulated and explored the wisdom and the sciences of the day. They functioned on a highly developed social and economic system. Compared to Baghdad, Damascus, Cairo and Cordoba, the Greek polis of Aristotle’s time and the towns of the Latin West at the period of the early crusades were only in their take-off period toward grandeur. The crusades familiarized the Western feudal lords and churchmen with this higher culture, with its more advanced techniques and with the intellectual knowledge of Byzantium and of the Middle East. The Spanish reconquista brought the Christian intellectuals and clerics of Castile, Asturia, Aragon and Navarra in more frequent contact with the cultural centres of alAndalus. In the twelfth century, the transfer of Greek and Arabic knowledge took off in an organized way; the movement intensified in the thirteenth century. The most important channels in the transfer of religious, philosophical and scientific texts were the following: 1 The first organized translation centre was Tarazona, in Aragon.

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2 In Castile, the translation centre of Toledo was created by Archbishop Raimundo. 3 The court of Emperor Frederick II in Sicily, played a prominent role. 4 Barcelona, the centre of high culture in Catalonia’s maritime economy, took part. 5 Cultural centres like Perpignan, Narbonne, Nîmes and Toulouse, were transmission belts of texts translated in old French, namely the vernacular Langue d’Oc. From the early twelfth century to the beginning of the thirteenth century, the first translation period starts. The most important texts written by Arab and Greek scholars were translated into Castilian, Catalan and Langue d’Oc.7 From these vernacular languages they were rendered into Latin. In this ‘double pass’ the translation team of Ibn Dawud and of Gundisalvi are the best known. Gerard of Cremona initiated the practice of direct translation from Arabic to Latin. The third period (first half of the thirteenth century), in which Michael Scott and Hermann the German were important, returned to the double pass: Arabic-Langue d’Oc-Latin. In the fourth stage, concentrating on texts of the Socratic philosophers and on scientific treatises by Pythagorians and other Hellenists, translation was directly rendered from Greek to Latin.8 In this process of translation the most important Arabic texts on astronomy, mathematics, medicine, kalam and philosophy were transfered to the West. The transmission belts: Catalonia and Languedoc The practice of the double pass, either through the vernacular Catalan or Langue d’Oc channel, is not only important in the creation of different semantic traditions; it was also influential in the development of typical regional and cultural accents. Especially for texts on ethics and on economic thought, the Catalan and the Langue d’Oc connection had more impact. Since the texts were put in the vernacular languages, they operated as a more popular vehicle; they were more accessible to lay readers, in comparison with the Latin versions. From the eleventh to half-way through the thirteenth century, Catalonia and still more so the Languedoc region were blessed with a more advanced economy and culture than northern France. In their social consciousness, mentality and world of ideas, these forerunners showed a more positive attitude towards economic activities. This positive mind-set was also in line with the economic doctrines of Islam and with the gist of the Cathar heresy in the south of France, who openly contested the canonical prescriptions of the Church. Catalonia and the Languedoc region (Provence, Toulouse, Aquitaine) absorbed in their troubadour lyrics the hedonism and the exalted romanticism of the Arabian Nights literature. Against the military mores of the feudal order, and against the canonical monopoly of the clerical institutions, Languedoc culture developed a distinctly lay and bourgeois mentality. From this viewpoint,

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engagement in productive activities and trading was considered to be of greater social utility than the warfare of the feudal class. A new system of values evolved which gave a freer rein to individual feelings, attuned to a modernizing cultural, social and economic perspective. In this evolution the doctrines of Islamic scholars, translated into the Langue d’Oc vernacular, and thus more accessible to a broader circle of people than the Latin texts, worked as an intellectual fertilizer. The Arab scholars had less moral apprehensions against trade and economic activities in general in comparison with the clerics of the Latin Church. The new mentality and bourgeois ethic, which evolved against the monopoly of sacerdotal intermediation and against clerical canons, paved the way for the popular heresies of the late Middle Ages. The Franciscan scholars of these regions were more open minded and in tune with this culture than the Dominican friars who stood in a more combative canonical line against these infidels.

THE REVIVAL OF THE ISLAMIC TRADITION In the beginning of the twentieth century the Westernized elites of the Islamic world mustered their intellectual forces for the modernization of their backward societies. The banner of this movement was nahda or renaissance. Its Westernized bourgeoisie conceived the needed reform by way of absorption of Western science, techniques and development methods. In the political field, however, they were fierce nationalists, with the avowed goal to transform colonial rule in independent nation states based on democratic principles. After the Second World War, in the wake of the decolonization wave, the elites in favour of Arab nationalism organized an attempt to modernize Islam. But in Egypt, Syria and Iraq, new movements, spearheaded by nationalist officers, took over the lead. They embarked upon a socialist development model with secularizing tendencies on the prototype of Nasserism. In Iran, the Shah’s regime, in open defiance of the traditional and religious establishment, launched the so-called white revolution. In fact this initiated the most intensive push of Westernization in Iran’s history. In the monarchies of the petroleum-rich desert region, like Saudi-Arabia and the Emirates, conservative forces were able to keep in check the seeds of modernization. On the sidelines, however, a second movement gathered force with the claim that real reform can only come from a return to the doctrines of Islam’s pure beginnings (salaf). The radicalization of the salafist’s claims gave birth to a new offspring, namely the Muslim Brotherhood (Ikhwan al-Muslimun). Since the 1970s a trend towards retraditionalization and religious revival, animated by militant minority groups, is noticeable in the three religions of the Book: in Judaism, in Christianity and in Islam. This comeback of God in a secularized world is a novel and unexpected phenomenon (Kepel 1991). According to the views voiced by Islamic scholars, the resurgence of Islam is a

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response to the failure of the major Western models—secular democracy, territorial nationalism, individualistic capitalism and totalitarian socialism—to take root in Muslim society and to capture the imagination of its people (Khurshid 1976). This revivalist upsurge is not confined to political activism or cultural regeneration. At a deeper level we notice a reassertion of Muslim thought and a revivication of its ethos. The Iranian revolution, the first revolution of the twentieth century in the name of Allah, revealed its strength to the world. It changed the geopolitical set-up in the Middle East. The complex nature of the resurgence of religious and ethical radicalism makes it well-nigh impossible to present a circumstantial analysis in this essay. Some Middle Eastern social scientists perceive this revival as a process of indigenization, since the avowed objective is the construction of a conceptual framework that reflects their own worldview, with reference to lived cultural, social and economic experiences and aspirations. Indigenization comes up against the slavish adherence to Western concepts and models by the postwar generation of social scientists. A great number of them were occupied in national government services or in foreignfunded institutions. The authoritarian rulers of the Middle East, however, were only interested in scientific legitimation of their own policies. Their bureaucrats frowned upon independent and critical research work. The more critical researchers, tradition-bound or secularist alike, could only work underground, in order to evade official censure. The activities of the foreign-funded research institutes led to the absorption of the local elite into Western or Soviet science traditions, and to its theoretical infeodation. In reaction, critical intellectuals railed against this so-called bedouinization of Middle Eastern sociology and economics.9 In the period following the Second World War, the region, like the rest of the developing countries, embarked upon ambitious programmes of industrialization and urban growth, with a careless neglect of the rural sector and its population. For the rulers of the new states, characterized by ethnic diversity and with problematic borders drawn by the colonizing powers, nation building based on authoritarian rule had priority. In the countries blessed with huge petroleum reserves, the oil rent produced enormous wealth for the happy few, resulting in great social and economic inequalities. The widening gap between rich and poor, the intense population growth, the spread of mass education, the lack of adequate employment opportunities for the young, the rural exodus and the squalor of the crowded urban centres, created resentment and frustration within the forgotten groups. For them, authentic development was a dream that did not materialize. The mismanagement by socialist and capitalist regimes alike, upset the devout Muslim and engendered a sense of betrayal in the circles of the traditionbound intelligentsia. They referred to the region’s past glory and longed for a complete reversal of the immiserizing misdevelopment. In the cultural reversal of indigenization, the novelists preceded the social scientists. In Iran, the writer Ale Ahmad published a novel in 1962, with the significant title of Gharbzadegi. This Persian catchword is a combination of gharb (west) with zadegi (intoxication)

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and means literally ‘westoxication’. The novel became an underground classic of Persian prose with the tradition-bound university students and nationalists more than a decade before the takeover by the ayatollahs (Hanson 1983). Arab Third-worldism In the social sciences, two currents of indigenization can be distinguished. A more or less socialist and secularist indigenization evolved in the wake of the Third-Worldist ideology. This current was an offspring of the theoretical models on dependency, which formed the rallying cry of the Latin American centre— periphery school. Some were influenced by the neo-Marxist theory on imperialism and on unequal exchange. In the field of development, a few of these secularist indigenizers drew inspiration from Ibn Khaldun, whom they hailed as the founding father of the Arab social sciences. In a series of seminars the forms and aims of decolonization in the Middle Eastern social sciences were discussed. But the failure of Nasserism, the deceptive course of the Ba’ath regimes in Iraq and Syria, the bleak perspectives in the Maghreb countries, put the theoretical tenets of Arab nationalism and socialism to a severe test. This landed the secular branch of indigenization in a state of crisis (Sabbagh and Ghazalla 1986). The Shah of Iran challenged the Shi’ite community with an ambitious programme of Westernization and floundered on a reef of his own making. After this cultural cataract the spell of modernization was broken. In the traditional undercurrents of the Muslim community a revival movement of the classical tradition took over the initiative. In today’s Islamic economics the works of the Hanbalite master Ibn Taymiyyah are again revered as a precious source of reference. The Islamic branch Since the 1970s an upsurge of loyalty to holy things became manifest. Due to the failures of nation building, the ideals of the religious community gained precedence over those of the secular state. In the urban centres, groups of young professionals and militants, bypassing the more passive and submissive members of the ulama, rediscovered Islam as the basic reference of collective identity. In reaction to the intellectuals in favour of the modernization of Islam, they profess a re-Islamization of society, of its morals, of its politics and of its economics. The Islamic resurgence symbolizes the failure of modernization in its most important manifestations: secularism in education and in culture, individualistic capitalism, state socialism and atheistic Marxism. The trend towards re-Islamization of Middle Eastern social sciences, carries the search for a better ordering of the world along the lines of social justice. In harmony with Islam’s historical legacy, sociology and economics are perceived as applied sciences subordinated to the moral spirit of the umma, or to the community of believers ordered by the shariah. The effort of re-Islamization

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triggered off a series of publications on Islamic economics in Urdu, in Turkish, in Persian and in Arabic. The most important have been translated or rewritten in English for an international public (Zianuddin 1971; Mohamad Mannan 1970, 1988; Ajijola Alhaji 1977; Afzal-ur-Rahman 1980; Siddiqi 1981; Naqvi 1981; Shahrukh Khan 1985; Katouzian 1985; Chapra 1992; Choudhury and Malik 1992). The challenge of Islamic social science is to exemplify the relevance of shariah to present-day problems and to formulate workable models to put it in practice. A great number of contemporary authors on Islamic economics have been exposed to modern currents of thought, and as a consequence their methodological standards are, in some respects, higher than those of earlier writings on the subject. Still, there are substantive continuities between the classical sources and contemporary Islamic economics, since the emphasis lies on the fundamental foundations of Islamic thought rather than on the positivistic elements of modern economics. The basic aim is to proclaim the ethical basis of economics, with the divine law as norm. The literature invokes the traditional Qur’ nic injunctions as a means to bring social and economic relations into conformity with the principles of equality and fairness. Although the individual authors subscribe to the same basic philosophy, they formulate a variety of practical priorities and opinions. In reaction to this revivalist chorus, critical voices are heard who point to the epistemological problems involved in this intellectual endeavour (Arkoun 1983; Kuran 1989:171– 91). According to these less apologetic scholars, the cultural gap between the medieval episteme of classical Islam and the real challenges of the contemporary Muslim societies requires a theoretical creativeness which a number of authors on Islamic economics failed to achieve. In fact, some publications are of a pure apologetical nature. The debate between the different currents of thought proves to be stimulating, since it defies the tenets of the conventional wisdom of modern economics. The Islamic paradigm—jihad—presents an imposing challenge to Western development theories. Given the need for more social justice in world development and in the historical trajectory of the Muslim societies as well, this revival of the Mediterranean tradition may open a new perspective.

V THE ECONOMIC IMPACT OF THE CISTERCIAN ORDER

THE WEBER THESIS REVISITED In a series of studies the German scholar Max Weber singled out the new ethics of the Reformation as the harbinger and incubator of the capitalist spirit in the West. In his work ‘The Protestant Ethic and the Spirit of Capitalism’, which appeared first in embryonic form in 1903 and was later developed into a book, he conceived the Calvinist doctrine of predestination, in conjunction with the idea of ‘calling’, as the decisive moral determinant of inner-worldly asceticism (Weber 1920). The new ethics conferred on believers a worldly function in which they had to prove their worth in the eyes of God. It legitimated earthly success as a visible token of divine grace. According to Weber, the ascetic spirit preached by the Reformation, acted as a powerful religious stimulus to the creation of economic wealth. The Weber thesis has attracted considerable attention from a great number of researchers. Scholars who were fascinated by the complexity of the problem criticized the thesis for its overemphasis on the Reformation’s role. Recent research findings by cultural and economic historians alike see the twelfth century renaissance as the historical hinge on which Western development took a new turn. From the end of the eleventh century onwards, the emerging city-states of northern Italy and Flanders witnessed a population explosion, accompanied by an intense growth of trade and industry. In these urban growth centres the bourgeoisie was animated by an entrepreneurial spirit which initiated some form of proto-capitalism. In the religious domain, the reform of the Benedictine order, known as the Cluniac reform, had given fresh impulse to the re-awakening of Western Christendom. The rule of St Benedict aimed at a balance between the liturgical and the economic activities of his monks, succinctly formulated by the maxim ora et labora or ‘pray and work’. As time went on, the Benedictine monasteries had grown into a huge network of rural estates, comparable to the estates of the feudal lords of their time. With the twelfth century renaissance the prospects of Western man in the afterlife brightened and his enjoyment of material betterment improved as well.

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In the feudal mentality of the time it was assumed that a man’s resources were a trust of which he was a steward rather than the owner. So long as the powerful and the wealthy spent lavishly on services, hospitality and charity or in social and cultural display, they stayed free from moral and religious disapproval and sanctions. Money and wealth were there to be spent, not to be hoarded or productively invested. The real sin was avarice, or worse still its companion, usury. The Cluniac movement had put the emphasis on reform of the liturgical and spiritual side of monastic life, but it left their feudal structure, based on peasant tenantry, almost untouched. In the stagnant rural economy of the age the radical breakthrough was the work of the Cistercians. This new order aimed at both spiritual austerity and rational exploitation of their domains. Animated by a complete sense of ascetic abnegation they fled the world and retired to the wilderness, where they pioneered rural development. Their estates were run with the managerial competence and the marketing strategies characteristic of modern agribusiness. In a relatively short time, hundreds of monasteries became incubators and vehicles of economic expansion. Weber acknowledged the role of Western monachism as forerunner in the domain of rural development, but he underestimated the rational and productive innovation wrought by the Cistercians. According to my understanding, the twelfth century was a decisive incubation period of economic rationalism, to which the Cistercians contributed in two ways: on the one hand with their praxis of efficient exploitation of their estates, and on the other with their new labour ethic. Weber’s ideal-type method underestimated the long, gradual historical process of development that produced the transition from feudalism to modern times and capitalism. The importance of the twelfth-century renaissance is now a welldocumented theme for a great number of medievalists. An important aspect of this renaissance and its incipient economic rationalism was the new valuation of time (Treiber and Steinert 1980). With their detailed application of ‘time and motion’ measurement to material tasks and productive operations, the Cistercians exemplified that time, although belonging to God, ought to be used with methodical care. A still more dynamic concept of time would break through at the end of the thirteenth and beginning of the fourteenth century, originated by the nominalist philosophers. But in the evolution towards a new time concept and its more rational use, the emerging commercial constituency took the lead (Le Goff 1977). In the practice of business, a great deal of capitalism’s ‘modern’ features were introduced by the Italian traders and bankers, who had learnt their first steps from the Islamic world. The Italians invented bookkeeping on the basis of double-entry, commercial law and marine insurance. The guild bosses of the thriving Flemish towns would fight against feudal lords and the ecclesiastical authorities for a belfry, whose carillon ordered the rhythm of working time for the labourers in their shops. Weber was correct in his thesis that Protestantism, especially the Calvinist spirit, betokened an important reinforcement of the ongoing evolution.

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HISTORICAL BACKGROUND In the tenth and eleventh centuries, the Latin part of Europe bore witness to a rapid increase in the number of monasteries and monks. In 909, Cluny Abbey was founded in Burgundy, whose numerous daughter institutions developed in an imposing and influential ecclesia cluniacensis. The Benedictine order developed a seigneurial tradition of liturgy, hospitality and building. Strongly under the influence of their enthusiasm for building, the Burgundian chronicler Raoul Glaber coined his telling metaphor at the beginning of the second millenium: ‘the old world has shaken off its dust and has adorned itself in a white mantle of churches’. The Cluny order developed into a powerful and prosperous network of abbeys and priories. As a result of the prosperity and secular success of the order, the original ideal of Benedict began to weaken, and the luxurious lifestyle of the Clunic monks became a problem. At the end of the eleventh century, the Christian communities of Latin Europe experienced a deep religious feeling of ascetic renewal, of evangelical rejuvenation and of military expansion like the crusades. The Benedictine tradition seemed unable to respond to the urge for renewal and lost its spiritual hegemony. Under the influence of successive religious reformers, the desire for evangelical simplicity (vita vere apostolica) and asceticism received several institutional responses and solutions. There was an intense second blossoming of monastery communities and abbeys, whereby the monks, inspired by an outspoken contemptus mundi, retreated into isolation. Etienne de Muret founded the Order of Grandmont in 1074; Bruno founded the order of the Carthusians in 1084; Robert de Molesme founded the order of Cîteaux (Cistercians) in 1098; Robert d’Arbrissel founded the Fontevrault community in 1101 and Nobertus founded the Premonstratensians in 1120. In 1112 the dynamic knight Bernard (1090–1153) joined the new order of Cîteaux, together with thirty noble companions. As Abbot of Clairvaux (1125), he exerted great influence on and wrought radical changes in both the religious and economic framework of twelfth-century Europe. Under his leadership the Cistercians began their historic journey. In the expanding world of the twelfth century, the exceptional personality of Bernard, played a highly influential role. He was a leader in the ascetic revival, an innovator in the economic organization of his abbeys, and a master of eloquence when preaching. This gifted knight, who had been converted to become a miles christi at the age of 22, also felt it was his calling to admonish, to chide and to influence popes, bishops, philosophers, theologians, counts and last but not least his noble relatives. Bernard waged battles on many fronts with his characteristic passion. Even his sympathizers admit that he was not always right, and did not always meet success.1 Aided by the material success of his order, this spiritual leader was to give the development of the century a new direction.

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THE CISTERCIANS AND THE RURAL ECONOMY The research findings of the French historical school known by the name of la nouvelle histoire, has thrown new light on rural development in the twelfth century. Besides the objective determinants in history, such as feudal structures, power relations, civil and canon law, technological innovations, demographic trends, etc., they also emphasize subjective factors such as the mentality of the time and of collective consciousness (Couteau-Begarie 1989). In this approach, they are inspired by the methods of cultural anthropology and by the study of the problems of present-day developing countries. This approach seems to me to be a very fruitful one for an analysis of the expansion of the twelfth century. Their empirical findings inform us that technological innovation and socio-economic development only ‘get going’ when they offer a response to latent needs (in both the material substructure and the cultural superstructure) of society. In most cases, an historical breakthrough is the result of a promising or productive project, introduced by a leading movement or avantgarde, whose innovation responds to the latent needs of the time. Demographic expansion and incipient urban development created the need for a rural surplus in order to feed the growing number of town dwellers. It was difficult to produce this surplus on the basis of the inherited seigneurial production framework, with its traditional servitudes, its tithe tenancies and its fixed benefits in kind for the lord of the manor. The fossilized structures of land tenure acted as a brake on the agents of production (serfs, villeins, tenants and free farmers) who pressed for reform. With his characteristic drive, Bernard not only propagated a new enterprise culture, he launched also an original corporate structure. By exploring, settling and cultivating the lands under their own management, by their positive evaluation of manual labour, by efficient management of human and material capital, by their positive inclination toward new technologies (unusual for its time), by a puritan austerity in lifestyle for the monks and their fellow brothers, and by means of a spirituality which presented all this as the fulfilment of a divine plan for the earthly acquisition of eternal bliss, the Cistercians emerged as the most productive stimulators of the rural economy. Under their influence, the stationary economy of the time was gradually transformed into a growth economy. It is also one of the paradoxes of the twelfth century that Bernard, the man who quarrelled with the monks of Grammont and the Chartreuse because they spent their time in sterile isolation (sacrum otium), and the man who spoke in scornful terms about the Benedictines of Cluny on account of their liturgical pomp, in fact accumulated property and financial wealth in the most intensive way as a result of the innovative economic success in his own abbeys. In the thirteenth century, this paradox was to lead to a crisis within the order.

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A PROTOTYPE OF MULTINATIONAL AGRIBUSINESS Following the founding of Cîteaux in 1098 the Cistercians initially experienced a difficult period. The arrival in the order and the leadership of Bernard, however, produced a take-off and initiated a period of burgeoning growth. By the time of his death, the order already numbered 328 abbeys with granges; and by the end of the twelfth century this number had jumped to 525. The geographical spread of the order was just as impressive: France, Italy, Belgium, Holland, Spain, Portugal, Germany, Hungary, Poland, England, Scotland, Ireland, Sweden, Syria and Palestine. This multinational corporation was centrally governed by the General Chapter, which every year summoned all the abbots to the headquarters. Léon Moulin, a specialist in the constitutional structure of the medieval monasteries, has labelled the corporate model of the Cistercians a forerunner of the multinational company (Moulin 1985). The building of the abbeys and granges stimulated the production of raw materials (stone, wood, iron), promoted the development of craftsmanship among building teams and contributed to the increasing precision in measurements and weights. Among the many accomplishments in architecture, there are a number of masterpieces. Visitors to the abbeys of Fontenay, Noirlac, Fontfroide and Silvanés, or the three southern sister abbeys of Sénanque, Le Thoronet and Silvacane, come under the spell of their hieratical architecture and charming simplicity. Bernard was averse to the ornamental decorations (saints, prophets and other sculptures) which adorned the Romanesque capitals and tympanums.2 The Cistercian abbeys are iconoclastically sober. Their architecture is a reflection of a radicalized monastic ideal with an aspiration to realize on earth the absolute triumph of the spiritual over the material and of the soul over the body. THE DEVELOPMENT TRAP OF THE TWELFTH CENTURY At the end of the eleventh century, the traditional model of rural management entered a period of crisis. New ideas led to an aspiration for change in the contractual production structures and the schemes of product sharing between feudal lord, villeins, tenants and serfs. The growth of the population created a surplus of labour which was only partly tapped by the exodus from the countryside to the rising towns by freed villeins. Some feudal lords went from collecting taxes in kind to levying rents and taxes in money. Gradually a growing number of more or less independent farmers evolved. They kept an ever-growing portion of the production yields for themselves, or for sale in the expanding markets. A similar evolution occurred in the seigneurial system of the Benedictine abbeys. The growth of the population and the development of the towns caused an increase in the demand for food production. This increased demand in turn led to

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a gradual upward trend in the price of food. The resulting devaluation of money, leading to the loss in value of fixed rents and taxes in numéraire, plunged many lords of the manors and abbeys into financial problems. In some places the fixed money rents were converted into variable redevances. All these changes in the seigneurial framework created tensions between lord and tenant. Higher yields by means of technological innovations was an ideal solution to the increasing demand. The introduction of the water mill and the windmill multiplied the energy-producing capacity. The substitution of horse teams for oxen increased the speed of operations on the land. The replacement of the antique shallow plough (aratrum) with the iron plough (carruca), which ploughed a deep furrow and turned the land over, produced better crops. The introduction of the three-year crop rotation system, which resulted in an increase in the proportion of cultivated land over fallow land, increased production per acre. However, in the fossilized land tenure systems and production structures fixed by the seigneurial contract, these technological innovations very quickly reached their socio-economic limit. The use of innovative techniques and the input of new work instruments meant higher investment costs for the operators (the lord of the manor and of the abbey, the independent farmers), who tried to siphon the created surplus from the labour force in service, by appropriating the resulting added value. As a result, the people who had to carry out the work under the traditional system were insufficiently motivated to implement these changes. The seigneurial system was set up for a stationary economy. It was unable to realize the needed breakthrough to growth. On the consumption side, however, the behaviour pattern developed in a different direction. The leading classes, and also the religious leaders, had traditionally followed a lifestyle which was based on ‘conspicuous consumption’, on a display of splendour and pomp. Richly garbed horsemen and mounts, festive tournaments, splendid religious services in which the church robes and ciboria glittered like jewels, prayer books decorated with artistic miniatures—all these things and more—were the prestigious status symbols characteristic for the upper-class ethos of living. At the beginning of the twelfth century, the desire for luxury increased still further among the upper layer of the population (both lay and religious), who lived from the rent of their tenants. The growth in the volume of international trade and the monetarization of the subsistence economy, offered wider consumption choices or more variety. This increased the aspiration for more sophisticated and expensive consumption goods. The seigneurial economic system, in too few places reformed by innovation, could not resolve the increasing imbalance between production and consumption.3 A take-off from the stationary rural economy spearheaded by a group with a promising innovatory model was needed. This breakthrough came from an unexpected quarter, namely a monastic order which combined its ideal of asceticism with a theologically inspired active work ethic. This led to a fundamental transformation in the rural production–consumption cycle.4

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AN INNOVATIVE CORPORATE CULTURE AND STRUCTURE The pronounced contempt for the world characteristic for Cistercians prompted them to settle on virgin land, marshes and woodlands. Initially they preferred to settle on lands far from the hustle and bustle of the world and from the temptations of the towns. In so doing, they defied the discomfort of life in regions which were described by their chroniclers as terra nebulosa et pluviosa.5 With the influence of a former knight and now a prestigious religious leader with rhetorical skill, Bernard impressed the nobility of his time. His order received numerous gifts of virgin land, which after reclamation evolved into an impressive network of daughter abbeys within his lifetime. As a productive annex to the abbeys, numerous grangiae, or farms were set up under the direct control of the monks and the brothers. These extensive farms were under the supervision of a grangiarius. Originally, the General Chapter decreed that these operations should be no more than a day’s journey from the abbey, but the dynamism of the expansion led to many deviations from this rule. Some large abbeys had up to twenty-five grangiae under their control. As the pace of development of productive and commercial operations increased, the farms grew in scale and larger plots of land were needed. Although this increase in scale allowed for more efficient methods of exploitation, it sometimes forced the order to claim lands which were already occupied. This frequently led to conflicts with the original claimants to the land. As they became big and powerful, the Cistercians did not always proceed with due respect to the property rights of former occupants, as could be expected of ascetic monks. The size of the grangiae varied from region to region and was also related to the nature of the activity. The running of a salt mine or a fish farm in ponds covered less area than a sheep farm, which required an extensive acreage of grazing land. The acreage of the operations was also dependent on the demographic pressure on the land. In France or Belgium, for example, there were relatively fewer fallow lands available as compared, say, to the regions east of the Elbe, where land settlement was still underdeveloped. The area of Villers (Belgium) was 1,250 ‘morgen’ (one ‘morgen’= 0.4 hectares), or 500 hectares, which is already a large unit. In other, more densely populated regions, on the other hand, smaller grangiae of 200 to 250 morgen were common. By contrast, in central Europe the Cistercians ran operations of 15–30,000 morgen. One of the most original characteristics of the Cistercian model is that it took the management of both the abbey lands and the grangiae under its own control. Thus, they did not work on a seigneurial basis whereby the labour was supplied by villeins and tenants. Instead, the labour was provided partly by the monks, who saw this manual labour as the fulfilling of God’s consummate plan. The chronicles of Clairvaux state that even the aristocratic Bernard sometimes set to work as a forester, cleaving wood to the point of exhaustion.

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With this religious upgrading of manual labour, in a society which still perceived it as an activity for low-born people, the Cistercians wrought a revolution in the mentality of their time. Besides manual labour, the monks also performed other tasks, such as supervising work in the stone quarries, in the iron foundries, in cattle and fish farms, in energy production (water mills and windmills), in wool processing and in the ‘marketing’ of the many agricultural and handicraft products which they produced. The rules issued by the General Chapter urged them to complete their task with perseverance, with precision and with efficiency. The new work ethic, entailing a religious upgrading of manual labour, was an early forerunner of the Calvinist view of the sixteenth century. This change in mentality, inaugurated and stimulated by the Cistercians, seems to me one of the most crucial stimuli for the economic development of the twelfth century. The largest part of the manual labour was provided by the lay brothers, however, and also by a small number of salaried labourers who were more or less in the permanent employ of the abbeys. In the rules of the order, we read: per conversos et mercenarios. Since these conversi and labourers were under the direct orders of the abbeys and of the grangiae, the Cistercians incurred no costs in the form of taxes, leases or other redevances. The lay brothers were explorers, land setters, marsh and polder drainers, shepherds and breeders of cattle, stonemasons, millers, builders, dyke builders, ploughmen, vinegrowers, wine pressers and much more besides. They were taught the most efficient operating methods by the monks. The conversi had an even more sober lifestyle (in eating, drinking, clothing, housing) than the ascetic monks. They formed a cheap labour force. They lived in separate buildings from the monks within the abbey or on the grangiae. The constitution of these lay brothers was regulated by the regula conversorum. The coupling of physical labour to a consumption which was restricted to the absolute minimum led to a remarkable surplus production that was commercialized at the markets of the towns and villages. Notwithstanding the poverty ideal, the Cistercians proved to be shrewd masters of ‘marketing’ techniques. They cultivated good relations with the toll collectors on the bridges and town gates; they were adept at winning the favour of the market bailiffs. When the surplus production for selling on the town markets began to flow steadily, the Cistercians bought one or more buildings (curiae) in neighbouring towns, and these served as entrepots for their trade. These urban properties were under the control of a procurator curiae. Some of the buildings were close to the town walls, which provided the opportunity of avoiding the town gate toll. Their financial means, which quickly became substantial, allowed the monks to speculate at the most favourable seasonal prices for selling. The combination of asceticism, cheap labour and efficient, businesslike management, created an accumulation of wealth which was exceptional for the time. In some chronicles we can read disparaging comments on the occasional financial cupidity of the Cistercians, and several complaints reached the papal

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curia. However, the General Chapter maintained that the chosen poverty of the monks and conversi was not in conflict with the collective ownership of property by the order. The argument was that the created surplus was invested in founding new institutions and in charity. It was not used for consumption. The fact that the Cistercians refrained from providing liturgical services to the community, or did not offer education for the young and did not participate in the organization of pilgrimages to relics, allowed them to concentrate their energy on productive activity outside prayer times. They were wary of living ‘from the altar’ like other monks, and devoted themselves to labour propriis manibus in order to accomplish God’s plan. The development of the towns led to an ever-increasing demand for the products of their labours, and by responding to this, the Cistercians obtained more than average material success. In the expanding markets of the period the members of the order projected themselves as expert production managers and as businesslike financial managers of their domains. The product range produced by the Cistercians was highly diversified. They oriented their efforts, their expertise and their precise working methods to production lines which, in terms of market demand, enjoyed a rapid turnover. In many farms, cash crops such as rye and barley were standard products. In the region of Burgundy, the Rhine and the Moselle they produced high quality wines, and also beer. In York, Scotland and Ireland, sheep farming dominated. Some large operations achieved 10 to 15 tonnes of wool per year (Donkin 1964:95– 144). The multinational spread of the order simplified commercial transactions; for example, wool from Scotland and England was shipped very quickly to Flemish textile centres. In Germany and central Europe, the Cistercians engaged in horse breeding, and the chronicles also refer to glass blowing and the working of salt mines. Due to the Church ban on eating meat during Lent and on many other sober days, fish farming in ponds was a widespread practice. Cattle farming also gave rise to other activities, such as leather processing. The increasing demand for metal implements meant that the iron foundry and the coppersmith’s trade flourished in those places where the necessary raw materials were available. However, in metallurgy too, the multinational network of the order was a positive factor. The operations which had no iron locally were able to obtain it from those grangiae with a surplus. In the area of water management (draining of marshes and flooded polders, as well as the building of dykes), the Cistercians introduced new techniques. For the transport of their products to the markets, they used not only teams of horses overland, but also their own fleet of sloops and barges on the streams and rivers. In making rivers navigable and in building small harbours for their own use, they also displayed great technical skill (von Guttenberg 1910:421–9). From the standpoint of technological progress, the Cistercians were ‘high tech’ in their time. They contributed to the increased precision in measuring and weighing instruments, and also developed efficient accounting methods in the

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running of their commercial operations. The General Chapter met every year in autumn, when the annual balance of income and expenditure of the large institutions was discussed and analysed in careful detail. This forerunner of the board of management of a multinational company led to an erosion of the original ascetic ideal. By the end of the twelfth century, the order had grown into a powerful institution with a corporate culture that contrasted with the evangelical austerity and asceticism of the early years. In 1190 the Cistercians had to deal with a number of local revolts by farmers, protesting against the highhanded expropriation of their tenanted land. As a result of this, the image of the order as an ascetic and disinterested explorer of virgin land received a serious blow. Some heretical movements, like the Cathars, labelled themselves as the pure or perfecti in comparison to the socalled white monks (Manselli 1975). Within the order itself, a millenarian counter-movement emerged, inspired by the Cantabrian Cistercian abbot Joachim of Fiore. With the radical zeal of a revolutionary, Joachim announced the dawn of a new era in which the pure spirit would slay the dragon of the mounting materialism. THE TRANSITION TO THE LATE MIDDLE AGES In the thirteenth century, a gradual shift manifested itself in the economic activities of the Cistercians towards more commercial and financial operations based on the urban markets. This evolution was to reach its full bloom in the fourteenth century. Right from the start, rational production methods yielded a substantial surplus which could be commercialized on the markets. As early as 1126 the General Chapter decreed that the order was permitted to carry out the necessary financial transactions resulting from the sale of the production surplus and from the acquisition of new lands. When the volume of trade and the resulting financial transactions gained full momentum, the closer involvement of the order with the commercial world created new problems. As far as commercial and financial transactions are concerned, the norms of the Church and the mentality of the rising trading class formed two different worlds. Canon law, codified by Gratianus and updated by Popes Alexander III and Urbanus III, professed a restrictive economic ethic in which the legitimate and illegitimate commercial activities for monks and lay people were described in detail. Commercial dealings and the carrying out of banking activities by monks were forbidden and in cases of transgression stiff sanctions were ordered by the curial courts (Leclercq 1954:68–82). Driven by the success of their rural activities, the Cistercians evolved in the direction of commercial and financial activity. The weakening of the ascetic ideal led to a gradual reduction in the numbers of conversi. They were wary of leading a life of hard work and austerity in order to enrich the monasteries. Due to the resulting shortage of manpower, a number of abbeys contracted out some of the plots to tenants on the basis of a seigneurial contract. This switch from

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rural exploitation under their own control to the formula of the seigneurial rent economy accelerated after the Chapter of 1224. In the economic activities of the order, there was a shift from the rural production base to the commercial and financial superstructure. In greater numbers than before, monks and conversi visited the markets and the urban centres, where they regularly came into contact with traders, money changers and bankers. These were people living a worldly life (in stark contrast with the austere lifestyle of the monks) and they were not strict followers of the canon law regulations. Some monks became involved in prohibited commercial practices and tarnished their virtue as a result. As early as 1157 the General Chapter, concerned about the purity of the monastic ideal, deplored this state of affairs: Multa de mercatoribus nostris querela est, multa confusio. The thirteenth century saw a multiplication of the number of urban buildings owned by the order. In some towns, several commercial entrepôts developed into full-blown trading houses. Besides the sale of the rural surplus and the purchase of needed work implements, these curiae gradually ventured into general trade and financial dealing. Some abbeys and grangiae followed this trend and organized rural markets. These market activities by monks were prohibited by canon law. The trade community also protested against the retail sale of common products by monks such as beer, wine, salt and fish. The Cistercians became partners in the upcoming credit economy of the late Middle Ages. Feudal lords in financial need sought recourse in the financial reserves of the abbeys, pledging land from their estates as security. Such mortgage loans were strictly regulated by canon law for lay people and forbidden for religious orders. Interest on mortgage loans was condemned by canon law as usury and was legally and morally sanctioned. In this as in other speculative activities, the Cistercians as children of the light showed themselves to be just as skilful in cupidity as the children of darkness, i.e. the secular traders and bankers. Thus, in 1240 the Cistercian abbot Caesarius von Heisterbach complained that some monks in the order were corrupt and behaved like avaricious traders and usurers: monachi avari sunt, mercatores sunt. In the second half of the thirteenth century their rural, and in particular, their agricultural operations gradually stagnated. The dynamism of the development in Latin Europe came from the towns, driven by the trading middle classes. The Cistercians had created the last cycle of economic growth by rural monks. The development of efficient operating techniques in the area of rural development in the twelfth century was largely their work. When their model entered a crisis, as a result of internal tension between ideal and reality, the mendicant orders of the growing urban centres of Latin Europe, the Dominicans and Franciscans, took over the reform movement in the Church and in society. The society of the late Middle Ages aspired to new forms of spirituality, of liturgy, of religious conscience and of socioeconomic norms. This was the dawning of modern times.

VI MEDIEVAL THOUGHT IN THE LATIN WEST

THE LATE BLOOMING OF THE LATIN WEST When the world of late Antiquity came to an end, it was succeeded by three major heirs: the civilizations of Greek Byzantium, of Islam and of the Latin West. Before the decline and fall of the Roman Empire, the very core of the Mediterranean had become the centre of a spiritual and socio-political transformation inspired by an ascending oriental religion, namely Christianity. This changed the inner structure of pagan society. During its formative period the new religion absorbed the classical legacy of Platonism and Stoicism, with appropriate emendations from the Christian perspective. The symbiosis of the message contained in the revealed scriptures with a Christianized Neoplatonism was one of the major achievements of the Greek Church Fathers. St Augustine, the first great theologian of the pars occidentalis, relayed this tradition to the Latin Church. His Civitas Dei formed a masterly synthesis of a Christianized Neoplatonism by a Latin rhetor emphasizing his own spiritual accents. In the following centuries St Augustine would have a greater impact on the development of dogma and on religious sentiment in Western Christendom than any other Church Father. Up to the late Middle Ages he was a star of the first magnitude. After a short eclipse during the high-tide of late medieval scholasticism he enjoyed a revival, leading to the genesis of Protestantism. In the early Middle Ages the temptation of the Church to become overtly secular was held at bay by ascetic movements and by the blooming monastic communities. In their prime these spiritual communities strove to live the heavenly kingdom on earth. The western part of the Roman Empire relapsed into a long rural slumber. And in the feudal mosaic that followed, the princes of the Church and more so the monasteries became almost the sole bearers and transmitters of the intellectual heritage. In the works of the early Middle Ages, upholding and cherishing an otherworldly ideal, there was hardly any place or interest for the material condition of people and society. Most economic dealings were perceived as a devilish trap, enticing the all too frail human nature. In these dealings, the sins of avarice,

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covetousness, cupidity and other falls from grace lurked constantly around the corner. The sin of usurious practice, loathed as rapine and the amor pecuniae in general, was considered to be an especially disgraceful offence against the virtue of Christian charity. Patristic literature quoted freely the famous verses (Matthew, 21:12) singled out by John Chrysostom, where Jesus chases traders and moneychangers from the temple: Et ejiciebat vendentes et ementes de templo. Another influential Church Father, Gregory of Nianza, epitomized with physiocratic overtones the patristic doctrine on usury for the predominant agricultural societies of that time. According to this spiritual leader, only productive activity counts in economies with a large subsistence sector where trade dealings are marginal. The trader (and especially the usurer) was morally downgraded as one who amasses where he did not sow and harvests where he did not scatter seeds; taking his affluence not from cultivation of the earth but from the destitution of the poor. Most Church Fathers looked at economic dealings from the standpoint of intention. Since the lust for gain was the driving motive, they opined that it was hardly possible for a tradesman and a money-changer to be a good Christian. With the inception of the second millenium the long period of stagnation came to an end and a flourishing new era was in the offing. The twelfthcentury renaissance of the Latin West produced seeds which in later ages would engender its intellectual and economic ascendancy. In the late Middle Ages, the Latin Church generated one of the most elaborate and thoroughly integrated systems of religious thought the Western world has ever known. The identification of the Church with society as a whole was a doctrinal achievement with innovative spin-offs for the theoretical development of canon law and of scholastic theology. During the high-tide of this doctrinal outburst the papacy was the supreme ecclesiastical authority with large temporal responsibilities (plenitudo potestatis). This self-assertion was sanctioned by the law courts of the Church and by the papal claim to excommunicate the non-conformists into the ban of heresy. In the twelfth and thirteenth centuries the papal monarchy was set to drive the doctrinal dissidents, without any exception, out of the field (Southern 1970; Kuttner 1980). This ambition of caesaro-papism was fiercely resisted by some of the most notorious emperors of that time. While in the Islamic world the spiritual power of the caliph had been gradually diluted and taken over by the secular arm of the sultans and emirs, in the Latin West the situation was more complex. In a first move and in emulation of the eastern Greek Church of Byzantium, the Latin papacy had asserted its spiritual and constitutional hegemony. In a second move the Pope of Rome strove to prove the superiority of the vicar of Christ over all temporal leaders. In the long and tenacious struggle that followed, both sides, popes as well as princes, indulged in some excesses. On a lower level the ambition of the ecclesiastical authorities to identify themselves with society as a whole aroused at times the anger of the population. The feudal practice of the Church tax, levied by the secular and monastic clerics,

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met with particular opposition from heretical movements like the Cathars. During several decades these movements were able to muster mass appeal against the rigid Church doctrine imposed on worldly activities like trade. At the moment when commercial expansion and economic development started to break through the feudal structure, several heretical movements in the north of Italy, in the south of France, in the Rhineland and in Flanders flowered on the basis of an ideology more in line with the needs and aspirations of the new social classes in ascendancy. The unfolding of the second millenium opened new material perspectives, leading towards a transformation of the feudal society largely based on a subsistence economy. With the crusades, demonstrating the newly acquired military clout of the Latin West against Byzantium and against the Islamic infidel, the crusaders had met with cultures and societies on a higher level of development. In the wake of this widened horizon, the closed enclaves of the subsistence economies broke from their isolation. Trade activities expanded, the urban centres started to bloom and technical progress went into a higher gear. The resultant economic and urban development wrought a system-change which would gradually sap the cohesion of the feudal fabric. In the course of this evolution a more complex society emerged, eliciting a new intelligibility of the world with new solutions to its problems. A great number of monasteries, who for centuries had been enlightening points of intellectual life in the traditional mould, were unable to meet the challenge. The newly formed monastic order of the Cistercians, however, became a pioneer in development on the basis of a new work ethic and with an innovative managerial model. In the intellectual field, the vacuum was eagerly filled by the cathedral schools, followed by the universities, where the newly created mendicant orders took the lead. In the dynamics of intense change the scholastic mission of the monasteries declined and the universities of the Latin West evolved as the intellectual hot-houses of the late Middle Ages. One of the most important by-products of this innovative search in the new centres of learning was the rediscovery and absorption of ancient texts. The newly found texts like the Roman law and the accelerated reception of a wider range of classical philosophical works produced a quantum leap, resulting in a theoretical widening and deepening. In this process the scholars of the Latin world proved to be more than passive absorbers. Like their Islamic predecessors they interpreted the textual legacies from Antiquity in their own spiritual, intellectual and social mould. In this process of cultural indigenization the Latin scholars benefited largely from the Islamic models before them. These texts were scrutinized, commented upon and constantly subjected to new questioning and interpretation by succeeding generations of scholars from the late Middle Ages. The rediscovery of Emperor Justinian’s law codex, the reception of the Greek writings, in particular of Aristotle’s works, as well as the reading of the Islamic commentaries, initiated a theoretical deepening. The scholastic achievement became the historical bench-mark in medieval

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intellectual history. The numerous glosses of the Roman legists, the detailed elaborations of the canonists and the more speculative constructs of the Latin scholastics have been studied since the end of the nineteenth century by a great number of historians of economic thought. The volume of the original material, a great deal of which is still in manuscript form, is enormous. But only a small part of the medieval texts deal with topics of interest to the historian of economic thought, like the concepts of money and wealth, value theory, commercial exchange and usury. In their enthusiasm a number of historians regard the commentaries produced by these scholastic writers as medieval anticipations of modern economic analysis (Worland 1967; Gilchrist 1969). There is no doubt that the major of these scholastic texts offered pioneer work in the domain of economic ethics, but their prior objective was a pastoral one. The first and foremost preoccupation of the medieval schoolmen, canonists and theologians alike, was moral theology. The major question was: how can the faithful, who engage in commercial and in financial dealings, avoid the sin of cupidity and usury? Against the outright condemnation of interest on money transactions and the negative view on trade activities in the patristic literature, the schoolmen of the late Middle Ages constructed new and elaborate sets of doctrine, the novelty being that they interpreted economic activity not so much from the sole standpoint of intention, but also with due regard to the natural, objective and social context in which the various economic dealings took place. In the formal treatment of value theory, in the theoretical analysis of exchange relations and in comments on the functions of money, the exegesis of Aristotle’s practical philosophy took pride of place. However, since the medieval schoolmen lived in a society very different from the Greek polis, the scholastic Aristotle or the Aristoteles Latinus emerged with different accents in comparison with the original Stagirite, due to the process of cultural indigenization. The original works amount to thousands of pages scattered over a multitude of manuscripts. Since the end of the nineteenth century an impressive amount of secondary literature on the medieval scholar has been published by historians of jurisprudence, of canon law, of moral theology and of economic thought. In my own university the study of the economic ethics of medieval times started with Victor Brants and a young theologian who later became Cardinal Van Roey (Brants 1895, Van Roey 1905). In our synthetic survey it is an impossible task to do justice to the many medieval scholars individually. Since a great deal of the scholars belonged to, repeated and sometimes copied the major standpoints of their predecessors and colleagues except for minor details, only the profiles of the most influential come into line. In what follows I briefly describe the most relevant arguments and salient features of scholars who had decisive influence on the development of thought in their time and after.

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THE ROMAN LEGISTS From the fifth century on, when the western part of the Roman Empire slowly disintegrated into a beleaguered and crumbling citadel, the Church took the lead. In due time the Christian community, which up to Emperor Constantine’s reign had been an underground and persecuted catacomb Church, assumed its historic mission as the sole legitimizing superstructure with a universal claim. The unremitting pressure of the invasions by a series of northern tribes attracted by the spoils of civilization, dealt a shattering blow to the structures of the imperial state and society. Succeeding floods of barbarian conquerors—the Franks, the Allemani, the Goths, the Burgundies, the Vandals, and others—moved south in search of land for settlement. Local aristocrats and landowners were exterminated, cities were in many cases destroyed and a feudal-tribal society came into existence. In so far as it survived, the old population took refuge in the forests or were made serfs of the invading landlords. In due time the invaders converted themselves and their peoples to Christendom. For a time-span of centuries the Latin West turned into a rural mosaic of little kingdoms, counties and baronies which were almost constantly at war with each other. In the emerging feudal system political power did not derive from the civil authority of the state; it stemmed from the military prowess and valour of the victorious princeling or chieftain. Authority and jurisdictional power depended upon the personal loyalty of the tribesman to his chief and of the warrior to his leader. A considerable part of jurisdictional power was delegated to local kinsmen and followers, swearing allegiance to a powerful leader. Personal loyalty and a sense of honour to keep this pledge took the place of the legal relation of the public magistrate to the free citizen of the empire, enjoying intrinsic rights. In this feudal mosaic, law and order were largely based on tribal and local customs. Some princes, assisted by ecclesiastical chancellors, had ambitions to bring to life again a jurisprudential system which would transcend tribal bounds. This was the case with the Visigothic Brevarium and of the law tradition elaborated by King Theodosius. But the most prestigious and lasting efforts of jurisprudential systematization were the Carolingian capitularia. The dismemberment of the central state power also had an impact on the economy. The latifundia or the large estates of late Antiquity, who entertained useful contacts with the urban centres of the empire, started to dislocate into a multitude of almost completely ruralized, self-sufficient enclaves. Although trade and town life had not entirely ceased, the surviving urban centres were reduced to a rudimentary form. The feudal society and economy had become almost completely agrarian. The material structure of feudalism was based on the ownership of land. The apex of this closed feudal economy was the landlord. The productive system of the feudal estates had as their main function the material support of the ruling lords and their retinue. Besides a great number of peasants and serfs, these estates also had various craftsmen under command. Their crafts were necessary

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to satisfy the material and military needs of the feudal lord and his dependants: brewers, bakers, spinners, weavers, masons, carpenters and workers in metal. The feudal economy was basically a rent society where the ruling lords, secular and ecclesiastical alike, extracted through an elaborate system of tax levies, the surplus created by the subsistence farmers and the artisans. In return the lord offered protection to his military kinsmen, his followers and his underlings. Feudal lords with only a meagre surplus did not hesitate to go to war in order to replenish their estate. The Church also transformed into a feudal structure. At the time of Charlemagne the abbeys were no longer the colonies of self-supporting ascetics they were at the beginning. The Carolingian monasteries had grown into vast social and economic centres and many were civilizers of virgin territory. They had become the nucleus of a many-sided and intense cultural activity, in many points comparable to the palace and temple estates of ancient Egypt and Mesopotamia. The feudal system was in essence a redistributive economy where rank and esteem for the overlords were in proportion to the capacity to display prodigal expense, conspicuous consumption and lavish hospitality. It was in no way comparable to the allocative calculus of the cumulative economy, based on investment and growth in productivity, of modern times. In the eleventh century, however, an economic take-off was in the making. In the cities of southern Italy – to wit Naples, Amalfi, Salerno and Palermo—and in Ravenna where the classical tradition of Byzantine culture had survived, an emergent class profited from intensified contacts with the flourishing centres of Islam. A mounting class of traders, bankers and entrepreneurs in maritime expeditions started a new expansionary course. In no time this expansionary drive, stimulated by the crusades, spread to Catalonia, to the Languedoc region, to the Rhineland and to Flanders. At these poles of development the new class of civil servants, together with the emerging marchanderie, fought for commercial privileges and for more autonomy in the city government from the feudal lords. It was not a pure coincidence that the Roman law tradition from late Antiquity was rediscovered in Ravenna. Later, the Roman corpus of law was more fully commented upon and systematized in Bologna. These were the centres where Byzantine cultural influence had continued to have an historical impact (Dawson 1946). In the year 1070 the Corpus Juris Civilis of Emperor Justinian came into the possession of the intellectual sympathizers with the Roman law tradition. In no time, the scholars of the newly founded Bologna University initiated the systematic study and interpretation of the Institutes, the Digest and the Code. The jurisprudential revival brought about by the Romanist legists resulted in a series of monumental legal treatises. From the twelfth century on, law and jurisprudence became an autonomous subject in the university curricula of the Latin West. Since the renovatio of the Roman law tradition postulated an autonomous sphere for civil society, the scene was clearly set for an open fight with the feudal system and for a theoretical and doctrinal conflict with the

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magisterium of the Church. Later developments demonstrated that the Roman legists paved the way for the genesis of the modern state. They also opened theoretical and practical avenues for the expansion of the marchanderie, which later was labelled the commercial and urban bourgeoisie. In the high-tide of the jurisprudential research of the twelfth century, the glossators came up with a complete legal system. It was their enthusiastic claim that the reborn legal system offered a panacea for almost all the pressing problems of that time. Before the reception of Aristotle’s political theory, the scholars of the Middle Ages had already taken up the threads with Cicero’s practical philosophy and with a law tradition that was based on the premisses of autonomy for the natural sphere. The glossators with their wider juristic implications of the naturalistic roots of law and civil society, presented an alternative to the theocratic conceptions of the ecclesiastic world, with a renovated conception of the state as a societas humana, or as a man-made community. In the emperor’s palaces this call was heard as an argument with the aura of antique authority. In the conflict between the ecclesiastical magisterium and the secular imperium the law concepts were mobilized against the texts of the ecclesiastics. But also in the nascent city-states these themes had a powerful ring for the leaders of the newly founded guilds, fraternities and communia in their combat against the feudal lords. The Italian glossators particularly systematized concepts proclaiming the legal sovereignty of the people (Nuccio 1984). The new source of law was no longer based on the voluntas principis or the sheer will of the prince relayed by close-knit personal allegiance, but on the voluntas populi, or the will of the people. Against the theocratic claim of the Church and the feudal framework, with their descending forms of authority and law (based on the principle Rex Dei Gratia), the most influential glossators elaborated legal constructs leading to a doctrinal counterpart in which political power stemmed from popular will (Ullmann 1980, 1988). In the economic sphere also the renovation of the Roman law tradition operated as a novel trend-setter. Justinian’s corpus juris was a compilation of edicts evolving from Classical times to late Antiquity. As such it bears the imprints of a legal system from a state-controlled economic system. Basic concepts like equitable price (justumpretium and pretium verurri) as well as the corrective devices to the speculative gyrations of market prices, like the concept of exorbitant fraud or unusual injury (laesio enormis), bear witness to the intention of the public authorities to keep the volatility of price formation in bounds. This according to a principle of reasonable, socially acceptable target zones. But the basic principle of Roman law was freedom of private bargaining. In the adaptation of Justinian’s corpus to the Middle Ages the glossators, with a feudal society before them, initially took laesio enormis as an exceptional protection for injured sellers and buyers of land. In feudal society, where military clout and political power were unevenly distributed, the trader as an individual could become a victim of undue moral and material pressure. The concept of laesio enormis evolved as a legal device to protect the individual against the

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vicissitudes of the power system. In the later commentaries it matured towards a broad generalized principle for both buyers and sellers of all kinds of goods. The evolution may be seen as a legal effort to rectify fraudulent bargaining or gross commercial injustice (Baldwin 1959). The glossators of the twelfth century adapted the ancient norms to an urban and commercial society in expansion, while the Justinian texts came from the more conservative background of Late Antiquity. Taking into account the changed social and economic background, the glossators transformed the ancient principles to the functional prerequisites of the ascending commercial community. They came up with new solutions. In the legal mind-set characteristic of the time, notarial acts formed the contractual nexus of all commercial and financial dealings. Although the interpretative schemes of the Romanist legists could not pretend to have the moral authority of the ecclesiastical canonists and theologians, in the private sphere and in the practical dealings of trade and finance they had a binding character. Two of the many notable civilists merit the attention of historians of economic thought, namely Azzo and Accursius. Their monumental treatises were basic to the later developments spun out by Odefredus, Andrea d’Isernia and Cino de Pistoia. Azzo was a law professor in Bologna from 1191 to 1220, where he wrote his famous Summa Codicis. The manuscript has been copied hundreds of times in the law faculties, but the first reliable printed version was edited in Venice in the year 1498. With rhetorical arguments and style more reminiscent of Cicero’s work than of Aristotle’s philosophical treatises, the Bolognese glossator draws a clear distinction between man-made natural laws and God’s justice: nam author juris homo, justitiae vel Deus. Although he was a devout Christian, in his scholarly work he does not hesitate to draw sharp demarcation lines between Church and State. In the natural state of affairs, he muses, man is at times unable to live up to the divine ideals which were revealed to us in the Old and the New Testaments. In his rather short chapters on usury, this pragmatic vantage point is exemplified by the statement that the emperor, on account of the necessities of life, may not be able to forbid and sanction the taking of interest. In many cases the emperor’s power is limited to the more useful task, which consists in legislation and jurisprudence destined to keep the margin of interest taking in reasonable bounds. The etymological root of usura is usus res (usu rei), which in Classical times had no negative ring at all. Later, the terminology changed to foenus, derived from fetus, or ‘new life’. The legists and canonists followed the distinction in Roman Law of a mutuum (referring to non-fungibles). In the mutuum, what is mine becomes thine. There can be no question of compensation (id quod interest) for the use of money, except in cases where the creditor suffers damage, because his money is paid back too late. If he has suffered damage he may ask for compensation (interest); if not, this is called usuru. The maximum rate is the usura centesima or 12 per cent a year for maritime credits (frequently called foenus nauticum), with the notable exception for agricultural credits where 4 per cent is a limit, because of the lower yields in this activity: qui fructus aridos. In

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the classic case, the practice of a loan (mutuum) does not only leave the door open for financial compensation to the creditor (id quod interest) but it moreover tolerates compensation for the probable risk of non-repayment or of a delay (damnum emergens, lucrum cessans). Azzo also takes into account the utility of the loan to the debtor. When the loan is made for a productive end to the debtor, the taking of interest becomes a licit deal vel praestatur tanquam utilitas, et ideo videretur licita. In his chapters on trade contracts and on price formation Azzo goes upstream to the laissez-faire stand from the age of Classical Rome. His arguments form a legal combat against the many feudal interventions. Most of the time they were institutionalized devices to levy tax income for the feudal lord. In the view of the author, the commercial market sphere is a natural sphere. Its social utility cannot be contested. In so far as possible those who take part in it should be left free in their dealings, on the absolute condition however, that they do not depart from equity. In his comments on the market process Azzo adheres to the Roman classical school developed by Ulpian, who defended freedom of bargaining, with the proviso that the material and moral conditions are such that they permit the negotiation of an equitable contract (aequalitas contrahentium). The price paid and the price received should correspond to a pretium verum translating the worth of the goods; this means a justum pretium, a fair deal. One of the conditions being that commercial exchanges are paid in money of good quality (bonitas intrinseca). The Bolognese jurists produced the legal seeds for a tradition of lay ethics adapted to the expansion of commercial and financial markets in the Latin West. Azzo is one of the first to underline the economic difference between interesse and usura. If the loan has been contracted on the expectation of a materially useful and profitable investment (praestatur tamquam utilitas… et fructus percepit) the interest due is licit and should not be considered to be usury in the clerical sense. Being a Christian, he dutifully completes his argument by the statement that the legitimacy of interest in the lay sphere or the jus humanum may be in contradiction with the stricter canons of the ecclesiastical authorities. Accursius (1185–1263) was the second towering figure of the law faculty in Bologna. This prolific writer assembled the impressive number of 96,940 glosses in his Magna Glossa. This monumental work was a great success and had an enormous impact on succeeding generations of Roman legists. The first printed editions date from 1494, published in Perugia. Accursius was an avowed protagonist of the new lay ethics of his time. A fierce defender of the secular power’s authority, he separates with clear lines the specific domains for the spiritual magisterium of the Church and the imperium of civil society. With forceful arguments he claims that the ecclesiastical authorities should refrain from interference in the natural sphere, since in this domain the prince wields legitimate power: princeps legibus solitus. The lay character of his work also shows in the chapters on usury and interest. In these he opposes, in long and tedious distinctions, the laws of man and the laws

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of the Church. Sinibaldi de Fieschi, who was at the time one of his students and was later elected Pope Innocent IV, became his able antagonist in defence of the hierocratic structure and of papal authority in temporal affairs. The arguments on usury and interest, although on the same line as those of Azzo, are more muddled by tedious juridical hair-splitting than the clear glosses of his predecessor. In the chapters on the market process and on price formation, Accursius is again in better form. In crisp language he defends dogmatically the absolute autonomy of private transactions and contracts. His dictum on the problem of the just price became one of the most quoted lines in the civil law tradition and in medieval jurisprudence. His preference for the formation of free prices rings sonorously in a celebrated locus (Digest, 14, 4, 3): communi pretio aestimatur res, quod ergo dicitur, res tantum valet quantum vendi potest, scilicet communiter. Within the constraints set by the social cohesion of the community, market prices are perceived to express the real value of commodities. In normal market conditions the price one can get or one has to pay for a commodity is a just price, since it is an acceptable estimation of its value. In connection with his doctrine on the just price within the social limits set by the principle of laesio enormis, Accursius emerges as a metallist in the debate on money value. At a time when the princes did not hesitate to manipulate the value of currencies, our author clearly sides with the emerging marchanderie of the city-states in their fight against the feudal conception of the valor impositus, that is, against the political conception of money. In this he will be followed by Odefredus, an influential glossator of another generation, who closed the first medieval cycle of Roman jurists with a brilliant synthesis. In the commercial world where money was an indispensable medium of exchange, the value of money had to meet the requirement of bonitas intrinseca. Being a special commodity, it was nevertheless a commodity; tersely stated Odefredus declared: moneta merx. As such, the value of the legal tender should express and follow the (market) worth of the metal it contains. In the feudal world of their time the pioneering Roman legists initiated a lay tradition of thought on the pressing economic problems of the merchant classes in the urban centres. They started the doctrinal discussion on the just price. But lacking the philosophical framework of Aristotle’s ethics, they only stated the principle of free bargaining in exchange, omitting to analyse the mechanics of the market process in detail. More elaborate theories on the genesis of the just price in a socially and morally corrected market context, came later in the summae of the scholastic theologians, who excelled in speculative discourse. THE TEACHING OF THE CANONISTS The Church was quick to react against the laicist challenge of the Romanist jurists. From the eleventh century onwards a series of able clerical reformers were set to strengthen the constitutional apparatus and doctrinal authority of the central Curia vis-á-vis the periphery of local bishop,, the ambition of secular

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rulers and the city bourgeoisie. The Church leaders of the time sensed the tunes of change and prepared for a doctrinal battle. In the mounting conflict between the pope’s ambition of uncontested power (plenitudo potestatis) and the prince’s claim for an autonomous sphere, or secular imperium, juridical questions loomed large. The Church mustered forces, putting in the frontline specialized clerics in the newly founded faculties of canonical law. In the thirteenth century, the theologians joined the chorus. In the twelfth and thirteenth centuries whole generations of scholarly clerics plunged into legal battle and speculative discourse with incomparable skill and zest. For the Latin Church, which had recently asserted its supremacy over its orthodox sister of Byzantium, the time had come to position itself as the undisputed vicar of Christ in its own territorium; against the princes and against the ruptures in the social fabric wrought by commercial expansion and economic development in general. Spiritual unity was seen in terms of doctrinal discipline, obedience and uniformity. A succession of scholarly, able and determined popes– Alexander III, Innocent III, Gregory IX, Innocent IV and Boniface VIII—put their indelible print on the government of the ecclesiastical institutions and on late medieval religious conscience. Around 1140 Gratian, a Camandolese monk, assembled with the aid of his assistants a collection of ecclesiastical edicts, moral norms, decretals and instructions issued by the Church Councils, the popes and the bishops since the end of the Roman Empire. Since his avowed aim consisted in the harmonization of this mosaic of norms, its significant title was Concordia discordantium canonum, better known under the name of Decretum Gratiani. The assembled texts were only a first attempt at concordia or harmonious synthesis between the abundant collection of authoritative rulings issued by ecclesiastical leaders in the past. This stepping-stone, nevertheless, became extremely significant. Moreover, the Decretum treated in great detail the numerous appeals by litigants and the jurisdictional responses given by bishops and other Church leaders. In the decades following the appearance of the Decretum, canon law became the master science in the clerical world. In the doctrinal effort of the following decades, canon law matured as the technical instrument of the papacy to consolidate its hierocratic ambitions. With the newly discovered art of Greek logic and with the model of the grammatical skill displayed by the Roman rhetors and legalists of their time, the canonists developed a novel methodology of hermeneutical exegesis and analytical reasoning in the organization and exposition of their scriptural material. Compared to their Islamic predecessors in the doctrinal interpretation of divine law, from which they learned by symbiosis, the achievements of the Latin canonists rank among the highest quality. In the beginning, the influence of biblical sources and of the commentaries of later Church Fathers prevailed. But in the ongoing professionalization of the canonical texts the doctrinal position hardened and the treatises took a definite academic turn. This was the case in the numerous discourses on usury. The twelfth and thirteenth century canonists were in general more dogmatic and

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conservative than the scholastic theologians who indulged in more speculative discourses. With the vigorous expansion of trade and banking the issue of usury moved centre stage in the doctrinal discussion. The canonical doctrine of the Middle Ages has been covered in great detail by a number of scholars since the end of the last century. The most notable contributions published in the last decades are those of Baldwin 1959; Langholm 1984; Lapidus 1987; McLaughlin 1939; Le Bras 1972; Noonan 1957; Nuccio 1984; Manselli 1983 and Spicciani 1990. The take-off in urban revival and economic development offered new perspectives for a new class of civil servants and for the marchanderie, but aggravated the socio-economic plight for others. Investment in commercial activities, in banking in the new crafts of artisans, in long-distance trade and in other profitable novelties widened the income gap between these homines novi, the new mounting classes and between the conservative groups keeping to the traditional mould. As time went on a growing number of urban poor became potential followers of heretical movements with a messiantic flavour. The differential rate of profit to be expected from commercial investments and in activities such as land speculation in the expanding urban centres, drained the financial means away from employment in the rural and feudal economy. Here the rate of accumulation was, for structural reasons, much lower. Since the Church was itself a feudal lord with large rural estates and monasterial organizations, and bearer of a moral doctrine in this domain, its scholars reacted institutionally with a vigorous condemnation of usury. The condemnation of usury was doctrinal in nature but it also aimed to present a solution to the economic plight of the rural sector and to the misery of the urban poor. In tune with the biblical texts and with the doctrinal position of the Church Fathers on the human frailty of cupidity, the medieval canonists developed new legal constructs, refined by analogical reasoning and the rediscovered logic. They analysed the procedural consequences of a loan or a mutuum. In a loan, they argued, the creditor abandons to the debtor the right to dispose of the transmitted financial means. This was a clear reminder of Luke’s gospel (6:35): Mutuum dare, nihil inde sperantes, ‘what is mine [meum] becomes yours [tuum]’. Usury occurs ex cupiditate when the creditor extracts from the borrower a due in excess of the received principal. On this principle, the twelfth century literature of the canonists introduced a dogmatization on the gratuity of a loan. In the doctrine on usury and the just price Gratian’s Decretum offered nothing new, since it leaned heavily on the dicta of Church Fathers from the early Middle Ages like Isidore of Seville (Gaudemet 1980). It is with the second generation of canonists that we notice an inkling of an opening towards the moral problems confronting the commercial community in a wider social context. This is the case with Ruphinus, who wrote his Summa Decretorum in 1157. In his chapter on usury Ruptinus still follows the strict norm laid down by Gratian: Quicquid unquam preter sortem accipiunt usura est, stating that all that is expected in excess of the loan’s principal amounts to usury. In the locus on the

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just price in commodity exchange, where since Carolingian times the ban on turpe lucrum morally condemned the making of profits in exchange, Ruphinus relaxed the strict norm for cases in which merchants or commercial artisans render the commodities more useful by their labour and their skill: Si suis laboribus vel impendiis rem meliorem reddidit, sicut artificibus; lucrum licitus est. This first appearance of an ‘added value’ doctrine in canon law was made more specific still in the case of exchange in agricultural products by Huguccio, the second leading canonist after Gratian. His Summa Super Decretum started to circulate after 1185. Huguccio’s emphasis on the special case of agriculture received the authoritative imprint of one of the most influential popes of the thirteenth century, Innocent IV. Several historians of the canonical issues that concern us here, have underlined the conceptual novelty of this great scholar and Church leader. As a young man Sinibaldi de Fieschi grew up and became familiar with the bristling activity of Genoa, a maritime centre of the Mediterranean in full expansion. As a student he attended for a while the lectures of the prominent Bologna legists, who shocked him on account of their laicist novelties. The Roman Curia chose him as pope for his outspoken ecclesiological stand. During his papacy the doctrine of plenitudo potestatis in the spiritual and secular domain, as well as the hierocratic superstructure of the Church, reached its climax. This caused a sharp conflict with the German emperors. In 1151 he assembled his manuscript Apparatus in quinque libros decretalium, which was widely circulated and later edited and printed in Venice (1495). Some historians have described this prominent Church leader as a physiocrat. He was moreover a keen observer of the ongoing mercantilization and monetarization of the medieval economy. His sharp mind grasped the wider implications of socio-economic transformation. In addition, we should mention his firm stand against the vicious practice of money fraud (defraudata moneta) and his solid defence of the metallist tradition, requiring currencies of good material quality. In the Expositio ad Rubricam, an addendum to his usury chapter, the pontiff excelled with a pioneering masterpiece on the ‘differential rates of rent’ and on its social and economic consequences (Venice edition, pp. 615–16, 618–19). As a result of the higher rent rate to be obtained in financial and commercial activities in comparison with lower rates in agriculture, he observed that capital deserted the rural sector and moved to the more lucrative activities of the urban and commercial sector. This created a moral and social vicious circle, with grave consequences to the authority of the Church and misery for the involuntary poor. Innocent IV was literally traumatized by the ‘immiserizing growth’, which created a widening gap in living standards between the new rich and the urban and rural poor. The widening gap between ‘haves’ and ‘have nots’ was also characteristic of the take-off in growth of later times, as the more recent experience of the developing countries has amply demonstrated (Baeck 1993). More than any other canonist of his time, the pontiff points to the evil

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consequences for the growing mass of marginal poor, who were inclined to join the successful heretical movements of the time. The text of his rubric opens with well chosen quotations from the Old and New Testaments and the Church Fathers, on the prohibition of usurious practice. But as a former student of the Roman legists he adds that even if the law of the natural sphere considers the taking of interest a licit procedure, morally speaking it is a sin, because of the evil that results, like famine and misery for the involuntary poor. If the taking of usurious rates were allowed by the Church, great evils may follow omnia mala inde sequentur. By the growing scarcity of capital, people would leave the land, except when they have nothing else to do. The rural exodus will cause great famines and the poor may perish. Although some would have land in property to till, usurious rates would make them unable to buy the necessary animals and implements to work the soil. Those who are able to do so would rather place their money where the rate of profit is higher and more certain, preferably in profitable or usurious business, rather than in agriculture, where the gain is smaller and less certain: turn propter lucrum, turn propter securitatem pecuniae, potius in usuras quam in minora et minus tuta lucra ponerent pecuniam. In this locus we read for the first time a description of an embryonic allocative calculus, in a condition where differential profit rates operate to the detriment of the sector with the lowest rate, namely agricultural production. The medieval pontiff continued his analysis with the argument that food would become too expensive as a result of its scarcity, so that the poor would be unable to buy it and may perish. In a situation where usury prevails, only a few will survive without being reduced to poverty. This is a problem since only the grace of God can make one willingly accept poverty, as is the case with the ascetic monks. In a third locus the author states that usury is prohibited by the Church because one who engages in it can hardly avoid the sin of idolatry. The heart of avaricious men is possessed by the desire for money. In his concluding arguments the pope picks up themes, which at the time of writing, were repeatedly formulated by the theologians. The charging of usury amounts to selling time, but time belongs to God, not to man. In addition to this, he muses, the ancient scholars teach us that money, being a mere instrument of exchange, is unproductive: cum nullus ex pecunia sit fructus. A contemporary of the great pope, Enrico da Susa (c. 1195–1271), who in 1262 became Archbishop of Ostia and shortly afterwards Cardinal Hostiensis, defended a more nuanced thesis. His Summa, Book V, de usuris, followed the prevalent ecclesiastical doctrine: usury is a rapacious practice and as such grave sin. One important exception should be noted, however, namely in the case of commercial money. When the facts show clearly that the money put at another’s disposal becomes an integral part of professional business, where the rate of profit scores high sit mercator qui consuevit sequi mercata et nundinas et ibi multa lucrari, an interest or compensation may be expected, in case of damnum emergens; this is in case the retarded repayment causes a loss of opportunity to

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the mercator or creditor. A more forceful line of reasoning breaks through, a few decades later, in the works of the Franciscan scholar, Petrus Johannis Olivi, who introduced the concept of commercial money under a new term, namely capital. Important to notice is the fact that the prohibition of usury was not only the work of scholarly canonists. It moreover was incorporated into the imperative deliberations of the Church Councils. Their sanctions were strictly executed by the ecclesiastical law courts. In the confessional also the faithful were questioned on usurious practice. There the penitent faced severe material and moral sanctions, the most radical being the ecclesiastical refusal of sacramental service for the usurer. For the masses, the medieval Church disposed of still other means to imprint its moral codes into the collective mind, the most illustrative being the iconography of sculptures in the tympanums and capitals of the churches. In the sculptures of the churches in Romanesque style (eleventh and twelfth centuries) particularly, sanctions for usurious practice after death appear frequently. In a most spectacular way the sculptures display the qualms of the usurer, the moneychanger and the merchant, and those who had practised exorbitant pricing were exposed to tortures by Satan at the moment of death. The rapacious wrongdoers were dragged to hell without mercy by devils with horrible grimaces. The iconography of these sculptures, visible and understandable to all, left a deeper imprint on the collective mind than the scholarly decretals and the dicta of the canonist texts. In the deep layers of society, however, the iron law of ecclesiastical prohibition had notable counter-effects. In the material domain the urban and commercial expansion gradually sapped the cohesion of the feudal fabric. A manifest drift in religious consciousness was taking place. The structural violence of ecclesiastical dogma engendered, especially in the regions experiencing expansionary growth, an anti-clerical opposition. At regular times the latent opposition against moral constraints of Church dogma and against the feudal structures, which had been smouldering for a long time, burst into the open. The heretical movements of the twelfth and thirteenth centuries formed an amalgam of spiritual messianism, of reformist zeal and of an eschatological longing for a social renovation of society. In the ascetic hotbed of the Church itself, the Cistercian abbot Joachim of Fiore, called for the triumph of the Spirit over the degenerated institution in a messianic drive. In the lay sector of society, one of the most radical heretical movements, the Cathars, prospered not only on a medieval version of the gnostic dualism of ancient Persia, it attracted also a good many members of the merchant class and the artisans. Against the strict dogma of the ecclesiastical authorities, prohibiting usury and financial dealings in general, the Cathars espoused a doctrine more in line with the growing commercialization of economic life. In their view the social novelty of the emerging commercial and democratic society was morally better than the exploitation inherent in the feudal structure.

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With a logic and propaganda understandable by the landless peasants and the rural artisans, they railed against the feudal lords who profited from the extraction of economic surplus under the form of seigneurial rent. In their eyes the feudal lords were the most shameless and rapacious usurers of all. In vehement language, reminiscent of the prophet Amos, the spiritual leaders of Catharism hammered out the point that the feudal rent, sanctimoniously legitimated by ecclesiastical doctrine, was pure rapine. In defence of the common people working with their own hands, like craftsmen, merchants and even money brokers, the ‘pure spirituals’ of the movement quoted evangelical sources like the parable of the talents. In this locus Jesus praises the ones who have doubled the principal and loathes the one who had idly kept his treasure without profit; they also referred to similar lines in Matthew 25:27 and Luke 6:34. Among the many spiritual revivalist movements of that time the Cathars were the first to attack openly the doctrine of the Church on usury (Brenon 1989; Nelli 1972). Long before the originators of the ‘Calvinist Ethic’, the Cathar leaders conceived the new classes of merchants and craftsmen as indispensable and useful elements of society, whose activity merits a fair material reward. Their legitimation was that the peasants and traders worked with their own hands, while the feudal system of seigniorage drained the rural surplus produced by the work of others. In the regions of northern Italy and southern France (Languedoc) the Cathar heresy enjoyed a mass appeal that threatened the traditional system. A bloody crusade organized by a feudal coalition blessed by the pope, crushed the popular movement; this notwithstanding its tenacious resistance. In the Flemish towns where a powerful merchant class had developed in connection with the preindustrial masters of the flourishing guilds of craftsmen, the Church’s dictum that time belonged only to God and could not be sold tempus donum Dei est, unde vendi non potest came under attack. This purely religious notion of time not only blocked the expansion of credit on interest, it also disorganized the work rhythm of the laboratories in the industrial shops. The angelus bells of the numerous churches and convents reminded the workforce at regular intervals during the day that time had come for the moment of prayer. The frequent interruptions on behalf of ‘religious time’ for the labourers disorganized their rational employment or ‘professional time’. The ensuing conflict over the ‘just wage’ in a situation with frequent stops in working time, sharpened the issue. From the thirteenth century, the authorities of these urbanindustrial centres asked for a stricter regulation and separation of the two time schedules. After a long battle with the ecclesiastical authorities, the guilds of the most important Flemish towns obtained the permission to build a belfry. From then on, its carillon would regulate the work rhythm in the shops. Outside the lecture halls of the universities and under the pressure of the marchanderie, the notion that ‘time is money’ was more easily accepted than in the doctrinal texts.

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THE CONTRIBUTION OF SCHOLASTIC THEOLOGY In the twelfth century the educational system of the Latin West underwent a fundamental transformation. The intellectual leaders of the monasteries who kept to their traditional mould lost the initiative and the newly founded universities started with a new organization and formalization of knowledge and of research. Just as the faculties of civil and canonical law had done before them, the faculties of the arts and of theology were enthusiastic in their reception of ancient texts. Although the Latin scholars had never lost contact with the literature of the Roman rhetors, the cherished treasure was relayed through intermediary channels, the most important being the Church Fathers of the Augustinian tradition. As a consequence of the renewed interest in the legacy Roman rhetors such as Cicero, Seneca, Boethius, Lactantius and Macrobius–the Latin scholars renewed acquaintance with discourses on practical philosophy produced without the inspiration of divine revelation. The infiltration of Arab commentaries on the heritage of Greek science, especially Aristotle’s logic, created a sudden passion for the systematization of knowledge on the basis of this novel methodology. Not only Abelard with his famous dialectic of Sic et Non, but also other prominent figures of twelfth century thought, namely St Victor of Hugh, William of Conches, Domenicus Gundisalvi and John of Salisbury, joined the chorus. The disordered texts of the patristic tradition needed streamlining on the basis of the discovered logic, in order to satisfy the trend of systematization. Like the pioneering canonist Gratian had done a decade before him, Peter Lombard the theologian compiled in 1150–2 a sort of encyclopedia with the title Sententiae in IV Libros. The method employed in this ‘Book of the Sentences’ consisted, first, in the formulation of a doctrinal theme or problem; second, to quote authorities for and against from the Scriptures, the Councils and the Canons; third, to give his own judgement on the issue. His textbook was a masterpiece of harmonious balance between received tradition and hermeneutic novelty. Generations of theologians would honour Peter Lombard’s opus with careful analysis and with their continuous effort of actualization on the basis of judicious comments. Several developments contributed to the sudden flowering of themes derived from practical philosophy, the most important being the socio-economic changes and the problems raised by intellectual renewal. In the faculties of arts and theology the old interpretative themes of ethics, politics and economics were passionately reworked on the models offered by the Roman rhetors and the Arab scholars. Practical philosophy and moral theology of the twelfth century continued to lean heavily on the Platonic-Augustinian tradition. But they received a new methodological impetus from the study of Cicero’s treatises, more particularly his De Officiis. Cicero’s influence would keep the scholarly work of the twelfth century on politics, ethics and the economy in practical bounds; with only an inkling of theoretical analysis along the lines initiated by the Islamic sources, more particularly al-Farabi.

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In the thirteenth century the study of practical philosophy and moral theology took a radical turn towards a more theoretical foundation with the invasion of Aristotle’s Ethics (Van Steenberghen 1966). The work of the Greek master reached the Latin West in the company of Ibn Rushd’s theoretical reworkings. Its intellectual impact provoked a break in the Latin tradition. The study of practical philosophy and moral theology was suddenly enriched by a method and intellectual focus of unparalleled philosophical depth. The new approach became the glory of the Paris university. This philosophical enrichment, however, had also a darker side, namely the gradual academization of the scholastic discourses. In the course of time discourses held in the lecture halls of the universities narrowed and shrivelled in the closed intellectual atmosphere, with an almost complete disregard of what was happening in the real world (Knowles 1962; Chenu 1966; Wieland 1981; Nederman 199D). At the end of the thirteenth century scholastic theology became embroiled in a paradigmatic controversy on the epistemological union of concepts and reality. The via moderna of the nominalists initiated a way of thought separating the conceptual world (the universals) from the real world. The initiation of conceptual pluralism paved the way for the more empirical outlook of authors like Petrus Olivi, Duns Scotus, John Buridan and Nicholas Oresme (Leff 1984). This fourteenth century dissolution of the medieval outlook left more leeway for the study of the concrete world. In this new mind-set the scholars and artists of the Italian Renaissance generated the lay flowers of modern humanism. ALBERTUS MAGNUS AND THOMAS AQUINAS Albertus Magnus (c. 1200–80) and Thomas Aquinas (1225–74) were two giants of thirteenth-century scholasticism. Their influence on late medieval thought was enormous. Their basic outlook had a lasting impact on the development of Christian philosophy and theology. Even up to modern times their intellectual influence has been acknowledged. It came to life again in several renaissances, in the many Neo-Albertisms and NeoThomisms influencing the evolution of Christian thought. In the last quarter of the nineteenth century the two scholastics made their entrance in the study material on the history of economic thought. At that time, socialism and Marxism started to mobilize the labour class. The two isms also fascinated a growing number of progressive intellectuals. The Church, herein supported by socially minded intellectuals and economists, reacted with a rethinking of its social and economic doctrine. In this intellectual and moral renewal the basic principles of the scholastics, especially the Thomistic tradition, loomed large. Socialist intellectuals and even Marx himself, recognized Thomas as the originator of the labour theory of value and as an authoritative critic of the emerging capitalism of the medieval period. The non-socialist camp presented the scholastics as judicious analysts of the ongoing socio-economic transformation towards a market economy and stressed the need for the social

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and moral correction of capitalism. They criticized its darker sides, particularly its extreme individualism and liberalism. They also strove to correct its pernicious effects, this from a standpoint of bonum commune; advocating just market prices and fair wages for all. In the rising tide of socialism, in favour of a state-planned economy and collective ownership, the opposing forces pointedly referred to the scholastic doctrine on private property. In the ensuing debate on the scholastic economic literature, militants on both sides have marred serene study of the historical traditions. The publication of Schumpeter’s high esteem for the scholastics in his History of Economic Analysis (1954), at a time when the cold war was at its height, rekindled intellectual interest in their work. Some of the resulting literature is loaded with ideological bias, leading to wrong interpretations which mistakenly impart the colour of their authors’ beliefs to the original doctrines. In recent interpretative literature on the economic issues of the scholastic texts two scholars of the Italian school, Spicciani and Manselli, rank among the best, while Langholm’s opus magnum takes the crown (Spicciani 1977,1990; 1991; Manselli 1983; Langholm 1992). When those two towering figures, Albertus Magnus and Thomas Aquinas, arrived on the intellectual scene of the thirteenth century, the preceding moral theologians had leaned heavily on the decretals of the canonists in combination with Cicero’s rhetorical discourses on political theory and justice. In the thirteenth century, however, the study of Aristotle’s corpus reached a climax. The times were ripe for a paradigmatic change from the spiritual idealism represented by Augustine’s Neoplatonism to a new intelligibility of reality and of justice in particular, on the basis of Aristotle’s rational conceptualism. In the years 1220–30 the Paris faculty of arts took the then known Aristotelian corpus, the ethica vetus and some Arabian commentaries, on its curriculum. When direct translations from Greek to Latin became available, an intellectual crisis was impending, in which Albertus and Thomas played a crucial role. In the year 1247 Robert Grosseteste presented his Translatio Lincolniensis1 with the complete text of Ethics and a series of comments by early Greek exegists. Grosseteste, a philosopher of standing, whose translation team had a solid knowledge of Greek, was able to sail upstream to the original material contextualized by the Greek exegesis of Antiquity. The result was a reHellenization of the Arabian Aristotle (McEvoy 1982). At the beginning of the 1260s William of Moerbeke translated the Stagirite’s complete works, with Politics (up to chapter 1270a 30) included.2 Before we proceed to discuss Albertus Magnus’ reading of the new material, a short reference to Moerbeke’s rendering of some of the crucial Aristotelian terms seems necessary. Indeed, they influenced Albertus’s interpretative scheme on commercial activities and on usury. As we have amply demonstrated in chapter three, Aristotle’s first book on politics analysed the evolution from a selfsufficient household economy towards a commercialized society. This transformation went into higher gear at the moment when the use of money was

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introduced as an efficient and practical intermediary of exchange. In the wake of this evolution the commercial economy (chrematistike) bifurcated into two directions: the natural chrematistics, responding to the need of the community, and the unnatural, or kapelike chrematistike, purely inspired by the lust for profit. With the introduction of money, the acquisition of the medium became an end in itself. In the original Greek version the key reference reads as follows: poristentos oun ede nomismatos (1257 a 41). In Moerbeke’s first version this line is translated as determinato igitur numismate iam ex necessaria commutatione altera species crimatistice facta est, campsoria. In his second version, Moerbeke offers a slightly different wording: facto igitur iam numismate ex necessaria commutatione altera species pecuniativae facta est, campsoria. Plainly formulated: in its development course, the natural exchange of the oikos was overshadowed by another species, namely the monetarized trade for gain, labelled by Moerbeke as campsor and in other places campsoria. In the glosses of the Roman legist Azzo, a century earlier, the first clear definition of the term campsor reads as follows: homines qui prestent denarius ad usuram…vel in butegis vel in cambio. The use of the word campsor or campsoria for commercial and monetary deals inspired by the profit motive, shows that Moerbeke reduced Aristotle’s moral disapproval to the moneychanger’s activity only. Albertus picked up the line and gave the trading community a free hand as long as commercial activities responded to the needs of orderly community life and in so far as the merchants did not profit unduly from monopoly or scarcity. The campsoria or the business of money-changers and commerce for pure gain ex cupiditate, on the other hand, was sharply disapproved. In his early writings like De Bono and in his comment on Peter Lombard’s textbook Super IV Sententiarium some brief references to the issue of justice in exchange are discussed in Ciceronian rhetorist fashion; but Albertus’s trendsetting work in this field came in his two commentaries on Aristotle’s Ethica Nicomachea. The first version, Super Ethicam, was written after his return from the Paris university in Cologne (1250–2), and the second commentary was ready in 1263.3 Albert had a fair knowledge of al-Farabis’ and Ibn Rushd’s exegesis and feels free to depart from the original text in order to adapt it to his own context and outlook. This new technique of paraphrasing, ex sensu supplevi, was also applied in his treatment of Book V, 5 of Ethics on justice in exchange. In a first effort of clarification, Albertus reduces Aristotle’s categories of special justice to two only: the Justitia distributiva and commutativa. Albertus, a Dominican scholar possessing the evangelical virtues but living in a feudal society, justifies the unequal distribution of material conditions and wealth on the basis of differential needs according to the situation (gradus dignitatis) one occupies in society. A bishop needs more than a clerk, a king more than a soldier, a manager of an estate more than his subsistence farmers. Christian virtue invites and counsels the faithful to share their opulence with the poor, but this charitable solidarity applies only to the superfluities, not to the necessities.

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Notwithstanding Aristotle’s sometimes confusing analysis of the terms of exchange, clarified in due time by the Arabian Ibn Rushd, Albertus’s analysis emerged as a well-balanced discourse with new openings. According to Langholm, who has published the first extensive study of Albert’s commentary on exchange, the Dominican’s main contribution consisted in rejecting the status interpretation and the intrinsic value interpretation. Both of these have been attributed to the medieval scholastics, without much real basis in the texts. Those which Albertus set on foot are the demand interpretation and the labour interpretation (Langholm 1992:183). This was an historical bench-mark in speculative, moral theology. In order to arrive at a just compensation in exchange for both sides, the equality should not be quantitative but proportional (secundum equalitatem proportionis). In a further development, proportional equivalence in exchange is specified as the value of one packet of commodities against the value of another: secundum proportionem valoris rei unius ad valorem rei alterius, and in another line res in rem commutatur secundum valorem. Up to this point Albertus stayed solidly in the crux of Aristotelian orthodoxy. When it comes to specifying the source of value, however, he parts company with his Greek model. Indeed, for reasons of justice the exchangers should offer to each other an equivalent value in pretio secundum proportionem operis ad opus. In the first commentary, the value does not stem from the status of the exchangers but from the worth of the products. The following lines leave no doubt that the norm for our Latin scholar is based on labour value, or more generally on the cost of the inputs, since he repeatedly uses terms such as in laboribus et expensis and differentia secundum labores et expensae. This is illustrated in Aristotelian fashion by a clear example: ‘As the farmer is to the shoemaker in labour and expenses, thus the product of the shoemaker is to the farmer’s product’. But he adds that the labour and cost norm is not an absolute criterion of value. In order that exchange takes place, the exchanged products should respond to a need (Aristotle’s chreia) of the exchangers for each other’s supply and demand: opus diximus esse usum vel utilitatem vel indigentiam. In his second commentary the concept of chreia comes out still more clearly as reciprocal need (indigentia) with specifying terms like necessitas and utilitas. Albertus did not elaborate on the value paradox inherent in this dualism. When he arrives at the difficult question of commensurability, he is perfectly aware (as was Aristotle) of the problem raised by measurement to achieve equality between the things exchanged Equalitas autem esse non potest sine commensuratione. In his comment on Aristotle’s Metaphysics X, 1, the Arab scholar Ibn Rushd had inserted the interpolation that an object’s measuring rod had to be the smallest unit of its own kind. Albertus, a keen reader of the Andalusian, picks up the line in his discourse on the commensurability in exchange: quia sic unumquodque mensuratur sui generis minimo, but he did not expand on this hint of marginalism. A few decades later the nominalist

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philosophers, with a greater sensibility for methodological individualism than the holistic Albertus would open this horizon. In his discourse on the functions and value of money, Albertus comes very near to Ibn Rushd’s metaphysical absolutism for measures. In its function of mensura or regula, the medium serves as a valuation standard of different commodities and services as they appear in the economic order, as distinct from the natural order. But his feudal context induces him to a more political stand. In the ideal situation, money should live up to a quality which renders it stable (moneta certa). A fluctuating mensura entails uncertainty and indetermination in the exchange relations. This defect also diminishes the value of money as a stock of future purchasing power. In fact money with a fluctuating value is an unreliable stock: non est fidejussor certus. Finally, he accepts resignedly the power of the prince to alter its course, according to valor impositus. The Aristotelian sterility of money is emphasized with a biological metaphor, pecunia non parit, ‘money cannot beget money’. Albertus’s Super Ethicum betokened a take-off in the philosophical foundation of moral theology. His promotion of Aristotle’s conceptual rationalism to the status of a privileged authority—etymologically, auctoritas stems from the Greek authentes, or ‘what can be trusted’—sowed the seeds of a more radical movement, namely Latin Averroism. The canonization of the Stagirite led to the decolonization of practical philosophy from the paternalism of theology towards its scientific autonomy (Dundabin 1963; De Libera 1990). While Ibn Rushd had been unable to consolidate a rationalist tradition in the scholarly world of Islam, Albertus was followed by generations of Latin disciples in the peripatetic tradition. Thomas Aquinas, who during his student years had attended Albertus’s lectures in Paris and Cologne, positioned himself in the middle between his pioneering master and the radical Averroists (Cheneval and Imbach 1993). Thomas led the quiet professional life of a scholarly Dominican. As a distinguished guest-professor in Paris and in other study centres, he spent his whole life in lecture halls or in the scriptorium of various monasteries, researching and dictating a voluminous amount of texts (Chenu 1984, Weisheipl 1983). In contrast with the encyclopedic Albertus writing in a flamboyant style, Thomas was a systematizer solely in the field of philosophy and theology. His style is rather dry but limpid. The reader of Albertus’s works on economic issues, reaching the scholastic realm of Thomas, touches already familiar ground. In order to avoid tedious repetition, we will only single out the major points where the doctor angelicus, in comparison with Albertus, puts a slightly different accent.4 We also refrain from joining the chorus on the sources used by Thomas for his comments on Aristotle’s works on practical philosophy: the Translatio vetus, the Latin translations from Arab texts, the Grosseteste and Moerbeke translations. Scholarly discussion on this issue has not yet arrived at a serene conclusion. According to the specialists of the DeWulf-Mansion Centre in Leuven it seems,

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however, that the Gauthier-vintage of research on this point underestimates the presence of Moerbeke’s material in the library of Thomas (Brams and Vanhamel 1984). The texts of interest to the historian of economic thought were all written in Thomas’ maturity; first his uncompleted treatise on government De Regno (1207). Shortly afterwards after came the more important of his comments on Aristotle’s practical philosophy, the Sententia Libri Politicorum, the Sententia Libri Ethicorum, together with the second volume, second part of the Summa Theologiae (ST 2a, 2ae), all written during his time as magister in Paris, from 1269–72. In the Sentences on Politics and Ethics, Thomas literally transcribes the original text, followed by a treatment of former exegesis and the intentio auctoris (Church Fathers, the view of ancient authors) together with his own judgement on the problems involved. In the Summa, a textbook written for students beginning in theology, Thomas affirms his personal views more freely. In order to overcome the dispersion of discourses of interest to us, and spread over several fragments, the following schematic synthesis seems the most adequate solution. The scholastic rehabilitation of an ancient and pagan author who conceived the state (polis) as the highest achievement of human beings, confronted the Dominican scholar with a penetrating but incomplete view of man’s divine calling. For a Christian the final end is to enter the heavenly kingdom. The common or lay believers had to prepare for this in the earthly kingdom, with a virtuous life guided by the revealed, divine norms. For the clerical elite, the ideal way to prepare for the entry into the heavenly kingdom, consisted not only in a virtuous life, but in monastic contemplatio of God’s splendour and divine justice. Fully conscious of the difference between the ideals of Aristotle’s natural order and his faith, the doctor angelicus, in a most subtle way, set out to reconcile the two. In the translations at his disposal, Aristotle’s concept of zoon politikon was rendered as animal civile. In his own comments he also frequently used the term animal politicum et sociale. The emphasis on the social character of man and of politics is most clearly expressed in the guiding principle of bonum commune. In his socio-political opinions Thomas retreated from the canonists’ sweeping formulations, which conceived the Church as a total society like plenitudo potestatis. In his view the natural and political domain of man is a material necessity. With an almost al-Farabian touch the Dominican sketches the characteristics of an ideal state. The ideal state is endowed with a natural lawmaking capacity, with a potestas coactiva. This is, for example, the case in the material sphere where in situations of monopoly prices or of undue fluctuations in prices due to commercial speculation, the governmental authorities have the capacity to intervene in order to regulate the gyrations of market prices. The prince also has the capacity to fix the value course of money, and of seigniorage, expressed by the principle valor impositus. But even the ideal state cannot be more than a useful stepping-stone to the final end, since divine law is of a higher order. All true or all authentic authority and power has therefore a sacred

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character. In his teleological view, the Dominican emphasized duties rather than rights, and the common good had priority over the individual. His comments on the Stagirite’s Politics and Ethics were developed in the same vein as Albertus’s. This should not come as a surprise, since the two worked studiously together during Thomas’ formative years. Their intellectual kinship shows clearly in their comments on exchange relations, which more than in Aristotle’s case developed into a novel value theory. Both emphasize that justice in exchange relations is achieved when there is equality between the things exchanged. Commercial exchange is an exchange of things for things. The value of things does not derive from their worth in the natural order: ‘a mouse is of higher natural order than a jewel stone; a slave ranks higher than a horse; but the stone and the horse may have a higher economic value’. Value is also correlative with the functional worth in the spectrum of utility: secundum relationem ad usum. Thomas, like his predecessor Albertus, specifies the original Aristotelian foundation of value with a clear distinction between production cost and aestimatio. This betokened a significant dualism of historical impact. Value, monetarily expressed as price, is based on a conjunction of costs of production and labour, with the intensity of the need (indigentia). The contextualization of need derives from the utility of the exchanged thing (res, opus) to the buyers and sellers. At the moment of exchange the subjective aestimatio influences the vectors of cost prices. Thomas, still more than Albertus, stresses the subjective factors of need and utility. This has led some modern commentators to the thesis that in his discourse the subjective element forms the overpowering determinant of price formation. This seems to me a biased reading of a subtle discourse by a moral theologian who distinguished himself by a conception of justice based on the correct mean. In contrast with nominalist and neo-classical conceptions of utility, based on methodological individualism, Thomas conceives a social hierarchization of need and utility according to the holistic constraint of bonum commune. In ST 2a, 2ae he admits that the just price cannot always be arrived at with precision: justum pretium rerum quandoque non est punctualiter determinatum. Therefore in cases of laesio enormis the law of men has to intervene in order to bring about restitution and, if this continues, by market regulation. Situations permitting disorderly exchange would destroy social intercourse with the result that the useful stream of exchange might dry up. Also, the measures of the commercial commodities are bound to be different in different places because these commodities are in such different supply everywhere. With this regional variety of situation it is the business of the state authorities to determine what are the just measures. Since money expresses the price of commodities, the determination of its measuring capacity (mensura) belongs to the prince: valor impositus. Apparently, the metallist options of the Roman legists would not budge the Dominican. In ST 2a, 2ae, more particularly in question, ch. 4 on the problem ‘is one entitled to make profits by selling for more than the purchase price?’ Thomas again departs from Aristotle’s negative evaluation of commercial profits. In his

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idealist conception of the Greek polis, Aristotle could only approve of the exchange of surplus for consumption based on natural needs, the reason being that the system of household economy, which he favoured, was unable to produce for itself the whole gamut of commodities needed to live the decent life of a Greek citizen. The intensification of trade activities could only spoil the moral decency of the polis. Living 1,500 years later, with before him the medieval towns in full commercial expansion, and also familiar with the Arab sources whose scholastic texts were more positive on trade activities, Thomas concurred with the legitimation of a moderate profit. In his Politics, Aristotle distrusted commercial intermediaries, especially when their monetarized exchanges degenerate into lust for gain quandam turpitudem habet. By the thirteenth century the social utility of the growing commercial middle class had already been recognized by the medieval legists and even by the leading canonists; the condition being that profit-making stayed in reasonable bounds. In the clerical world of canonist and moral theologian alike, however, the ban on the commerce of money for money with a profit (the campsoria) was maintained. And in his doctrine on usury, Thomas produced nothing new. Familiarized with Aristotle’s distinction between the natural monetarized exchange of householders, linked to the unavoidable diversity of their consumption needs (pecuniativa economica; ad domus sustentationem; unde laudatur) and the exchange for pure profit (ex cupiditate campsoria; et ideo iuste vituperatur). Thomas, in full possession of his intellectual powers, is ready to formulate his own view. In a burst of energy he engages in his Aristotelian comment, and in the redaction of ST2a, 2ae, written at about the same time, moves into a subtle discourse. In a masterly show of interpretative skill and casuistry, he deliberates in a limpid style on the material context and the moral demarcation lines where a moderate profit is licit: 1 The first arguments, in recognition of the natural diversity of consumption needs, are still Aristotelian. Natural trade between householders and craftsmen is licit: ad domus suae sustentationem and ad subveniendum indigentibus. 2 The following argument is already more in line with Thomas’ concept of the social good: propter publicam utilitatem. 3 Last but not least: lucrum licitum est, non quasi finem, sed quasi stipendium laboris. Thus, he conceives profit as a compensation for the trader’s effort to improve the commodity in some fashion. As such justifiable profit is seen as a premium of the exchanger’s work: premium sui laboris. In studies on the medieval history of economic thought, the works of Albertus and still more of Thomas have been analysed by a great number of scholars. In some studies the two Dominicans are seen as initiators or pioneers of the labour theory of value. Taking into account the overall context in which the labour

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thesis evolved, we come to a more nuanced evaluation. At the time when the two Dominicans lectured, the appreciation of manual labour often ascribed to both was no longer a novelty. The monastic tradition of the Cistercians, the glosses of the legists, some decretals of the canonists, and last but not least the heretical movements, had previously anchored the value of man’s labour in the collective mind. It should be noted, however, that the two scholars were the first to introduce the concept of labour in the speculative tradition of moral philosophy. Under their influence moral speculations on commercial exchange and the justification of a reasonable profit took a new turn. In this the Franciscan scholars would take the lead a few decades later, followed by the humanists of the Italian Renaissance with their concept of man as a homo faber. Being a theorist of the middle, Thomas blended in a balanced way the tradition of the Church with the intellectual legacy of Aristotle. His sociopolitical concept of the bonum commune has captivated the minds of Christian scholars until today. His purely theoretical approach, however, formed also a conceptual barrier to approach the individual of his time with a view of his concrete problems (Verbeke and Verhelst 1974). The adoption of Aristotle’s conceptual tools in medieval scholasticism betokened an unparalleled enrichment of its interpretative schemes of speculation. But the insertion of an antique vision, characterized by a preference for a structural status quo of society, had another side. The authority conferred on Aristotle’s works resulted in the mobilization of a great deal of time and energy for an almost obsessive round of commentaries. Relatively little attention was given to research on the historical change taking place in the real world. The over emphasis on the epistemological union of concept with reality, expressed in universals, could not but lead to an intellectual impasse. Some scholastics hailed the Stagirite as a canonized Greek oracle. The exegesis of his thought, cherished as an almost absolute legacy and less as a vision anchored in the historical Sitz im Leben of peripatetic philosophy, became for the most enthusiastic scholastics a substitute for original research into the novel changes and the new historical consciousness of their own society. The growing dissatisfaction with this state of affairs elicited a different approach. A reorientation of scholasticism towards the dynamic complexity of the real world, moved not only by reason but also by the human will, was in the offing. The new turn came in the wake of a revival in Franciscan spirituality, in combination with the innovative philosophy of nominalism. THE LANGUEDOCIAN FRANCISCAN P.J.OLIVI In the developing urban centres of northern Italy, southern France and Flanders, the Franciscan Minorites evolved as catalysts of the new spirituality and as incubators of late medieval humanism. From the beginning Friar Francis had sensed the dissatisfaction of many Christians with the hierocratic structure, with

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the emphasis on dogma, with the ostentatious pomp and with the material privileges of the Church, as well as with the institutional violence of its law courts. In a couple of decades the evangelical zeal of the charismatic saint had inspired a great number of disciples. In the thirteenth century, the evangelical mustard seed had developed into an imposing institution, with an army of militant Minorites and also with scholars lecturing in Paris as the intellectual spearhead of the order. While the order grew in institutional weight and power, the Franciscans had stayed innovative enough to respond to the new aspirations with a via moderna, or with a pastoral approach in tune with the time’s longing for new forms and expressions of piety. In the scholarly domain of philosophy and theology, the Franciscans, in contrast with the Dominicans, averted the crisis mood engendered by Aristotelianism with their own vintage of NeoAugustianism. Its spiritual voluntarism and psychological subjectivism came to full bloom in nominalism. This paradigmatic shift, officially spearheaded by Duns Scotus, came to stress the impact of human experience in the existential sphere of the individual. Unlike their colleagues who were caught up by the systematization of determinist universals, the Franciscan nominalists saw man as an actor on the historical stage, as a creator and gubernator. While Thomas and his disciples were in search of a harmonious balance between faith and reason, the Franciscan reformers, with a mystic bent and in an endeavour reminiscent of al-Ghazalian ash’arism, defined faith as a voluntaristic admission (adhaesio) of God’s calling and grace. This was on the basis of inner experience rather than outward observance and on personal piety rather than institutionalized office. This more open theology, taking into account acts of will and spiritual dialogue, entailed also a more modern work ethic. In the Franciscan view, man could participate in God’s plan on earth with his own labour. With this reassertion of evangelical spirituality the Franciscan prime movers, like friar and scholar Olivi, were spinning cloth for a new religious consciousness. In due time its effects, reinforced by the popular heresies and the Italian Renaissance, were to undermine the institutional overload of the Church. According to his French name, Pierre Jean d’Olieu (1248–98) was bom in a small village near Sérignan in the heartland of the Languedoc region. The complex personality of Petrus Johannis Olivi has been underlined by historians as well as philosophers and theologians researching into his pastoral activity, his social role and his thought. First of all he was a Franciscan friar who mobilized other militant ascetics, the so-called Spirituals, to reorient his order to live the original ideal of evangelical poverty (usus pauper). After his studies in Paris, where he became familiarized with the Augustinian counter-current of Bonaventura against Aristotelianism, he was promoted lector of his order. The militant stance of his ecclesiological works against the hierocratic caesaro-papism of the Church, perceived by Olivi as a prefiguration of the Antichrist, together with his apocalyptic longing, brought him into trouble

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with the Curia and also with influential authorities of his own order. After a short stint of lecturing in northern Italy, he took refuge in the Franciscan study centres of his native Languedoc (Narbonne, Nîmes, Montpellier) where he wrote a voluminous amount of treatises. He was literally traumatized by the bloody crusade in which a coalition of feudal lords and clerics slew the Cathars. But weapons could not solve the religious crisis and the popular heresy continued to smoulder under the ashes. Elsewhere also the Albigensians, Waldensians and Beguines were persecuted by the Inquisition. Olivi’s Languedocian roots, in combination with his social philosophy, sharpened his Franciscan sensibility for the problems of the common people and strengthened his anti-institutional stand (Manselli 1972). In order to arrest the development of heterodoxy into open dissent, he proposed to meet the heretical propaganda with evangelical spirituality. The via moderna was wary of the excesses in dogma and law-giving of the Church. The modern way stimulated pastoral practices more oriented towards the human experience or the Sitz im Leben of the faithful. Responding to the pastoral need of the lay population, our prophetical friar wrote several opuscula in the vernacular of the Languedoc region. In no time this charismatic militant of the Franciscan Spirituals emerged as a brilliant polemicist and an innovative theoretician (Partee 1960; Stadter I960; Flood 1973). For a long time scholarly opinion considered Duns Scotus (1265–1308) the most influential Franciscan scholar of the late thirteenth century; in more recent literature, however, Olivi is seen as the leading star. Historians of economic thought have produced rapidly growing series of studies on Olivi’s so-called leap into modernity. His analysis of value, the just price, licit gain in trade, the economic value of time and the productive potential of investment capital, are viewed as a break with the preceding tradition (Spicciani 1977, 1990; Todeschini 1980; Kirshner and Lo Prete 1984; Capitani 1987; Bazzichi 1987; Langholm 1992). The notorious analyst of scholastic texts Raymond De Roover, who in his earlier work hailed San Bernardino of Siena as a bench-marker towards modernity, lowered flags when he discovered that the Italian bishop had largely copied the Languedocian doctor speculativus. Olivi is one of the first scholastics not to limit himself to the moral aspects of commercial and financial activities. In tune with the nascent nominalism of his time he moreover approached the business problems iuxta propria principia, or from their own functional requirements. His paradigmatic break with the fusion of concept and reality characteristic of the Aristotelian scholastics like Thomas, induced Olivi to formulate a more dynamic vision of time. Against their rational realism of splitting time in a static before (prius) and after (posterius), he conceived a dynamic flux, in which man as a voluntaristic and subjective actor is able to plan his projects through time. The economic value of time, and thus its vendibility, was an important steppingstone towards the perception of business money as a potential candidate for the

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role of productive capital. This was the first scholastic requiem for the antique and medieval doctrine on the sterility of money. Olivi’s ideas on economic matters appeared in two Latin texts, the substantial treatise Tractatus de emptionibus et venditionibus, de usuris, de restitutionibus and the shorter Quodlibet I, chapters 16 and 17.5 The text of the Tractatus, a textbook for lecturing, does not excel in the systematic ordering of the material. Olivi’s treatment of the natural value of goods and price formation, develops the foundations laid by Albertus and Thomas. It is noteworthy that he has a keener grasp than his Dominican predecessors of the problems raised by the value dualism resulting from two theses: the objective factor of cost prices and the subjective aestimatio of need and utility. The argumentation on the criteria envisaged by the individual exchangers in order to weigh up the intensity of their valor usus is new. The graduation method exemplified by Olivi introduced already an embryo of subjective marginal calculus. In his view, commodities can have more worth than others for the following reasons: • because they respond more to our needs on the basis of their intrinsic value; • because the intensity of the need varies with scarcity or with difficulty in supply; • because some goods are more attractive and satisfying from a purely subjective standpoint. More than a century later, San Bernardino epitomized Olivi’s prose on the value criteria with three clear-sounding terms: virtuositas, raritas and complacibilitas. But the sole influence of individual subjectivity, however, may not lead to a just price for all. In Olivi’s following sequence of argumentation the element costs of production and the concept of communis aestimatio are juxtaposed as a reminder. In the discussion of the value paradox, Olivi comes very near to a theory of the market mechanism. In his world it is not an abstract or anonymous market mechanism, but one socially constrained by bonum commune and laesio enormis. In his treatment of licit profit for businessmen, Olivi picked up Henry of Ghent’s vision and elaborated on it. On Christmas 1276 this Parisian scholar held a free discussion for the students, published under the title Quodlibet Primum; this opened new horizons. In his freelance debate Henry of Ghent advanced the idea that the value genesis of the commodities in the marketplace should not be perceived as a static process. The values change according to place (ratione loci), according to time (ratione temporis) and for reasons intrinsic to business (ratione ipsius ementis). In the last formula, the scholar from Ghent referred to the market knowledge and perspicacity of the merchant. By his marketing skill the trader gives more worth to the goods. Olivi, one of the few scholastics to have pastoral and social contacts with ordinary people as well as with the business community, was inclined to see their problems in a very concrete way. It may seem a paradox that this ascetic friar

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and militant for usus pauper had an open eye and a clear grasp of the problems confronting the business community. In his discourse on prices and profits Olivi refers not only to labour and expenses, but also to the aleatoric conditions of marketing such as risk, and in a novel way to commercial skill and insight in future options: ex onerosis laboribus, ac periculis et expensis et industriis ac pervigilibus providentiis quae exigunt officium illud. Since the beginning of the first millenium the regions of Languedoc and Catalonia entertained intense cultural and commercial contacts with the Islamic world. The highly cultivated Languedocian business community, enjoying a fin amor tradition of lay prose and poetry voiced by wandering minstrels and troubadours, stood in stark contrast with the less advanced marchanderie of northern France, Paris included. Olivi clearly recognized the public utility of their enterprises and praised highly their entrepreneurial spirit. He even lauded them as homines novi, and honorabeles. With great risk to their lives they transported and commercialized useful products from and to far-away places for the community at large. They broke open and developed an economic space whose functioning he analysed with penetrating insight. In his view the entrepreneurial class was not only the harbinger of an economic space (ratione loci); they lived also with a qualitatively different time dimension, in contrast with the static view of the feudal enclaveeconomies. In the world of business, Olivi proclaims, time is not a static factor, it is rather a dynamic link between the before and after in the planning of commercial activities. As an aside to his discourse on legitimate commercial profit, Olivi’s sketches an embryonic future options market. His predecessors, who were mostly armchair philosophers, had recognized subjective price oscillations around the average equivalent of labor et expensae, that is, the costs of production and transport. The oscillations of market prices around this mean are morally constrained by the limits of laesio enormis. The commercial manipulation of prices outside these bounds is sin. Up to this point the Franciscan scholar remains solidly in the scholastic tradition of Albertus and Thomas. With his moral recognition of the entrepreneurial mentality of the business professionals he breaks new ground. With a tinge, or should we say a tingle, of modernity, the Languedocian scholar legitimizes entrepreneurial behaviour in a novel way. First, since business time has a commercial value, it can be sold with a licit gain: tempus proprium venditoris possit licite vendi. Second, the new class of entrepreneurs, who have their own social merit since only few possess the required ability, may not only bring into account the objective determinants of price like labour and transport costs, but also the precious professional quality they possess, like technical expertise and commitment to their job (peritia, industria). Last but not least, their entrepreneurial spirit does not shrink from engaging their capital in risky business, bringing a profit in a bull market and losses in a bear market. Entrepreneurial activity in a situation of uncertainty resulting from the dynamic time horizon, requires a rare quality of mind (solicitudo mentalis). This also merits a just remuneration.

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In his Qudlibetl, 17 and in the Tractatus de usuris Olivi first wrote down the received tradition on usury by the Church Fathers, the Roman legists, the canonists and the theologians. In a masterly combination of his vision of entrepreneurial activity with a new concept of pecunia capitale, he breaks with the age-long doctrine on the sterility of money. For the current use of money as an intermediary (simplex pecunia) and also in a mutuum, the extraction of interest above the principal is usury: usura unde peccatum est. The in-the-meantime morally approved exceptions in case of damnum emergens, lucrum cessans and periculum sortisare discussed at length. As a follow-up to this casuistry, our keen observer of professional business edges out his famous passage on the potential productivity of money. Just in case, it is deliberately inserted in the commercial circuit. After a reference to the licit commercial gain realized by normal entrepreneurial expectations concerning probable price fluctuations, the Languedocian scholar takes up the case of business credits. In case the loaned money is engaged in trade activities with the intention of a lucrative investment, the pecunia simplex changes in quality. In the professional business circuit money looses its stigma of sterility; it becomes potentially productive, therefore it is commonly referred to as capital. A capital loan requires a licit repayment above the original value of the principal because it creates ‘added value’. The outstanding originality of this passage induces us to quote it in full: Illud quod in firmo proposito domini sui est ordinatum ad aliquod probabile lucrum non solum habet rationem simplicis pecunie seu rei, sed ultra hoc quandam seminalem rationem lucrosi; quam communiter capitale vocamus; et ideo non solum debet reddi simpliciter valor ipsius, sed etiam valor superadiunctus. (De usuris, sextum dubium) Olivi’s cardinal passage on the entrepreneurial seminal ratio, reveals startling insight into the functional prerequisites of a commercial economy. In almost Schumpeterian terms Olivi describes entrepreneurs as creative captains of new commercial and financial combinations. Consistent with his voluntaristic stance on human action and intention, he shunned Aristotle’s rational determinism on several points, more particularly with his perception of the nature and the functions of money. In tune with the economic reality of his time he caused a rupture in the conservative tradition of monetary thought. For general use money is only simplex pecunia, or a passive intermediary without any worth in itself. In the world of business, with its dynamic conception of time, money acquires a fructifying capacity, it becomes a germ of profit. Investment capital possesses the potential to create added value valor superadiunctus. Correct business men merit a just remuneration for their risky endeavour; they are men of public utility who can play an active role in God’s plan with the world. Olivi’s legitimation of commercial and financial gain was shortly afterwards extended to the paper money engaged in banking and in exchange operations

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between different regional and national currencies. This was done by another scholar of the Franciscan order, Alexander of Alexandria. As a consequence of his militant stance in the usus pauper debate and of his apocalyptic and antiinstitutional theses, Olivi was branded as a latent heretic. After his death his works went underground and his superiors placed his corpse in an anonymous grave for fear that the people of Languedoc would venerate him as a charismatic prophet or as a saint. In the fifteenth century, San Bernardino of Siena plagiarized his themes without mentioning the original author. In the sixteenth century the scholars of Salamanca, especially the Flemish Jesuit Lessius, would elaborate on the Olivian themes in his discourses on usury. But his full recognition came only recently with the doctoral dissertation of Father Pacetti (1953). In the scholastic tradition on economic issues, the seminal ideas of the doctor speculativus stand out as an historical bench-mark. With the suppression of his work by the clerical authorities, its novelty was kept secret for ages. MONEY AND THE ABUSE OF POWER Since the introduction of money as a generalized intermediary in the economic circuit, the scholars of the succeeding Mediterranean cultures have analysed its nature and its functions. They also raised questions about the relative capacity of the religious, social, economic and political powers to determine and regulate its value. Aristotle’s monetary nominalism, with the vague statement that the value of money could be changed by the community at will, left the door open for different interpretations. The scholars of the Roman Empire did not excel in economic discourses. The empire’s contribution to history consisted in the grandeur of the Pax Romana. On the issue of money, the practically minded Romans professed a complex mix of political and metallist conceptions (caesaro-metallism) in which the seigniorage of the emperor prevailed (Nicolet 1988). The pragmatist Cicero Latinized the legacy of Greek peripateticism enriched by the Stoic theses on social harmony. In the second century, the legist Paul followed an Aristotelian line when he stated that money is an intermediary unit of pricing to bring about a quantitative equivalence (aequalitate quantitatis) in exchange relations. In the second line of his argument, however, money is embroidered in a silver lining. Paul remarks that the Latin term value (aestimatio) has an etymological origin derived from ‘Value in units of metal’. In the world of Islam, the first great religious umma with a highly developed economic and commercial base, the debate on money shifted into a higher gear. Money was perceived as a unique measure whose value, being a precious gift from Allah, had to be left untouched by human intermingling. An impressive number of jurists, theologians and even the Hellenizing philosopher Ibn Rushd hammered out the quality, or the ‘moneyness’ (thamaniyah), of money. According to their view, sultans and emirs who indulged in the practice of

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debasement caused material damage to the community and sooner or later lost the grace of Allah. In the feudal society of the Latin West, the right to mint money was perceived as an attribute of the prince’s order and prestige. The sovereign considered his image on the coins as the monetary expression of his power. But as in the Islamic world, the feudal lords and kings were often short of financial means to pay for their wars and to keep their princely state. The practice of coin debasement became a common device to amplify the prince’s income. Money debasement functioned as a substitute for taxes or as a fiscal subterfuge. The Roman legists of the Bologna school were the first to challenge the abuse of political power in money matters. The glosses of Accursius bring the first clear formulation of the metallist positions. In his legal stance against defraudata moneta he wrote an embryonic commodity-value theory of money (moneta merx). The legists Andrea d’Isernia and Cino de Pistoia followed with a more explicit insistence on money of good quality (bonitas intrinseca). Princes were much too inclined to multiply bad money in order to pay for their wars: in regno suo faciunt monetam vilem de vili materia. The prominent legist of the Italian trecento, Bartolo de Sassoferrato (1313–75), was one of the most outspoken advocates for money with a just weight (justum pondus) made of good materials (species probd). In the flourishing Italian towns, the works of Bartolo the jurist joined the chorus of sectional interests in their defence against the princely abuse of power in money transactions (Paradisi 1983; Dupuy 1989). In the canonical literature, the admonition of Pope Innocent IV that money should have a correct weight in quality metal (legitimum pondus) was followed up by Cardinal Hostiensis. A century before Oresme, the celebrated canonist declared that the constitutional or political power of the prince was in the first order limited by the magisterium of the Church and in a second order by the will of the people. Accordingly, an alteration in the nominal value should be approved by the ecclesiastical authorities and by a majority (maior pars) of his subjects. The famous dispute between Pope Boniface VIII and the French King Philip II brought the moral and political question of debasement into the open. But the papal reprimand was of no avail. Indeed, during the reigns of Philip IV and John II (1337–60) debasement became a royal sport, with an impressive score of 85 devaluations (Menjot 1988). In the ensuing climate of social unrest, two scholars of different origin and temperament took up the defence of the sectional interest groups who suffered laesio enormis by the monetary abuse, John Buridan (1295– 1358) and Nicholas Oresme (1300–82). We have to take into account, however, that their analysis of the perverse effects of the spoiled numéraire (morbus numerus) was written more than a century after the twelfth century legist’s texts and also after Ibn Taymiyyah’s valuable campaign against monetary fraud. In less vehement language than the Hanbalite jurist, Buridan and Oresme pulled the plug on the valor impositus doctrine. In their works both rallied forces and arguments against monetary nominalism, arguing in favour of monetary realism. It may seem confusing that these fans of philosophical nominalism professed a

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theory of commodity-money in the metallist tradition of the legists or of monetary realism. John Buridan was a moderate follower of Ockham and became an enthusiast of empirical verification tests in his scientific research. At one time he even climbed the crest of Mount Vernon to verify the laws of physics. He was moreover a notorious philosopher of the arts faculty in Paris, where he was elected rector of the university. The works of interest for historians of economic thought are Questiones Johannis Buridani super decem libros Ethicorum Aristotelis ad Nicomachum and the Questiones Johannis Buridani super octo libros Politicorum Aristotelis, both edited in Paris (1513). Buridan’s treatment of Aristotle’s Politics is an amalgam of traditional views, enriched by novel openings onto commercial development and its monetary implications. In his more original comments on Ethics, he comes out as a bench-marker of marginalist calculus. In questio 16 and 17 Buridan refers to Aristotle’s passage on exchange relations, but definitely goes his own way in the definition of money and with the quantification of individual needs. Following the Greek philosopher, Buridan states that indigentia is the basic factor in exchange relations. In the search for equivalence between the things exchanged, however, his emphasis on the quantification of the subjective, inter-individual valuations of the exchangers betokens a theoretical departure from Aristotle’s metaphysical and holistic approach. According to Buridan’s methodological individualism, not the total but only the satisfaction deriving from ‘the last’ units of exchanged commodities plays a role in the measurement of needs. On this basis the author’s mathematical analysis of proportionality developed into a clear formulation of inter-individual valuation based on marginal calculus. With the insertion of the metaphysical ‘smallest-unit’ notion in the exchange chapter of his Ethics commentary, Ibn Rushd had already opened the door to a latent form of marginalism. But in the holistic vision of the Arab philosopher and of the great Dominicans, Albertus and Thomas, this shift in emphasis was left unexploited. Olivi’s discussion of the hierarchical graduation of needs according to different scales of intensity, was a first attempt at a more explicit formulation of marginalism. This had, moreover, been exemplified in the Olivian theory of wage determination. There the differential quality of labour is introduced in a discussion on the just hierarchy of wages. Olivi’s texts disappeared from sight for ages, while Buridan’s quantitative approach immediately blossomed into a tradition. The affinity with the Ethics commentary of Gerald Odonis (c. 1290– 1349) is striking (Walsh 1975; Langholm 1983; Krop 1988; Dupuy 1989). Buridan was also at odds with Aristotle’s monetary nominalism. As an advocate of commodity money, he took a different tack. In fact Buridan was the first to introduce the metallist tradition in the philosophical constituency of the Latin West. His pioneering theoretical work inspired his contemporary Oresme, who wrote the first treatise on money.

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Nicholas Oresme climbed up the social strata: the son of a farmer’s family in Normandy, his intelligence brought him to the college of Navarre in the Paris university where he met Buridan; being a famous scientist he was promoted to tutor at the royal court where he translated Aristotle’s Politics and Ethics, later he wrote his famous treatise on money for Charles V; after his political career as royal councillor he was nominated Bishop of Lisieux. Oresme was first singled out as an economic star by Roscher, a leading figure of the German Historical School. In the beginning of this century the French historian Bridrey hailed him as the first great and original theorist on money (Bridrey 1906). With his characteristically outspoken portrayal, Schumpeter lowered the flags somewhat and reduced Oresme’s contribution to normal proportions. Oresme’s economic texts do indeed lack the theoretical depth of Buridan’s, but Oresme was a superior polemicist. As a result of his introduction to the centres of power, Oresme’s discourses had more immediate impact on official policy. For Oresme’s comments on Aristotle, we refer the reader to the publications of the American Philosophical Society, edited by A. Menut: Maître Nicole Oresme, le livre de l’Ethique d’ZAristote (New York, 1940) and Nicole Oresme, le livre de la Politique d’Aristote (New York, 1960). Of the original Latin and the later French text of the Traité sur l’origine, la nature, le droit et les mutations des monnaies, different versions were edited shortly after his death. A reliable text was edited by Charles Johnson in London (1956) entitled The Moneta of Nicholas Oresme and more recently by Jacqueline Fau, Nicolas Oreme’s Traité Monétaire, (Paris, 1990). This is a trilingual (Latin, French, English) edition. Oresme’s work has been commented upon by a great number of historians and economists. Among the most recent and best we refer to Langholm 1983; Menjot 1988; Dupuy 1989; Gillard 1990; Quillet 1990; Lapidus 1993. Oresme’s translation of Aristotle’s works into French was not the first in the field. Around 1305 a certain Pierre de Paris had rendered the Politics into the vernacular. Just as Cicero had put the Greek philosophical legacy into Latin at a time when Rome became hegemonic, and just as Dante and Petrarch in Italy introduced local language into literature, the French humanists felt the need to render the texts of Antiquity into the nascent language of the mounting middle classes. The translatio studii from Latin, which had functioned as a transnational language of clerics and scholars for ages, into the language of the common people, went hand in hand with the ambition of nation building deployed by the French kings. Translater telz livres en françois explained Oresme, facilitated not only the transfer of ideas, it had moreover seminal effects on the native language. On the basis of recent philological research it seems that Oresme’s translation enriched the upcoming intellectual idiom with a thousand new words (Lusignan 1988). Like Moerbeke in his time, Oresme on several occasions was unable to find the correct word and proceeded to literal transliteration. Most of the time, however, his imaginative mind was alert enough to spawn new words and expressions. The reading of Oresme’s medieval and charming French is an intellectual spell in itself.

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For his translations of Aristotle’s work in his treatise Oresme, not knowing Greek, relied on Moerbeke’s translatio with the well-known moral ban on campsoria. This term was rendered in the French text as changeresse. Moerbeke’s version of the acquisitive spirit omnis eorum vita circa acquisitionem pecuniarum est becomes adonques touz telz mettent leur cure vers acquisition de pecunes.6 Accordingly, the counterfeiting of money by princes is compared to the usurious practice of money-changers. Indeed, the changeresse profited greatly from the monetary instability on account of the higher transaction costs of the financial and commercial dealings. It should be noted that the royal adviser’s Sitz im Leben, was very different from the Greek philosopher’s. Moreover, Oresme’s and Buridan’s comments on Aristotle derived from another philosophical mind-set than those of the thirteenth century. In fourteenth-century France, the corporate interests of the bourgeoisie had evolved into a forceful social class to be seriously reckoned with in the political field. As a keen observer of the brooding conflict between the royal privilege of seigniorage and the sectional interests of the people, Oresme gives the marchanderie a solid footing in his texts. His work can alternatively be read as a political treatise on the ideal prince or as a monetary tract on the evil effects of devaluations. In his view the royal privilege to mint money is a public duty rather than a right: Moneta igitur non est solius principis, est igitur pecunia communitatis. Money, being the generalized instrument in exchange relations and a measure of value, is a common good. Money exists for the benefit of the community. Princes who use the monetary system for other purposes abuse their power, with pernicious counter-effects for the realm. The practice of debasement in order to collect taxes or, worse still, for the private gain of the royal domain, should be avoided by a virtuous prince. The counterfeiting of money causes a great prejudice to royal authority and to the people. In the first seven chapters of the treatise the author analyses the nature and the functions of money. Its basic property is stability, therefore coins should be minted in precious material of rare quality, for example silver and gold. The author is a convinced bi-metallist and enters into a detailed discussion on the maintenance of a correct monetary ratio between the two species. The bulk of the book offers a circumstantial treatment of the detrimental effects of debasement (mutatio or corruptio monetarum). From a purely economic standpoint the frequent value alterations of money cause uncertainty for the exchangers and consequently a substantial rise in transaction costs. Counterfeited money chases good money. As a result, the volume of traded goods in the realm spirals downward, since merchants choose to go to those places where they receive certain and good money. On a social level debasement unjustly modifies the real purchasing power of incomes (fixed by ordinance) in nominal terms. Debasement is an unjust means of pump-priming by the means of seigniorage for the benefit of the prince’s private domain, this at the expense of the community. In Oresme’s political view the royal authority derives from a mandate given by the community, thus the

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ideal prince should not betray his subjects with the minting of counterfeited money. In his capacity as royal councillor and fully aware that nation building (with the consequent expansion of central administration) costs money, he advised his king to raise taxes and to float public loans as a substitute for debasement. Statistical research on the importance of the fiscal gain realized by debasement indicates that at the time of Oresme’s writing this amounted to 70 per cent of the Treasury’s income (Menjot 1988). Last but not least money is one of the non-mutable measures; it is an instrument of mediation between man and the divine order. With this reference to the transcendental order, the cleric Oresme joined the company of the papal curia and of the Islamic scholars. Oresme’s treatise was the first single and synthetic monograph on monetary theory and on the economic and social effects of debasement. Originally written in the persuasive style of a report to a royal commission and additionally destined for public use, the tract did not possess the analytical depth of Buridan’s work. But its social and political impact was considerable. THE TURN TOWARDS MODERN TIMES The Franciscan nominalists Scotus, Ockham and Buridan, like the politically engaged ecclesiastic Oresme and the Italian humanists, announced the autumn of the Middle Ages. The hierocratic ambition of the Church and papal authority suffered a severe blow in the exile of the Roman pope in Avignon. The antiinstitutional spirituality, piety and theology of the Franciscans responded to late medieval longing for a via moderna. The corporate interests of the bourgeoisie posed a serious challenge to the feudal order. The new worldview of the humanists, with man as the homo faber, came into competition with the ideals of the chevalier. In fifteenth-century Burgundy ‘les grands dues d’Occident’ or the last chevaliers of the West, embodied the autumnal splendour of feudalism. In the famous paintings of Van Eyck and in the splendid miniatures illuminating the books of that time, the traders and the money-changers reach already a more equal status with the feudal lord. The iconography of fifteenth-century Flemish paintings and miniatures illustrates the emergence of a post-medieval mentality and a concomitant change in collective consciousness. This utterly self-confident and articulate expression of worldly values is also noticeable in the Italian quattrocento. In the literature of that period the humanists Leonardo Bruni, Matteo Palmeri and Lorenzo Valla questioned the moral restraint of the Aristotelian and scholastic worldviews with the thesis that the material and bodily needs of man should be given more leeway. Their discourses on the practical philosophy of the Stagirite were, in contrast to those of the thirteenth century, not only written in pure, classical Latin, they also resulted in a deSocratization of his political views. In their works, the ascetic overtones of the Aristotelian ethics paled and were coloured by the ‘civic’ rhetoric of Cicero and the individualism of Democritus.

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With a manifest Epicurean preference Lorenzo Valla proclaimed that human virtue ought not to put too hard a break on human aspirations for worldly pleasure. In his view the supreme achievements of man are not restricted to the cultural and intellectual domains, and they are moreover embodied in the entrepreneurial libido manifesting itself in economic life. This humanist proponent of pleasure, with the motto il bene supremo nel piacere, comes out clearly as a pioneer in economic hedonism (Nuccio 1984; Garin 1990). The proud struggle of the last Burgundian duke with the Flemish, Walloon and Swiss bourgeoisie ended in a military tragedy. With the defeat in battle and the death of Charles the Bold, the last great chevalier of late medieval times disappeared from the scene. The dynastic shift of the economically developed Low Countries under the political leadership of the AustroSpanish Habsburgs and the incorporation of the American colonies, betokened for the multicultural and heteroclite empire an uneasy entry into modern times. The conquest of the new world resulted in a disproportionate inflow of precious metals and the great inflation. The crux of the matter – inflation induced by a quantitative overflow of precious metals—was very different from the debasement problem. The times were ripe for new lines of economic and monetary thought.

VII IBERIAN MONETARISM AND DEVELOPMENT THEORIES OF THE SIXTEENTH AND SEVENTEENTH CENTURIES

THE CULTURAL AND ECONOMIC SETTING In the passage of the late Middle Ages to modern times, the southern part of Western Europe played an eminent role in the cultural domain, in economic development and last but not least in the geopolitical extension of the continent to distant shores. In Tuscany and more specifically in its cultural centre Florence, there evolved a single theme linking together the various developments which are commonly designated by the term ‘Renaissance’. One of its basic characteristics was a passionate interest in the inheritance of Classical Antiquity combined with a dynamic conception of human achievements in the making of history. Through exploring, imitating and analysing the works of the past, the people of the Renaissance discovered how to appreciate better the potentialities of the emerging novelties of their time. The results proved to be momentous in art, in literature, as well as in religion (Garin 1990). During the gradual expulsion of the Arabs from the Iberian peninsula, adventurous Italian, Portuguese and Spanish commercial vessels embarked upon a systematic exploration of the African coasts. With the accumulation of practical knowledge in navigation and new insights in geography and cartography, the idea matured of a sea voyage to India by a western-ocean route. Its unexpected result was the discovery and the conquest of America, with a maritime push to the shores of Asia by way of a circumnavigation of Africa. Enriched by the exploitation of this vastly extended geopolitical and commercial space, the Portuguese and the Spanish peoples lived their Golden Age, which was followed by decline as a result of over-extendedness and exhaustion. In the religious sphere, the birth of modern times proved to be an age of ferment. Since the late Middle Ages the teachings of Wycliffe, John Huss and other religious renewers aimed at the subordination of Church authority (the Pope and the Roman Curia) to that of the Bible. Like the Spiritual Franciscans of the thirteenth century and the later mystic movements, their endeavours pointed toward an interiorized and less institutionalized Christianity. But it was Luther’s

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radicalization of the Pauline—Augustinian doctrine of ‘calling’, enriched by biblical theology, which became the key of the Reformation. Meanwhile, a new Christian humanism headed by Erasmus laid the foundations of a literary, linguistic and historical study of the revealed sacred texts. In reaction to the new type of biblical theology propagated by Luther, a vigorous revival of philosophical theology averted the slumbering crisis of late-medieval scholasticism with a brilliant new synthesis, based on humanist scholarship. This was the work of a group of Spanish theologians and canonists who formed the famous School of Salamanca. Its doctrines of post-Renaissance scholasticism rejuvenated the Thomistic brand of philosophical theology, and in conjunction with the canonists who adopted the new style, the school imposed itself as a progressive Catholic think-tank on various actual issues, such as the sovereignty of the people, the basic rights of the colonized indios and the moral problems associated with the emergence of international financial markets. The school’s writings possessed the outstanding originality and creativeness of an academic elite developing in substantial independence from the Imperial Crown, from the Spanish Inquisition and from the Roman Curia.1 The scholars were keen observers and commentators on the political and economic transformation taking place before their eyes, like the sudden aggrandizement of the Habsburg Empire, with its concomitant expansion of trade and finance. The recording of observations concerning the new economic phenomena such as the improvement in techniques of transportation, the uneven development of regions, the ensuing discontinuities in supply and demand, the disruption of markets, the new media of payment and financial and monetary fluctuations, elicited the construction of a new framework for analysis. The cultural and intellectual stimuli that were active in the wake of humanism, together with the opening of the geographical horizon, created new sensibilities, posed fresh questions and redirected the intellectual energies towards novel explanations. In the ensuing reassessment of traditional moral prescriptions, insight into the autonomous market laws that rule the economy gradually emerged as an intellectual by-product. In the following study, we analyse the economic texts and pamphlets of the Iberian Peninsula in which the change in historical consciousness and in its material context were most intensely felt and commented upon. During the reign of Ferdinand and Isabella, the court and the universities had been gradually exposed to foreign ideas. The integration of the Spanish kingdoms in the Burgundian and Habsburg heritage entailed a brief spell of Erasmian ideas under the spiritual guidance of the influential figure Cardinal Francisco Jiménez de Cisneros (Tordesillas 1961; Bataillon 1966). At the University of Alcalá the intellectual currents of humanism, Neoplatonism, late medieval nominalism and the ideas of Erasmus produced a renovation of the philosophical support of theology. In the second quarter of the sixteenth century the University of Salamanca became the centre of an important scholastic revival that spread to Seville,

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Valladolid, Coïmbra and Evora. Under the leadership of the Dominican scholar, Francisco de Vitoria (1480–1546), there flourished a new scholastic tradition with a definite cosmopolitan flavour. This new presentation of Thomistic theology privileged and adapted its juridical and moral concepts to modern times and kept its metaphysical aspects in the background.2 Together with his disciple, Friar Domingo de Soto (1491–1560), de Vitoria initiated a new tradition in theology, ethics, canonical law, political philosophy, the law of nations and the rights of the Indians; and in economic problems such as trade, exchange and usury. The founder of the Salamanca tradition was a gifted teacher and in his posthumous works, based on student’s notes, the new phase of Thomism is clearly initiated: a revision of Thomas Aquinas’ theology enriched by late medieval nominalism, by Erasmian humanism and by a fresh, historico-relativistic reading of the philosophers of antiquity (Guy 1943). In their comments on key concepts like nature and natural change (development) in relation to the state, natural law and the economy, de Vitoria and de Soto follow a neo-Aristotelian line. They refer to the open and firmly ideological categories and processes of Aristotle’s Physics and Metaphysics, rather than to the theses developed in Politics land NE, V, 5. This change of emphasis is but one of many significant departures from medieval Thomism. Moreover, their frequent reference to the historical contingency of basic concepts like utilitas, commoditas and necessitas et ratio rerum, is the mark of a more secularized view on social, political and economic processes (Maravall 1987: 611–93). This novel philosophical stance opened the way to later developments and enquiries into the relative autonomy of the political community, economic laws and the functioning of the markets. Against the absolutist tendencies of the Habsburg monarchs, de Vitoria and de Soto proclaimed the democratic principle that the kingdom is not created for the king but for the community: reges ac principes a populo creati sunt. Their political and economic ideas evolved as a by-product of a rejuvenated moral philosophy (Barrientos 1985). The extension of rational autonomy to a broader field of human activity led to a gradual discovery of the natural laws that rule the economy as well as the proper value of money. The members of the newly founded Jesuit order, Luis de Molina, Juan de Mariana and Leonardus Lessius, contributed to the movement by their emphasis on individualism, more specifically on the psychological contingency of the individual. The explosive growth of the Iberian Peninsula’s geographical and political spaces formed an historical determinant in the redirection of its development. Since the fifteenth century the Portuguese had taken the lead in the African-coast border trade. In 1498, Vasco da Gama’s circumnavigation of Africa opened a sea route to the flourishing spice trade with Asia. The discovery of America, with its gold and silver mines, under the political guidance of Castile, was a feat that changed the destiny of Spain and challenged price stability in Europe.

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As a consequence of its dynastic heritage Spain spread its hegemonic wings. The still-fragile confederation of kingdoms and principalities, with Castile at their centre, was united by the Burgundian inheritance of the Low Countries. In association with the German princely states this confederation formed the Habsburg Empire. Spain was unexpectedly caught up in a global role for which it was unprepared on account of its relatively underdeveloped economic base. From the start, the unity of the Habsburg Empire was challenged by the Reformation, which caused a religious schism as well as spiritual and social unrest in Europe. The Habsburg monarchs tried unsuccessfully to rule this vast conglomeration of lands and peoples in a medieval manner. The extravagant ambition to impose a ban on Protestantism in Europe, to push the Turks back to the Bosporus and to triumph in the continental conflict with the French house of Valois, placed a heavy toll on human and material resources. This valiant attempt to give some coherence to lands and peoples with different historical traditions and with an uneven level of economic development landed the Habsburg monarchs in financial bankruptcy. As it evolved, the Habsburg Empire linked its political and military base in Spain with the two most developed poles (Flanders and Lombardy) in a global commercial and financial zone comprising the Indies, Germany, the northern Baltic, Portuguese Asia and Africa. For the financing of their wars, Emperor Charles and his son Phillip were heavily dependent on German and Italian bankers. As a consequence of its underdeveloped economic base, the Castilian monopoly of trade with the colonies proved to be inadequate for the imperial project. As time went on, the Spanish economy degenerated into a crisis while more developed interlopers took advantage of the international trade zone. Spain was dependent on the proto-industrial Low Countries for equipment and goods exported to the colonies, and on Northern Europe for its supplies of grain, timber and naval stores. At the time, Antwerp functioned as the most important commercial and financial transmission belt. In the expansion of international trade, the movements of goods were the prime movers of financial flows. For Spain, this resulted in a continuous recycling of its American treasure. With the expansion of commercial and financial capitalism, mercantilist theories blossomed in England and in France. They were preoccupied with precepts for regulating coinage and financial flows, for manipulating rates of foreign exchange, for encouraging exports and discouraging imports. To these conventional themes of mercantilism, the Portuguese and Spanish contributed with specific and original ideas. In Spain, the internationalization of trade, combined with the easy inflow of precious metals, led the scholars of Salamanca to a deep study of financial dealings and of monetary market relations. The sudden expansion of commercial, financial and monetary flows made the theologians and canonists aware of the variations in the relative value of money according to different times, places and the development level of the economic base. By the internationalization of trade, money was moved far beyond the political control

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of a single sovereign. As a consequence of their philosophical stance, they became more conscious of the relative functional autonomy of commercial and financial markets. Although they were in the first place concerned with moral aspects and with canonical norms, the intrusion of the market was taken into account as a natural phenomenon. The Spanish arbitristas and Portuguese alvitrismo went another way. From the start, they moved outside the moral arena and tackled the problems of an ambitious project that had failed. Today, they would be called development economists. With their often incisive pamphlets they tried to correct what was regarded as the over-extended outward expansion drive of their country. The leading theme of this literature was the interiorization of development. THE GREAT INFLATION The influx of precious metals Fifty years after the conquest of the New World the Spanish caravels brought in a flood of precious metals via Seville. The crown reserved a quarter of this colonial yield for itself. The rest flowed via private channels: to Castile in a first phase. Thereafter these liquid assets were recycled by tradesmen and bankers to the rest of Europe. A considerable amount was destined to pay for the Habsburg wars. Part of this inflowing mass of precious metals from the New World was first injected into the Spanish national economy: in the form of profit for the exploiters of the mines and for the colonials, and as payment for equipment to be exported to the colony from Castile. Another part was transferred to European countries to buy foreign goods to supplement shortages at home and to supply the colony. The result of this injection of liquidity was a general inflation of prices. This manifested itself and spread around in consecutive phases and cycles. As a result of the international trade and banking, a new network of commercial and financial flows superimposed itself on the different economies, breaking down the barriers of the local markets. The kaleidoscopic composition of the empire, with uneven levels of economic development and different elasticities of supply and demand of the various regions, resulted in an uneven spread of inflationary impulses. The dawning of the quantity theory The economic development of the Iberian Peninsula and the great inflation have been widely analysed by the historians of our time.3 In textbooks on the history of economic thought, however, the Iberian contribution to theorizing was, until recently, hardly mentioned. In the last few decades this incomplete image has

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been corrected by pioneering research on the Spanish and Portuguese authors of the sixteenth century (Pereña 1954; Grice-Hutchinson 1952, 1989).4 The first formulations of the nature and the function of money appeared in the economic texts of Plato and Aristotle. These pioneers defined money as an intermediary in exchange and as a measure of value in the estimation of the equivalents upon which all exchange depends. Aristotle, being a monetary nominalist, stated that the value of the measuring rod, being a conventional standard, may be changed by convention. The political theories of valor impositus of Roman and early medieval times left the initiative to the prince. These doctrines left the way open to practices of excessive debasement by political authority. In the lands of Islam and in Latin Europe of the late Middle Ages, the political theory of money was repudiated by the commercial community, who conceived debasement as a fiscal subterfuge. With the world-wide linkage of economic zones, the expansion of international trade and financial markets, the inflow of American gold and silver, the focus on the debasement issue seemed inadequate to explain the drift of inflation in prices. The Spanish schoolmen were the first to single out market forces, or the impact of supply and demand of goods and the quantity of money, as a codeterminant in their framework of analysis. In previous ages the quantity of money as a price determinant had been perceived, but only on an intuitive basis. In the period 1550–1650 economic thought reached a pinnacle in Spain. The Salmantino’s primary concern was to formulate the ethical problems that confronted Christian bankers and tradesmen. In the field of trade and banking the propriety of profits and the risk of usurious gain was a vitally important question. The schoolmen’s analysis of the fluctuation in the value of money, paved the way for modern monetarism. The application of a formal model may help to clarify the positions. The conventional quantity relation is presented in its static form by the wellknown formula MV = PQ. Logarithmation and differentiation to time, gives a dynamic version, which may be written as follows: m + v = p + q. In this last formula the dots above the symbols represent percentages. The schoolmen of Salamanca focused their attention on the relation p = f (m). In their texts we find only occasional references to (v) or to changes in velocity. The factor q or the growth elasticity of national product was left in the background. The arbitristas on the other hand took the factor q as the core of their thesis. Their pamphleteering took issue with the structural inconsistencies of Spain’s economic development. This inward looking analysis emphasized the functioning of the real sectors of the economy and marked a clear departure from monetary analysis. In their pamphlets and briefs to the court, they offered precepts for the reform of agriculture, rural exodus, urban unemployment, import substitution, a more positive work ethos, etc. Seen from the political angle, one could also call them the intellectual constituency of the nationalist bourgeoisie of Castile, in opposition to the tenets of the imperial party.

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In most European nations the mercantilist mainstream regarded the influx of bullion as a blessing, even as a goal of national economic policy. In Spain, however, the abundance and the waste of the precious metals brought the arbitristas to an operational analysis of the real sector. In modern jargon, the arbitristas would be called structuralists in opposition to the monetarists of Salamanca. In the debate on Latin American development of the fifties and sixties of our age, the opposition between a monetarist and a structuralist debate would reappear. The debate in the 1950s on the monetarist approach of the IMF and the structuralist theories formulated by ECLA (Economic Commission for Latin America, directed by R. Prebisch) had many similarities to the dispute between the monetarists and the arbitristas in Spain. THE SCHOOL OF SALAMANCA The rejuvenation of scholastic economics The Dominican Francisco de Vitoria who started teaching there in 1526, is generally regarded as the pacemaker of the Salamanca school, since he rejuvenated scholastic theology by orienting it towards the problems of his time (Pozo 1967; Maravel 1967; Abellan 1979; Guy 1982:119–28; Fernández 1989). In the field of economics he is a trend-setter for the subjective theory of value. The rapid expansion of the financial bills market and the credit market wrought a change in the functioning of the system as well as in value perceptions. The subjective value theory is a short-term view on market trends which reflects the perception of the commercial and financial world. This view pays less attention to the aspect of material production costs as a determinant of value, prevalent in the real sector of the economy. As such it became popular in the milieu of the traders, of the bankers and of the money changers. According to Vitoria, the price of goods and of money is determined by demand and supply in a free market. The market price is seen as the normal price, because this expresses the utility and the scarcity as experienced by society (aestimatio communis). The pioneering Salmantino de Vitoria was also averse to the regulation of prices by the administrative authorities or by the guilds. He had no sympathy for the oligopolies and monopolies of his time. Louis de Molina, a Jesuit scholar at the Coimbra University, expanded this idea of economic liberalism more forcefully (Weber 1959). The doctores of Salamanca raised the following objections to the regulation of prices by the authorities: 1 Regulation of prices by the authorities or by guilds induces sooner or later incorrect prices and a distorted market. Because the prices of goods are internally related, it serves no purpose to regulate the prices of the endproducts only. This thesis is illustrated by means of an example. If the authorities wish to regulate the prices of bread and shoes, the prices of the

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inputs wheat and leather must also be kept under control. If not, then distorted growth takes place in the production line or between it and the distribution line. 2 Official regulation of prices encourages the corruption of the public authorities in charge. 3 Regulation of prices elicits fraud and evasion of the law by the economic agents, with the effect that respect for the law is eroded in the long run. Very influential in the monetary issues was Martin de Azpilcueta (1492–1586), better known as Doctor Navarrus, and also Tomás de Mercado (1530–76). The then young Society of Jesus produced the aforementioned Luis de Molina (1535– 1601), who spread the Salmantino tradition to the universities of Coïmbra and Evora in Portugal. The Jesuit Leonardus Lessius (1554–1623) introduced their way of thinking to the University of Louvain in Flanders. Two other Jesuit scholars, Juan de Mariana (1535–1624) and Juan de Lugo (1583–1660) made significant contributions. Perspectives and accents of study The analysis of national and especially international (commercial, financial and monetary) mechanisms forms an important part of these scholars’ writings. The moral restrictions on price speculation, on interest and on profit, and on the rate of exchange were analysed from a dual standpoint: 1 Pastoral concern: as priests they bore in mind the cura animorum, i.e. the shaping of the conscience. They wrote for believing merchants with qualms of conscience and for confessors in need of guidelines. Interesting insights and practical wisdom are not only scattered over the learned treatises, but can also be found in the numerous ‘manuals’ or instruction books for confessors. 2 As scholastics they feared that an uncontrolled expansion of the speculative spirit would cause moral disintegration resulting in the disruption of society. This is an idea inherited from the Greek philosophers. In their view, an ordered society had to be a just society. The Salmantino theologians, canonists and moral philosophers formed a school in the sense that their scholars adhered to a common intellectual tradition, for a time-span of almost three generations. Moreover, their tradition spread to the universities of Portugal, Italy, Flanders and South America (Popescu 1990). Some of their publications became enduring bestsellers, translated into different languages. In their moral and political philosophy they may be called democratic humanists. More than the medieval schoolmen, they strongly emphasized the social and political autonomy of people in their role as citizens. They viewed

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humans as God’s co-workers in the earthly realization of the divine plan. In this line of thinking the Salmantinos radicalized the concept of individual voluntarism and of democratic humanism initiated by the Franciscans of the thirteenth and fourteenth centuries. The Salamancan theology gives the free will and the responsible conscience of the individual a prominent place. It culminates in the concept of a social pact between the authorities and the people. In its natural law theory, the people’s sovereignty and the rights of the individual are recognized and stressed against the power of the feudal order, against imperial absolutism and even against the authority of the Church.5 A large role is reserved for personal free will and private conscience, for the family and the community of artisans and traders, as well as for the market mechanism. According to the theological concept of dubium-opinio (‘when in doubt respect the natural order’) the Salmantinos were more willing than the medieval schoolmen to credit the experience of practitioners in the field (Ternus 1930). If social customs or trade operations were practised by upright people with no apparent injustice, there is probably a valid title to it: ‘for merchants understand these things better than the doctors’. We find this modern line of thought continued by the later natural law philosophers such as Pufendorf and Locke. Monetary analysis In the 16th century the interpretative themes on commercial exchange, on the function, nature and value of money and on financial dealings in general, already had a long history. Aristotle, the Islamic scholars, the Roman legists, the canonists and the medieval scholastics had largely contributed with fundamental but diverging views. Oresme’s treatise had given a lift to the commodity theory of money initiated by the Roman legists. In the sixteenth century the cause of mutatio monetarum was no more the sole practice of debasement, it was generated by the growth in quantity and reinforced by the use of banker’s money. The dynamic concepts of entrepreneurial time, uncertainty and risk had now become evident in the business world and the debate could not be kept out of the lecture halls any longer. In the realm of monetary analysis the schoolmen of Salamanca revealed themselves as founders of a tradition of thought that would know many revivals up to this day. The quantity relationship and the theory of purchasing-power parity formed the two crowning pieces in their system. The Salmantinos perceived the real purchasing power of money in the same terms as the merchant class. This is in terms of utility and scarcity and not in terms of the political value imposed by the prince. Tomás de Mercado (Summa, lib. II, cap. 17) formulated these ideas quite clearly and succinctly: Mas la moneda solamente la hace valor nuestra voluntad.6 Money has always been one of the most complex parts of economic thought and theory. It has an ‘officially’ determined currency value, sanctioned by the image of the prince. But money also has the power to purchase goods and the

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capacity to pay for services. And this purchasing power determines its real value in time and space. Furthermore, in the determining of the value of money, and of the rate of exchange, the element of psychological valuation also plays a role. Not only the market price of goods and services, but also the market price of the medium of exchange itself (i.e. money) is psychological, and thus subjectively tinted. The Latin terms that express this subjectivity such as valor, valere and aestimatio (estima in Spanish) are key concepts in the economic analysis of the doctores of Salamanca. The theoretical awareness and analysis of the monetary market mechanisms had not come suddenly. In the late Middle Ages, Christian scholars such as Olivi, Buridanus and Oresme had already indicated the way ahead (Langholm 1992). The princes and kings were always short of money to pay for their wars. For many of them, the practice of debasement was an easy way out. Islamic scholars, as well as Buridanus and Oresme, like their Islamic predecessors, had voiced the claims of the rising commercial classes. The Salmantinos developed the following concepts concerning the value of money: 1 Valor: legalis, impositus, extrinsecus, i.e. the official rate of currency. 2 Valor: intrinsecus, naturalis, i.e. the value of the metal or raw material, in the case of coins. 3 Valor: accidentalis (on the basis of aestimatio or estimation), i.e. the real purchasing power of money. According to this viewpoint money is a market variable. As such its value is regarded as changeable. In their texts a term often used for the fluctuations in the ‘purchasing power’ of money is varietas valoris monetae. This expression conveys the changeable nature of the value of money. The combination of the concepts of utility, scarcity and aestimatio in one term, namely the subjectively determined value of money, forms the core of the economic theory of the school. The official, feudal view saw money as token money. It has the value that the prince gives it: an official rate. But money (including paper money) is also merchandise. Its price is dependent on shortage or on abundance, on utility and on other market variables.

A NEW PERCEPTION OF INFLATION In the second half of the sixteenth century the caravels returned from the Americas (in the sixteenth century the discovered territories were still called the Indias) with ever greater shipments of precious metals, especially silver. This set prices adrift, first in Castile, then in the whole of Spain and finally in the rest of Europe. But the scale of the Habsburgs’ belligerence involved these sovereigns in a debt crisis, in spite of the flood of precious metals. To meet their vast need of funds they let the prominent bankers make short-term drafts on the next

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shipment of silver from America. This resulted in imperial credit transactions experiencing an enormous expansion. The large financial centres (Lyon, Florence, Antwerp, Augsburg, etc.) saw to it that the Spanish sovereigns could finance their military campaigns in Italy, the Netherlands, Germany, etc. with drafts on the announced shipments of silver in Seville. The major influx of silver caused the silver–gold parity to shift from 1:10 to 1:15. Castile was incapable of supplying the colonies with sufficient consumer goods and equipment. This forced the merchants of Spain to purchase most of the necessary finished products in the trading centres of Flanders, Holland, England and North Italy. Because of their capacity to deliver consumer goods and equipment to Spain and the South American colonies, money poured into Flanders, Italy, France, Holland, etc. as well, which led to an ‘imported’ inflation. Military and economic factors thus resulted in the silver of the Indias being recycled over the whole of Europe. This set prices adrift everywhere and resulted in devaluation of its money value. The intensity of the inflation was not the same everywhere. In the Indias money was more abundant than in Spain, prices climbed the highest and the value of money in terms of purchasing power fell to its lowest level. Thereupon followed the financial centre of Seville.7 Finally, the prices also started rising in the rest of Europe, albeit more slowly and with some delay. The change in the internal value of money brought in its wake a variation in the external value of money or in the exchange rate. With the same bank draft (bank paper) one could buy more goods in Antwerp than in Seville, because the purchasing power of money was greater in Antwerp than in Seville, money being less plentiful there. Could the bankers pocket the profit from the exchange rates with a clean conscience, or was that considered usury? Seeking a moral answer to these questions, the doctores formulated, as ‘theoretical by-product’, the theory of purchasing-power parity. In the middle of the sixteenth century an awareness among the Salmantinos of the quantity relation began to manifest itself: authors such as Vitoria, de Soto and Saravia de la Calle mention the volume of money as a determinant of fluctuation in its value. Around 1550 people in well-informed circles began to realize that the value of money varies segun la falta o abundancia de moneda que hay en la plaza.8 But it was especially Martin de Azpilcueta and Tomás de Mercado who published a coherent formulation of the quantity theory. Martin de Azpilcueta Azpilcueta was a descendant of the minor landed nobility of Navarre. He entered the Order of the Dominicans and rose to become a canonist with great authority. He lectured at the universities of Cahors, Toulouse, Salamanca and Coïmbra in succession. In 1553 during his time in Coimbra, he wrote a manual for confessors in which his quantity formulation appeared in primitive form. In 1556 he wrote his influential Comentario resolutorio de cambios. It is a work written

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in full intellectual maturity. The chapters of the Comentario are organized around different topics: currency and change practices, the problem of interest and usury, fluctuations in the value of money. As such it offers interesting insights into the rapidly developing international money and credit markets of the time. The book was a success and there followed several editions during the lifetime of the author. In 1965 the Comentario was published in a new edition with an introductory comment by the Madrid economist A.Ullastres. After a historical introduction in which most of the scholastic authorities are commented on, Azpilcueta arrives at the core of his argument on the function and ambivalent nature of money: 1 Money is regarded in the scholastic tradition as numéraire in the official sense. In the words of Azpilcueta (Book III, art. 11): El dinero es medida publica de las cosas vendibles.9 2 But in Book XII, art. 52 it is clearly stated that money is also merchandise because it can be bought, sold, lent and exchanged for foreign currency: El dinero en quanta es cosa vendible, trocable o commutable por otro es mercaderia.10 From the point of view of this complex nature of money (numéraire or measure but also merchandise) Azpilcueta develops his analysis further: 1 Internally, money is the official measure and expresses the value of goods and services. Thus, money indicates the price of goods: El dinero es precio.11 This is the nominal sphere: metron according to Aristotle, mensura according to Aquinas. 2 However, money is also merchandise and as such it enters the economic field. Moreover, in the international economy of the sixteenth century, there is not only a demand for and supply of money internally. It is also used in the foreign financial markets. In this international field the valor impositus loses its meaning, because the authority of the prince has no effect in foreign countries. In the international field money becomes a pure market variable. 3 On account of the increased financial activity and flows, the intermediary chain of exchange became longer and more complex, with an intensification of interchange of paper money against paper money. The demand for and supply of money are no longer determined only by the users of coins. Demand and supply are also influenced by the speed or on the contrary by the reluctance by which credit (paper money) is created by the bankers, the money-changers and the financial speculators. Hence, the demand for money as well as the supply are activated by the credit policy of the financial establishment: Mas vale tanto de dinero en manos del tratante aparejado tratar con el, que otro tanto en mano de otro.12 It is not the passive demand and supply but the effective demand and supply that are the determinants of value in the money and credit market.

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4 Finally, Azpilcueta formulates the quantity relation (Book II, art. 51). In countries where money is scarce not only the prices of goods but also wages las manos y trabajos de los hombres will be lower than in areas where there is a surplus of money. The buying power of money la capacidad de compra is therefore determined by the volume of money and credit, if other factors remain constant, for example in the case of zero or low elasticity of the productive capacity. If the general level of prices determines the purchasing power of money (with rising prices purchasing power diminishes and vice versa), then the relation can be formulated as follows: p = m – q In the quantity relation with monetarist overtones, the attention is focused upon the impulses going from m to p. Since money is regarded as moneyneutral in the production sphere over the long term, the variable q is omitted. The monetarist formula is then reduced to = f (m), with in the background the velocity change. In the general scheme of Azpilcueta various factors are therefore involved: • the volume of money; • the volume of credit: the creation of international credit was very active in his time; • the speculation in international currency. The inflation set off by the influx of precious metals was therefore a specific field of application of the general quantity relation. This also takes into account the practice of supplementary (paper) credit creation. Tomás de Mercado The second important monetarist, namely Tomás de Mercado, went to Mexico in his youth where he entered the Dominican Order. On his return he became lecturer in Salamanca. After his teaching charge he was appointed in the Casa de Contratación or the Exchange House of Seville. There he followed closely the international money and credit market, as well as the trade between Spain, Western Europe and las Indias. In 1569 he wrote his now famous Suma de tratos y contratos. In 1975 a new edition was published with an introductory comment by R.Bravo. Tomás de Mercado was not only a theoretician. With his experience of the Mexican colony and his sociable character, he mixed freely with the merchants and bankers whom he frequently met in the Andalusian metropolis. His treatise departs from the abstract scholastic mould. In an entertaining style it is meant to be a didactic work for merchants and bankers who shy away from dogmatic casuistry: mi intento principal es instruir cumplidamente a un mercader en todo to que con su ingenio puede entender por reglas, (Prologo, p. 20). He knew intimately the commercial and financial matters on which he commented. His sympathy for businessmen, who according to Mercado took huge risks and

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worked hard, was rather unusual for a moral philosopher. Yet as a monk he noted drily that though one could earn decently through trade and banking during one’s earthly life, by doing so too avidly one could lose the eternal life. 1 Mercado was one of the first schoolmen to positively appreciate the trading and money business not only for its social value, that is to say as a necessary element for the well-being of society. He furthermore enthused somewhat lyrically over these hombres universales, who in their contacts with foreign countries, with their customs and political mores, became cosmopolitan citizens of the world. Thus, he broke with the aristocratic prejudices of Aristotle and with the moral a priori of the medieval Church Fathers against traders and bankers. 2 Although he never quotes his Dominican colleague, the quantity relation of Azpilcueta is developed in a lucid and more precise way. Tomás de Mercado analysed the ‘de-doubling’ between the official rate (precio) of money and the purchasing power. Although one ducat in Spain bore the same official sign as in Flanders and in las Indias, its purchasing power in Spain was higher than in las Indias (where there was a surplus of money) and lower than in Flanders (where money was scarcer). The value of money is inversely related to its quantity. In all this the ‘effective’ demand for goods is important; especially in a situation characterized by scarcity of goods and abundance of money, as in the colonies: Vemos que en Indias hay mucho que comprar13 Hence purchasing power is also determined by the scarcity of goods; for example, in the underdeveloped colony where industrial goods are scarce. This may be called a demand inflation. 3 Mercado’s theory lies wholly in the realm of the subjective theory of value. 4 He developed his theory of external purchasing power to fit into the sphere of international trade in currency. The comparative value of currency is determined by the national differences in the purchasing power of money.

PURCHASING-POWER PARITY The reference of Tomás de Mercado to the international purchasing-power parity preceded the analyses of living Fisher and Gustav Cassel by three centuries. With no visible sense of humility, Mercado announces his own originality in the formulation of this theory (Book IV, cap. 3): Cierto nunca la he visto enteramente explicada en ninguna obra.14 Yet, the international exchange value of bank paper is not the same in all financial centres. Unequal fluctuations in demand and supply of goods and money in the national markets result in exchange rates evolving unequally. In Castile money is abundant, the prices of goods high and the exchange rate unfavourable. It is more profitable to recycle

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the currency (via drafts) to Flanders where more goods and services can be bought for the same amount. There the purchasing power of money is higher. The differences in exchange rates that are the result of fluctuations in the market and the profits that flow from these differences, are morally justifiable. It is not usury, but cambium iustum in the market as it is. With regard to the analysis of the international money and credit market, the Flemish Jesuit Leonardus Lessius (1554–1623) deserves special mention here (Beutels 1987). At a stage when the School of Salamanca had already passed its zenith, he produced fine analyses on different matters, like money value and on international trade, at the theological study centre of the Jesuits in Louvain. The theses are developed in the Salmantino vein. Moreover, several scholars of scholastic economic doctrine have underlined the striking affinity between Lessius’ theses and the novel themes formulated by Olivi, the thirteenth-century Franciscan friar and theorist (Spicciani 1977, 1990; Langholm 1983, 1992). His study De Justitia et Jure was first published in 1605, in Louvain; later in Lyon, Paris and Venice. It went through several reprints and circulated largely in the European lecture halls. Like Tomás de Mercado, the Jesuit contacted freely the financial establishment of the Flemish metropolis. Lessius, who had a very thorough knowledge of trade and banking transactions, was often ‘consulted’ by traders and bankers from Antwerp.15 Lessius’ theory of interest anticipates the nineteenth-century agio-theory: the creditor should be rewarded, because he temporarily forgoes valuable liquid assets (carentia pecuniae). Money in hand is worth more than the portfolio paper of a bank. This is an early formulation of the preference for liquid assets. With this Lessius takes up an old problem, namely ‘how should time and expectations be integrated into the economic calculus?’ He notices that bankers and speculators keep cash at hand, i.e. temporarily they do not convert their liquid assets into bank drafts or lending contracts, in expectation of higher proceeds (interest) at a later stage. But if potential creditors keep too much liquid resources from circulation, and thereby cause a shortage of credit (followed by a rise in the rate of interest) it may be interpreted that the creditor has attained a higher interest on a later loan by foregoing a (lower) interest on an earlier loan. Morally this is not incorrect. We close our list of Salmantinos with the Jesuit Juande Mariana, the author of De Monetae Mutatione published in 1609 (Cologne) and translated into Spanish as Tratado y discurso sobre la moneda de vellon. During his long career he held teaching posts in Sicily, Rome and at the University of Paris. His bold thesis on debasement and his vehement language landed him in difficulties with the Spanish authorities, which explains the publication of his treatise in Cologne. Juan de Mariana did not break new ground in the debasement analysis of former analysts. Mariana’s debasement analysis followed upon his earlier work on political theory De Rege et regis institutione, published in Toledo (1598) and later rendered into Spanish as Del rey y de la institution real. His political theory may

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be summarized in one dictum: the king has no domain over the goods of the people, nor over money. In vehement argument he states that debasement is un infame latrocinio, ‘an infamous robbery’. In anticipation of Gresham he continues that debasement creates inflationary demand, since everyone will try to get rid of debased money. With clear insight into the devaluation plans of Phillip III he declared that this magic would not avert Spain’s international deficit. In a country with a passive balance of trade, or with no noticeable elasticity in its export capacity, a policy of deliberate depreciation of the currency would only aggravate the economic plight. The School of Salamanca formulates the Church’s teaching on political order and economic justice for a post-medieval commercial and financial world. The inner development of theology, of moral philosophy and of canon law towards more recognizance of personal conscience and autonomous action as a citizen, elicited a new approach to natural phenomena. Most of the Salmantinos pay great respect to towering figures like Thomas Aquinas and to other Church Fathers. In their own treatises, however, they complement doctrinal positions with factual insights into the concrete functioning of the national and international economy. Like their medieval predecessors they delineate the principles; but being keen observers of reality, they understand the laws of the markets. By their acceptance of an autonomous economic sphere, the Salamanca School emerges as a bridge between medieval Church doctrine and the natural law philosophers of the seventeenth and eighteenth centuries. That this novel approach came from theologians and scholars of canon law, conferred on their doctrines an aura of authority in the Catholic world. THE POLITICAL ECONOMISTS OR ‘ARBITRISTAS’ Doctrinal change: from public virtue to national wealth With the advent of modern times, the European nations sailed out in conquest of colonial trade centres and markets. Spain and Portugal went ahead, the Dutch, the English and the French followed suit. Mercantilism has variously been identified as a systematic quest for bullion, as the economic legitimation of nation building, as a doctrinal change from the medieval universal ideal towards national egoism and as a case of export-led economic growth. In theory, it confers a first éclat to macroeconomics. The retrospective literature on mercantilism has been marred by ideological discussions on the merits of state intervention in the economy or, on the other hand, on its disruptive effects. The debate along these lines alone misses the point. State intervention in the economy was a long-standing practice and thus preceded mercantilism. Looked at from the standpoint of intellectual history, the most important novelty of mercantilistic thought is that it marked the retreat of the moral economy. The evacuation of ethical principles and the differentiation of

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things economic from their normative context, truly distinguishes mercantilist writings from those of the preceding Mediterranean tradition. The decline of the Mediterranean region and the migration of economic opportunity to the upcoming Atlantic nations like Holland, England and France, inaugurated a pragmatization of economics. The ethical paradigm that had reigned over the thinking about economics from the ancient Greeks to the School of Salamanca, was dethroned by the atlantization of the modern world and its doctrines. In the writings of the mercantilists, the economy is an instrument of practical, social and political aims. In their policy programme the engine of trade had pride of place. In this, the mercantilists drew clear demarcation lines between the proper laws of economics and the principles that order the broader sociopolitical context. Even the state-minded mercantilists professed that there existed economic laws whose operation was beyond the power of the prince to control. This new theoretical insight was particularly strong in Holland and in England. In France, Italy and Germany, however, the defenders of this new paradigm lost the battle against the interventionist mercantilists. There is no doubt that the conquest of new markets caused a spurt in the development of our continent. Successively, the Portuguese, Spanish, Dutch, English and later also the French economies, underwent a growth shock. They benefited from internal and external economies by the ensuing scale effects. The foreign markets, and later the colonies, had to be equipped with investment goods (long-distance ships, sugar and cement mills, agricultural tools, etc.) in exchange for tropical products and precious metals. That this intensification in production and trade worked as a dynamic stimulus to the economic development of the European continent is a fact corroborated by historical research. Mercantilism and colonial conquest caused not only virtuous or positive growth effects. It also generated vicious circles in the metropolis; particularly when its economy was underdeveloped, and thus unable to supply the required quantity or quality of export goods as a productive counterpart to earn the inflow of precious metals. The Dutch economy especially and later the English, met this challenge with success; not so the Spanish and the Portuguese economies. Their seventeenth-century political economists make this very clear in a flood of publications. The ideology of the arbitristas The conquest of the New World opened large foreign markets for the Spanish economy. It gave a stimulus to the export-orientated agriculture. For the financial establishment this opening meant financial opportunities for the expanding maritime trade. But the infant industries and their small-town workers in Toledo, Segovia, Avila and Valencia looked disapprovingly at the imperial projects of the export industry. They were in favour of transforming their raw materials themselves in the local manufacturing shops. They quickly received the

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label of comuneros, or Spanish nationalists. And when the Emperor Charles revealed his imperial plans, sustained by the export establishment and the imperial party, the comuneros rebelled against the sovereign. The emperor suppressed the uprising with a bloodbath and purged the lobby of the local interests represented in the Cortes. The interests of the imperial party, and the socio-economic class supporting it (large rural landowners, export bourgeoisie, international bankers, etc.) began to count more and more in the official policy options. The ‘Castile first’ party, with its plans for the development of the national manufacturing industry and its ideology of creating added value through the work of local artisans, was pushed into the background. The first cycle of inflation from 1530 to 1580 gave financial circles—the speculating bourgeoisie, the latifundistas and the maritime trading classes of Seville—in short the supporters of the imperial party, a false impression of wealth (Maravall 1972:322). However, the ‘monetarists’ of Salamanca had presented a more sobering view on the new phenomenon. More bullion increases wealth only marginally, they said, if the ‘purchasing power’ of the money is weakened. They also had a moral message: inflation creates easy windfall profits; it weakens the real spirit of enterprise and the work ethic. Inflation benefits speculating financial agents who shun productive effort. The ideas on social and economic development of the arbitristas were given a true lift after a publication on the national interest by the Venetian Jesuit Giovanni Botero (Botero 1589). Contrary to the doctores of Salamanca, with their ethical point of view, Botero expressed secularized ideas on the running of a modern nation and on the development of its productive capacity. In Botero’s view the following policy lines, among others, are of importance: • the striving towards balance (he speaks of solidarity) between all national sectors: agriculture, trade and especially industry; • the importance of ‘manufacturing’ industry for creating wealth and employment; • the need for a wealthy nation to have sufficient labour (population) at its disposal; • the development of the middle classes: artisans, industrialists, rural residents, etc. It was the Italian Botero who formulated the first coherent socio-economic ideology for the upcoming modern state. In his strategy he stressed the following options: • upgrading of productive labour; • revaluation of the provincial bourgeoisie and their national trades and industries;

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• moral rearmament of the comuneros against the cosmopolitan party and its associates. The work of Botero became the blueprint of the provincial and regional forces in Europe in favour of a balanced development policy. In Spain, where the cosmopolitan policy in trade and industry was undermining the national middle classes by favouring a transit economy, Bolero’s ideas were well received. Luis Ortiz was the first to pick up the line. During the following century the arbitristas would hammer out Botero’s development philosophy. They adapted its guide lines to Spanish circumstances and proclaimed them over and over again in the Cortes (States General) of Castile. In their complaints to the king, the spoils of foreign bankers and tradesmen, i.e. the explotació grave y humiliante de los hombres de negocios extranjeros became an oft-repeated refrain.16 And with a lyrical exaltation del hombre de empresa, or ‘praise of the creative businessman’, their development hymm was sung in Schumpeterian notes. The king was requested to temper his messianic obsession and his ambitious plans (among them the extermination of the Protestant ‘heresy’) because the military expeditions were bringing the state finances into disarray by piling up debts. The dependence of the prince on the credit of bankers is unhealthy. The growing indebtedness goes against the political logic of a modern nation. A healthy nation bases its development on a rational and balanced productive effort. The continuous wars of the Habsburg dynasty, against the Protestants, against the Turks, against the Indians, etc. were frowned upon by the comuneros as a waste of resources. The pioneer: Luis Ortiz The sixteenth century was the high tide of ‘nation building’. The transnational system of the Res Publica Christiana was in a shambles and a new constellation of interests and social classes was in the making: the rural nobles, the civilian middle class, the military establishment that waged the wars of the sovereigns. Spain was still a feudal-rural society, but its towns began to function on a capitalistic basis. The empire-building of the Habsburgs went against these national tides. They exhausted themselves in various religious wars: against the French, the Protestants and the Turks at the same time. The flood of bullion streaming into the Spanish Empire supplied the sovereigns with ample means to support their military undertakings. But these military excesses, and by implication the money they cost as well as the inflation they caused, did not meet the functional requisites of national (capitalist, mercantilist) development that was the new wave of modern times. These military excesses were not only a cause of debt, they also clashed with the socio-economic interests of the civilian middle classes in trade and in agriculture which were bent on development.

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Half-way through the sixteenth century political economists began to write in a purely ‘technocratic’ way about the economy. The macroeconomic perspective triumphed over the moral doctrines of the scholastic scholars. The situation in Spain was extraordinary because of the fact that it was the core of the imperium, yet economically relatively underdeveloped. Under the impulse of Philip II Spain began to play a hegemonial role. His imperium was graced with a periphery rich in precious metals (America) and with an economic centre (a developed manufacturing industry) in the Netherlands. The Habsburgs (Charles V, Philip II and his successors) applied a policy that was, according to the arbitristas, contrary to the interest of Castile. Their arguments ran as follows: • Spain was not able to maintain the colonial monopoly whereby Castile could deliver consumer goods and equipment for las Indias via the warehouses of Seville only. Castile was forced to import more and more goods from Flanders, Holland and England: for its own use and for transit and export to America. • The deluge of bullion generated a galloping inflation in Spain; and the high prices rendered the national industry uncompetitive and caused stagnation. • The drain of bullion outside Spain set off by inflation, was intensified by expensive military expeditions and religious strife. The political economists were critical of the policy of the Habsburgs in a populist fashion. They looked at development from a Spanish nationalist standpoint. They were of the opinion that the development of Spain was sacrificed in favour of the imperial policy of the Habsburgs. The first and best-known pamphleteer is Luis Ortiz, who in 1558 (i.e. when the Spanish Empire was still at its zenith) published his critical Memorial al Rey. Contrary to the bullionist doctrine of the time, he formulated an economic policy that was based on the development of national industry. It was not the import of bullion that had to increase, but national productivity. To achieve this target, the nation had to invest more. According to Ortiz the Spanish economy relied too much on the export of raw materials and on the import of refined products. Because the former are cheap and the latter dear, this is an onerous operation. Spain had to pay the ‘added value’ created by the transformation of raw materials to foreign countries. This helped the drain of precious metals along. His solution was the stricter application of the late medieval ban on raw materials and to protect the country against the imported refined products: El remedio para esto es vedar, que salgan del reino mercaderia por labrar, ni entren en el labradas.17 Upon this thesis on trade and import substitution, Ortiz expands in detail in the following policy of industrialization: 1 First the infrastructure had to be developed: Spain had to dig more channels and build more sluices.

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2 To increase the production of energy he advised the installation of more water mills. 3 Forests had to be exploited for more fuel. 4 A fiscal reform had to provide for the necessary investment impulses. 5 To propagate industry in Spain, the authorities had to organize a number of expositions at which new machines could be displayed. Ortiz was strongly opposed to the hidalgo mentality. This is a feudalaristocratic attitude of looking down upon economic and industrial development as business for the lower classes. Between the noblemen and sovereigns who thought continually of war, and the speculators and bankers who, thanks to the diluvio, wanted to become wealthy without much effort (rentier economy), the productive class of industrialists and peasants had to fight for their place. Ortiz was particularly astute, but in his time he was like a voice crying in the wilderness. Spain was then at the zenith of its imperial power and the king as well as the leading party had no interest in what the pamphleteers called national development. The crisis syndrome of the ‘arbitristas’ The end of the reign of Philip II (1598) was a turning-point for Spain. The triumphant, imperial mentality of the Golden Age contrasted more and more with the fundamentals, i.e. with the productive capacity of the country. The imperial effort had exhausted Castile and crippled the finances (Echevarria 1991:933–64). The decline of Spain became a theme. A wave of introspection swept over the nation. As a refrain the same question was heard: what has gone wrong? The Stoic philosopher and novelist Francisco de Quevedo looked at the moral and cultural roots of the system crisis. The arbitristas posed as political economists with a strategy to avert it. The fact that several intellectuals wrote pamphlets not on monetary theory but on general economic policy is a novel development in the cultural consciousness of modern times. The idea of social and macroeconomic utility or national wealth was a seed that would grow and bloom in the coming ages. In seventeenth-century Spain, however, the cultural establishment impregnated by seigneurial values, was shocked by this utilitarian bent. Among the arbitristas were pamphleteers who posed as Castilian chauvinists and as naive and extravagant reformers. Quevedo, Cervantes and Lope de Vega poked fun at them.18 Others rose to the status of respected figures, who were able to point out the ills and the maldevelopment of the country with clear insight and great authority. The best among them were what one would today call development economists. After the ‘golden’ sixteenth century, with its imperial extension in scale and its inflationary expansion, the symptoms of the crisis became visible. During the reign of Phillip III (1598–1621) the arbitrista genre came into its own with the work of the following projectors of development schemes: Pedro

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Fernández de Navarrete, Gerónimo de Cevallos, José Pellicer de Ossian, Diego de Saavedra de Fajardo, Miguel Alvarez Ossorio, Luis Valle de la Cerda, Pedro Hurtado de Alcocer, Juan de Arieta, Gutiérrez de los Rios, Lope de Deza, Benito Peñaloso, Pedro de Valencia and many others. But the key figures were Miguel Caxa de Leruela, Christobal Pererez de Herrera, Francisco Martines de Mata and Sancho de Moncada. Unlike the scholars of Salamanca, the arbitristas did not form a coherent group. They were individuals from a great variety of backgrounds: the public service, the declining centres of national trade and industry, the advocates of agriculture-first, the populist party. At times they represented regional interests. Thus, for example, de Moncada stood up for the restauración of the declining industry of Toledo. De Mata on the other hand was well acquainted with the problems of Andalucia and argued for solutions there. What they had in common though was their belonging to the nationalist party, which put the interests of Castile first and was opposed to the imperial party that wasted all its efforts on a transnational imperium. Of the more or less 150 arbitristas from the seventeenth century the following were the most important figures. In the work of Christobal Pererez de Herrera (Amparo de Pobres, 1598) the social concern of the arbitristas came to the fore. The author had read Botero and strongly emphasized the effect of the application of an active industrialization policy. His primary thesis is that the national economy does not benefit from a mass of unskilled unemployed. Therefore, he advocates the establishment of workshops in the poverty-stricken cities, in which unskilled unemployed could be offered a vocational training. For de Herrera the handing out of alms was, looked at from the productive angle, a fruitless activity. It serves a greater purpose to teach the poor unemployed a skill. This was to the benefit of the poor, but also of the nation. However, the most important figure and outspoken advocate for import substitution by means of industrial development was Sancho de Moncada, with his book Restauración Politica de España of 1619. It is a polemical essay, whose radical thesis conveys the industrial chauvinism of Toledo. In a relatively short text, the author discusses in an interrelated way four main topics: population, development of manufacture, manpower training and rural economy. In the first chapter of his work he recapitulates the economic plagues that racked Spain: the expansion of the imperium, the depopulation, the sterility of the soil, the rentier mentality and the spirit of hidalgo, the over-bureaucratization, the incoming stream of bullion, etc. These problems were considered to be secondary. For example, it was not the diluvio of bullion that caused the financial and monetary crisis, but the bad use it was put to: El origin de la crisis no estuvo solo en la abundancia de los metales preciosos, sino en el mal uso que de ellos se hizo, el abandonar Ia produccion de bienes.19 The production mentality was paralysed and a rentier economy installed itself. In order to cope with the neglected state of the manufacturing arts, Moncada took up the thesis of Ortiz on import substitution by industrialization, stimulated

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by protection. He radicalized this strategy by singling it out as the only solution. The transformation of the primary commodities creates more added value for the nation: Todo el remedio de España esta en labrar sus mercaderias.20 In his view, this industrialization could not succeed without a simultaneous reform of the education system, the adequate training of manpower and the modernization of the administration. Moncada advocated the use of the vernacular instead of Latin for teaching at universities. He furthermore regretted that the educational system did not pay any attention to social and economic problems. According to him, the educational system had to be relevant to reality. It should be attentive to the socio-economic and cultural development problems of the nation. As long ago as that! The text seems even more modern (technocratic) when Moncada voices his plea for the inclusion of management sciences (ciencias de gobierno) in the school curriculum. The administration of a modern nation should be run on methods of professional management. This can only be had by adequate schooling, for certainly the Spaniards are not lacking in insight compared to other nations. In modern terminology one could say that Moncada saw the crisis as the result of the misallocation of material and human resources. The situation could be rectified by a policy of industrialization guided in this by professional políticos (bureaucrats). This is to my knowledge the first blueprint for professional management written by a theologian. For a period in his career, Moncada was a professor of theology in Toledo. With Segovia, this city belonged in his time to the most industrialized area of Castile. Here he must have heard the complaints of the industrial establishment against the process of de-industrialization. This was caused by the loss of competitive capacity of the national industry as a result of the rising prices in Spain. In response to these complaints he formulated his development strategy, which he wished to see implemented by professional managers. In an incisive chapter the Toledan theologian applies Botero’s interpretative scheme on population dynamics, in which the food-producing capacity of the land looms large. In line with Pedro Fernández de Navarrete, another councillor to the king, he grapples with the issue of depopulation in the special context of Spain. A great number of people, in fact the most active, emigrated to the colonies. This had a negative impact on the rural supply of manpower in particular and on the productive capacity of the national economy in general. In chapters IV to VI on the malfunctioning of the rural economy, Moncada grapples with the seigneurial land tenure system and with low wages paid by the landowners to the workers producing the frutas de la tierra. In this context he harks back to the population plight of the land. The author’s final verdict is very clear: the rural economy succumbed to stagnation by the shortage of manpower and by the rentier mentality. This brings him back to his linchpin argument: la pobreza de España ha resultado del descubrimiento de las Indias Occidentales.21

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The value of Moncada’s analysis resides in the linkage of the political and economic forces and factors acting as an impediment to a balanced development of the nation. Since he perceived the development strategy of the nation as an autonomous field of study, with more than usual attention to its requisite coherence, the scholar of Toledo emerges as the founding father of modern political economy in Spain and as one of the first macroeconomists of the seventeenth century. Miguel Caxa de Leruela represents a group that gave priority to the rural areas. He may be called either a rural Utopist or an agrarian socialist. His publication of 1631, Restauración de la Abundancia de España, was ideologically opposed to the monetary obsessions (obsesiones monetarias) of his contemporaries. He perceived the economic problem from the supply side. The consecutive wars in Europe and the colonization of America did after all rob the rural areas of people and thus also of manpower. In comparison to the past, agricultural production had dropped. This resulted in an increase in prices and in the import of foodstuffs. Due to the rural exodus, the land was not farmed to the same extent as in the past and the breeding of livestock slackened as well. Between the lines Leruela formulated the law of diminishing returns in agriculture. The leitmotiv of his book is the shortage of livestock, especially of small stock, i.e. goats and sheep. The financial speculators from the cities bought up the land. For the small peasant this resulted in a shortage of communal grazing grounds for sheep. In de Leruela’s words falta depastos comunes. He was a fervent advocate for a redistribution of land, or for a reforma agraria. His ideal was a harmonious co-operation between cultivators and shepherds. He was a social-minded precursor of the physiocrats. Francisco Martines de Mata (Memoriales y discursos, 1626) is a figure that belongs with Sancho de Moncada to the group of industry centrists. On the purely theoretical level his formulation of the consumption multiplier is of interest. This idea (necesidad de gastar lo adquirido) forms a seventeenthcentury precursor to the Keynesian idea of a consumption-driven economy. The Spanish historian Gonzalo Anes, who wrote an introduction to the new edition of the Memoriales, calls Mata a social agitator. He started his career as a supervisor of the galley-driven fleet and became, after some soul searching, a member of the Franciscan lay order. Although he rebelled against social injustice and pleaded for more solidarity between the privileged and the poor, he was rather a social worker than an agitator. We conclude the list of authors with the counter-current coming from Alberto Struzzi. In his Dialogo sobre el Comercio of 1626 he viewed the Spanish economy from an imperial perspective. The foregoing authors emphasized the disfunctional policy of the monarchy from the perspective of the national interest of Castile. Struzzi, who was a banker of Italian descent and associated with the ruling family, also operated as a lobbyist for the imperial policy. His pamphlet is a plea in favour of free trade in a multinational setting. If the international trade between Castile and the rest of the Empire (e.g. Flanders as well as Holland and

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England) was to be paralysed by protectionist measures, fraudulent trade would develop, with economic setbacks for Spain and with benefits for the competing nations: 1 In the first place the volume of the trade of Castile with las Indias would be reduced by half, because Castile does not have the industrial goods (i.e. equipment goods) that the colonies need. This would imply that the influx of bullion from there would be reduced by the same measure. 2 In the second place the suppliers of equipment goods to America, such as Flanders, Holland and England, would break the imperial preference regulations and step directly into the market. They would open a direct trade route to las Indias and would not go via the legally compulsory staple-place, Seville. In Struzzi’s terms the ‘de-industrialization’ of Spain, with the result that its trade engine ran out of steam, was not only the fault of the political authorities. More particularly he took umbrage at the speculative spirit of the capital owners who engaged in quick lucrative dealings but did not invest in productive capacity: la culpa no la tienen tan solo los dirigentes políticos, sino los que detienen el capital, los quepodrian investir pero no lo hacen…falta espíritu investor. The real solution, as he saw it, was the substitution of merchant capitalism by a policy of productive investment in manufacturing. In this strategy the owners of capital, not the state, should take the lead. As an internationalist, Struzzi advised a development plan based on export-led growth, with the competitive industries (i.e. wool industry) as the leading sector. Reading the Dialogo one gets the impression that it is the view of an imperial banker belonging to the Flemish party that was then still influential at the court in Madrid. It is clear that open trade borders offer a natural advantage to the most developed party: in this case industrial Flanders and also northern Italy.22 The Castilian authors were not ignorant of the fact that the interests of the Flemish industry lobbied under the cover of Struzzi’s ideal of free trade. The issue of free trade versus import substitution with protection became an acute controversy. But no official attention was paid to the grievances uttered by the arbitristas that Spain was las Indias del extranjero or the colony of the rest of the world. The Habsburgs remained blind to socio-economic aspects of development and exhausted themselves in imperial and messianic dreams. During the second half of the seventeenth century the Spanish Empire went down-hill.23 The writings of the arbitristas and their associates failed to make any headway against the established interests of the Sevillian banking world, or against those sectors profiteering from the inflation and deindustrialization, or against the Spanish kings and nobles. Seldom in history has such loudly proclaimed advice been disregarded by the responsible policy executives with such damaging consequences. But even the caustic criticisms contained in the literature could not stem the tide. The crusader mentality of Philipp II and of some

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noblemen was stigmatized as Don Quixotism in this literature. In the Empire ‘where the sun never sets’ the economy would go to pieces in the second half of the seventeenth century and with it the Spanish hegemony.24 PORTUGUESE ‘ALVITRISMO’ Since the late Middle Ages, Portugal, although a small country, had become a first-rate maritime power. In the sixteenth century it controlled several colonial trading posts in the Orient, on the African coast and in Brazil. During the first phase of expansion Portugal functioned as a bridgehead between the production centres of spices in the Orient and the consumption areas in Europe. The sudden expansion in colonial trade, however, transformed the social and economic base of the country. On top of the traditional infrastructure emerged not only an international merchant class but also a court society, living on colonial rent. The most active part of the nation changed into a huge joint-stock company. The exodus of the rural middle class to the capital Lisbon and to the colonies sapped the country of its traditional productive capacity. As early as 1535, Sá de Miranda, a perspicacious humanist, wrote a satirical rime: maís me temo de Lisboa, que ao cheiro desta canela, o reino nos despovoa.25 In the following decades a falta da gente or the lack of people became a recurring theme in Portuguese letters. In the second half of the sixteenth century a dynastic struggle went sour, and ended with the domination of the country by the Spanish crown: from 1580 to 1640. This shocking experience wrought a rupture in the collective identity and triggered off a wave of introspection with nationalist overtones. In the crisis mood a literary genre evolved under the name of alvitrismo (Curto 1988). A group of acute and responsive observers felt that Portugal was paying too high a price for imperial glory. Like their Spanish colleagues, the Portuguese alvitristas opined that their country was geographically overextended. In order to reverse the ill fortunes of the nation, a policy with emphasis on national development was deemed necessary. In the alvitrismo genre a number of authors distinguished themselves: Luis Mendes de Va’sconcelos, Miguel Leitao de Andrade, Duarte Gomes Solis, Manuel Severim de Faria, Antonio Vieira and Duarte Ribeiro de Macedo (Amzalak 1929; Calvet de Magelhaes 1967; Castro 1978). Luis Mendes de Vasconcelos lived in the second half of the sixteenth and first quarter of the seventeenth century. In the beginning of his career he was general captain of the armies in the Orient, followed by a governorship in Angola. His book Diálogos do Sítio de Lisboa, published in 1608, is a crisp dialogue between a soldier, an administrator and a philosopher.26 Luis Mendes de Vasconcelos, as an experienced administrator and humanist, was profoundly and painfully concerned with his country’s condition and destiny. In his Platonic-style dialogues, the philosopher has pride of place and steals the show from the political spokesman and from the soldier. His plea addressed to the Spanish King Philip II to change the capital of his kingdom to Lisbon, is followed by a

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discourse in favour of more economic self-reliance. Policies for more population and efficient rural development loom large in the debate. The last part of the dialogue discusses the new orientation for colonization. Being in favour of an Atlantist solution, he inclines to drop the Orient and concentrate on Africa and Brazil. The need for a more efficient exploitation of the human and material resources of the country, requires a concomitant re-organization of its merchant fleet. Duarte Gomes Solis is considered to be a typical representative of the commercial establishment (the companies of the East and West Indies). He wrote, in Spanish, Discursos sobre los comercios de las dos Indias (1622, reedited in 1942) and Alegación en favor de la Compañia de la India Oriental (1628, re-edited in 1955). Some modern commentators rate Duarte Solis as the best economist of seventeenth-century Portugal. I hesitate to confer this distinction. Solis writes in a rambling and repetitious style and some of his arguments, especially his monetary discourses, are rather confusing. In his analysis of international price movements, Solis is groping for an alternative to the by then well-known quantity theory. He comes up with a pure commodity standard of value. For a monetary economy this is not so relevant. His arguments in favour of import substitution industrialization, to stem the outflow of bullion, and his discourse for an active population policy are more solid. As a Christian of Jewish origin, the spokesman of the merchant class muses over the nobility’s aversion toward commerce and economic activities in general. Consequently, he urges the authorities to liberalize the restrictions against the new Christians who were very active in this field. As a businessman, familiar with the Far East and with China, he had a keener insight into practical matters than theoretical issues. Manuel Severim de Faria (1583–1655) a theologian with ecclesiastical charge in Evora, and the Jesuit Antonio Vieira (1608–97), were well-known figures in the cultural world and at the same time influential economic analysts of the Restoration era. In his Notícias de Portugal (1655) de Faria showed himself to be a disciple of the Italian Jesuit Botero, on the thesis that insufficient population lay at the root of economic decline. For the small population of Portugal, which had exhausted itself in far-away colonies, this was a most relevant stance. In his Notícias he surpassed Botero with his penetrating analysis of the circumstances peculiar to Portugal. For this openminded theologian, alvitrismo’s function was not only to provide solutions, but also to describe the situation so sincerely, doing justice to all sides of the question, that the reading public could no longer evade the problem. According to the theologian from Evora, depopulation had three main causes: the drain of manpower to the colonies, the lack of employment in Portugal and the latifundia in the hands of the nobility, who neglected to cultivate large areas of land.27 Living in the heart of the Alentejo region, where latifundias abounded with muitas terras incultas, de Faria focused on a sore spot, by singling out the low production in agriculture as a hindrance to development.

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In his advocacy of an active industrialization (introduçao de artes mecânicas) and rural development, he insists rather on the creation of employment than on reducing imports or conserving bullion. His employment emphasis was a theme of late mercantilism. The Notícias continue with a brief for diversification in manufacturing, for reform of the land tenure system and for more emphasis on food production. The discourse on the relationship between the reform of the land tenure system, food production and population dynamics, constitutes a major contribution to the still infant development economics of that time. The Jesuit Antonio Vieira produced an impressive series of publications. Against the contemporary prophets of doom, he prophesied that Portugal was to become a universal, biblical monarchy in charge of the East and the West Indies. In economics he is a globalist, much in the sense of Struzzi for the Spanish Empire. Vieira’s departure from alvitrismo’s conventional themes becomes clearer still in his emphasis on merchant capitalism instead of national manufacturing. In numerous examples the Jesuit’s admiration shows for Holland, which was sailing the oceans on the doctrine of open seas. I consider the Spanish and Portuguese arbitristas and alvitristas an original, Mediterranean brand of mercantilism, and this not only for the policies they proposed. Living in countries which were over-extended by colonial conquests, they also showed a keen sense of historical insight into the social change being wrought in their societies. The philosophically minded protagonists of the genre mused with nostalgic feelings over the traditional society that was passing and over the evolving international, mercantile order. The outward-looking expansion, they argued, was to the detriment of national development. Their pleas for national self-reliance were mingled with a certain mistrust of the rapid change that was taking place in social and economic structures as well as in the mentality of the people. In a certain sense, they were conscious already of Max Weber’s celebrated thesis on the historical transformation from Gemeinschaft to Gesellschaft. Portuguese alvitrismo expresses a longing for restoration, combined with a fervent desire for national reform. REVIEW AND EVALUATION Review The period 1550–1650 inaugurated an accelerated internationalization of the economy, first in the Mediterranean area, followed by the whole of Western Europe. We witness the birth of a global economy that transcended the medieval agro-pastoral economy with its urban centres of crafts and trades (Braudel 1990). This sudden expansion, engined by the spatial extension of markets (demand) and lubricated by abundant liquidity and credit markets, caused an intense wave of inflationary economic growth. This put the production capacity (supply

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capacity) of the agro-pastoral basis and of the urban industry under pressure. This development trap was most visible in Spain and in Portugal. Originally, things went well for Spain: materially, spiritually and culturally. The silver and gold from the Americas streamed in, and the noblemen and educated civilians were appointed to well-paid jobs in the vast imperium. Intellectual life took a lofty flight in Salamanca. A much used metaphor of the time was Salamanca docet or ‘the schoolmen of Salamanca have an answer to all problems and teach the rest of the world’. Architecture, painting and literature flourished. Spain experienced its Golden Age, its siglo de oro. The effort, however, was too exhausting. After Philip II the tide turned and the Golden Age lost its spell, materially and spiritually. The Spanish nation that was used to triunfos or to success, met with all sorts of problems, such as the revolt in the Netherlands, pressure from the Turks, inflation on the home front, the deficit in the balance of payments, the indebtedness of the court and the public sector in general. Spain became a transit country. A vicious circle developed: 1 La plata de las Indias arrived in Seville and streamed to the rest of Europe to finance the imperial policy (war) and to buy goods on the markets of Flanders, France and Holland that Castile could not produce itself. 2 The inflation caused by the incoming bullion was put into a still higher gear by the international credit system. The Royal House of Spain, but others too, lived on top of this credit pyramid. The Genoese and German bankers prospered. 3 The colonization attracted the most active and productive Spaniards to las Indias but also to Flanders and Holland. In Spain the economy of the rural areas was neglected and in the cities more and more ‘French’ migrant workers established themselves. Castile could not manage the economic role of a ‘centre’. The slow exhaustion led to a financial crisis towards the end of the sixteenth century. The crisis could only be averted by a royal moratorium on debts. In the seventeenth century the first crisis literature came into full bloom. But the advice it formulated was not heeded in official circles. As Castile’s hegemony eroded, the Western world was ready for one of those epoch-making geopolitical changes of world history. The civilization of the Mediterranean had spent its energy and lost its central role in history, which it had played since Antiquity. New nations such as England, France and Holland took over the torch of ‘development’. The centre of the European world was displaced from the Mediterranean and moved to the Atlantic. In economic and political terms this Atlantic world took over the hegemony and would keep it for a long time. For two centuries mercantilism was to be the economic development strategy of the ‘secularized’ nations of the West (Appleby 1978).

IBERIAN MONETARISM AND DEVELOPMENT THEORIES 201

The intellectual contribution of Salamanca In the field of development of economic thought the segunda escolástica represent a milestone. 1 Not only the abundance of bullion, but also the creation of credit, intensifying the velocity of circulation of money, came into the picture. Tomás de Mercado classified the money aggregates into the variables m1, (coins), m2 (national and international credits) and the parameter v (the acceleration of money by bank transactions). In the seventeenth century John Locke took over the idea of velocity and Richard Cantillon would expand this idea. 2 With their theory of international parity of purchasing power they offered a penetrating analysis of the balance of payments as the mercantilists of the Atlantic nations. 3 In their theories on interest and profit the Salmantinos anticipated modern times without losing track of their own moral principles: • Viewed solely as a medium of exchange, money is sterile; this is the age-old idea of Aristotle reformulated by Albertus Magnus under the metaphor pecunia non parit, or ‘money cannot bear children’. • The Franciscan Friar P. Olivi had introduced factor time in his doctrine of the just price and on usury. The Salmantinos put it still more in focus and developed a forerunner of the nineteenth-century agio theory of BöhmBawerk. • Money earns a profit (interesse) only if it ‘works’, this means if it can be invested productively. The Salmantinos were living in a time when the stationary economy of early Scholasticism was developing into a growing economy, i.e. an economy that accumulates and can produce real rent. In such a case the taking of interesse is not a sin of usury but the legitimate reaping of fruit. In a dynamic economy money becomes more than a medium of exchange, it is also a stock of (accumulated) value. It becomes capital and as such it acquires an investment function. The Salmantinos called investment capital instrumentum persistens lucri, or capital that creates profit. Interest is in such a case a participation in the profit or surplus value of the borrower (pars lucri) that in all justice is due to the creditor. Looked at from the history of economic ideas the doctores of Salamanca were the first to perceive the autonomous mechanisms of the market (the shaping of prices, the national value of money and the exchange rate of international currency) as stronger than interventions by the state (monopolies, oligopolies) and princely decrees. Since the schoolmen produced a theoretical analysis of these mechanisms in the national and international markets of goods, money and credit, they may be considered as modern economists.

202 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

The ‘arbitristas’ The arbitristas came two generations after the scholars of Salamanca. Their contribution to economics was different. Their views were not enveloped in moral concepts like those of the doctores; they were pamphleteers with a national development message. Their strategy reads as follows: 1 The socio-economic system of Spain is on the wrong track (desviación) and it exhausts itself: through political mistakes and financial waste (e.g. the war in Flanders), through the rural exodus of the population to the cities and las Indias, through the collapse of traditional values and through financial speculation that kills the work ethic, etc. 2 The surrounding nations (France, England, Italy, Flanders and Holland) profit from Castile; the international bankers especially are at fault. They suck the bullion out of Spain: el saqueo de los banqueros extranjeros. But French migrant workers and Flemish industry also take home a large portion of the spoils. Thus, according to the arbitristas, Spain exploited by foreign countries la pobreza precede del comercio abusado de los extranjeros is an oft-repeated refrain. The perception of Spain (the political centre) being dependent on the industrial imports of other nations is the dependency theory of the 1960s in reverse. A restoration programme had to be put into action quickly. 3 The arbitristas represented various groups such as state functionaries, the productive sectors of the national economy, the populist leaders. These groups considered it of primary importance that production be increased, productivity be improved and that all concerned should put in a mighty effort, guided and inspired by an adequate economic policy. 4 The nation had to produce more raw materials (livestock for meat, wool, leather; also grain) and manufacture the raw materials in local industries. The development policy of the most prominent arbitristas was all for import substitution through industrialization. In Portugal a particular brand emerged, with its own accents. But the flood of publications was to no avail: the rulers of the land turned a deaf ear. Portugal became an economic protectorate from the then rising nation: England. And Castile suffered first an erosion of its hegemony and afterward the bailing out of its wealth. Contrast with the imperialism thesis In the development literature of the 1960s, the conventional traditionmodernity and vicious-circle theories, with stress on the indigenous shortages of trained manpower, of industrial capital, of technological know-how and the load of traditional culture, were reversed by theories emphasizing the external

IBERIAN MONETARISM AND DEVELOPMENT THEORIES 203

determinants of growth. In these, the economic exchange relationships between colony and metropolis or between centre and periphery had pride of place. A voluminous literature flowered in which the genesis of economic backwardness and underdevelopment was seen as the historical consequence of colonization. With varying degrees of radicalism the neo-Marxist imperialism thesis, the Latin American dependencia school and the world-system view, focused their attention on the drain of surplus value and of capital to the metropolis. External, not internal, determinants were decisive in the early expansion of the European core countries and of the underdevelopment of the Third World nations. In other words, with the advent of modern times, the extraordinary economic growth of the European nations was the result of an outside stimulus. In neo-Marxist terms the stimulus was called ‘the looting of the colonies’. It fuelled the primitive capital accumulation in the mothercountries. In keeping with this focus, the colonizing nations invariably benefited from the colonial rent on the basis of unequal exchange. In the social field the colonial matrix engendered dependent class formation with local elites, who in juxtaposition to Marx’s lumpenproletariat were designed as a comprador bourgeoisie. This comprador class was more prone to ingratiate itself in dependent merchant capitalism than in autonomous development, i.e. on the basis of more productive manufacturing. Consequently the colonies were also forced by their local capitalist class to specialize in the production of primary commodities. This explains their structural backwardness and the delay in manufacturing. In this trend of thought, the gist of the arbitrista and alvitrista paradigm was applied to the colonial periphery. The factors and forces which have constrained the development of a more balanced society and economy are put on another footing: the metropolis. In the seventeenth-century literature of Portugal and Spain, however, the sudden outward expansion and its pernicious effects (colonial rent) were viewed as a retarding factor in their own national development. In the absence of a restoration of outwardlooking policies, such an expansion would entail decline for the metropolis. Yet the imperialism thesis and the Latin American dependencia schools radicalize the paradigm of their seventeenth-century predecessors and, with a reversal of focus, they single out the pernicious effects for the colonies. THE HISTORICAL UNFOLDING OF THEORIES AND THEIR SOURCES To the student of the history of economic thought it is a familiar notion that theoretical perceptions come and go in an historical rhythm of ‘birth followed by requiem’ and ‘renaissance followed by phasing out again’. The debate between monetarists and structuralists which was rampant in the development debate in the 1960s with a revival in the 1980s, bears a resemblance to the different perceptions of inflation under study: the monetarists from Salamanca and the

204 THE MEDITERRANEAN TRADITION IN ECONOMIC THOUGHT

arbitristas. The debate between economic historians of our time on the inflation of the sixteenth century points to the fact that the quantitative multiplication of bullion did indeed feed inflation; but it also takes into account the supply side. The idea that Europe (even Spain) at that time suffered from a chronic shortage of liquid assets may sound incredible. This can only be explained by the sudden maritime expansion. The latter resulted in the enormous external demand of the colonies, exceeding the supply of Spain’s underdeveloped agro-pastoral economy and its only slightly more resilient urban industry. This structural stickiness of the supply side was not analysed as a cause of inflation in the monetarist writings of Salamanca. It was stressed by the arbitristas. The monetarists of the sixteenth century, like those of the twentieth, singled out monetary factors: the increase in the supply of bullion and the creation of credit by bankers in response to the liquidity hunger of the Habsburg monarchy. The arbitristas placed the emphasis, like the structuralists of today, on the inelasticity of the agro-pastoral economy and on the inflexibility of urban industry. Almost all authors agree that Spain was overextended in the sixteenth century and this more so than the surrounding nations, with the exception of Portugal. Notwithstanding the enormous monetary resources at the disposal of Spain, it could not master the double task: the development of colonial territories together with waging war in Europe. The Habsburgs showed no interest in the economic constraints on their imperial ambitions. Charles V and Philip II were permanently in the bankers’ books. Spain had bitten off more than it could chew and exhausted itself. The ‘Invincible Armada’ lost to England. And the war in the Netherlands became a Vietnam for Philip II. Spain’s relatively underdeveloped economy could not supply enough material equipment for the immense colonies: Peru, Mexico, Central America. The Dutch, English and French traders confronted Spain with an unremitting pressure of industrial competition. Their deliveries of equipment to the Indias resulted in large amounts of precious metal flowing from Spain to its ‘rivals’. Spanish industry, which was still an infant industry at the end of the sixteenth century, could not come to full bloom due to the rise of an artificial rentier economy. Salaries at home were lifted up by inflation and a process of deindustrialization set in. The discovery and scholarly appreciation of the contributions produced by Iberian texts of the sixteenth and seventeenth centuries offers an interesting example of the eclectic unfolding of new ideas and theories. The original publications of the sixteenth and seventeenth centuries are naturally the first and essential sources. New editions of the most important authors have been published, in most cases provided with an excellent introduction (see Bibliography). In the third quarter of the nineteenth century the arbitristas were rediscovered by Colmeiro. Being a free trader, he was quite critical of these nationalists and ‘protectionist’ economists. The doctores of Salamanca are not mentioned in his

IBERIAN MONETARISM AND DEVELOPMENT THEORIES 205

survey: Colmeiro, M. (1863) Historia de la Economic Política de España, Madrid, with a new edition: Colmeiro, M. (1947) Biblioteca de los Economistas Españoles de los siglos XVI, XVII y XVIII, Barcelona: Carandell. A publication of the American historian E. Hamilton (American Treasure and the Price Revolution in Spain, Cambridge: Cambridge University Press, 1934) with its somewhat sloppy analysis of the Spanish economic thought of that time, caused considerable excitement in specialist circles. With the impulse of neoThomistic studies in the Catholic universities the economic doctrines of the doctores were rediscovered and partly analysed by an American Jesuit, B. Dempsey (The Historical Emergency of Quantity Theory’, in Quarterly Journal of Economics, 50, November 1935). This study gave rise to a war of words between the young Jesuit and Hamilton. In the controversy that followed, the Jesuit was victorious. He wrote a doctoral thesis on the forgotten economic texts of the segunda escolástica, under the guidance of Schumpeter. In his publication the Jesuits received more attention than the Dominicans. For more details see Dempsey, (1948) Interest and Usury, London. In Germany, interest in the doctrines of Salamanca was aroused by J. Höffner (1941) Wirtschaftsethik und Monopole im 15. und 16. Jahrhundert, Jena. This opening publication was followed in 1955 by Statik und Dynamik in der Scholastischen Wirtschaftsethik, Opladen. A few years later, the contributions of the Jesuits, especially of de Molina, were developed in two theoretical analyses: Weber, W. (1959) Wirtschaftsethik am Vorabend des Liberalismus, Münster: Aschendorff, and Weber, W. (1961) Geld und Zins in der Spanischen Spätscholastik, Münster: Aschendorff. In Spain itself Larraz rekindled interest in the forgotten arbitristas of the sixteenth and seventeenth centuries with his 1943 publication La Epoca del Mercantilismo en Castilla (1500–1700), Madrid: Aguilar. Following this, a number of analyses of the economic thought of that period appeared sporadically in Anales de Economia. A reader with a selection of English texts of the doctores, translated and compiled by M. Grice-Hutchinson, introduced the label ‘School of Salamanca’ in the Anglo-American world with her publication, The School of Salamanca, Oxford: 1952. The pioneering research of L. Pereña rekindled interest in the contribution of the Salmantinos. This resulted in new editions of their works. The most recent publications shed more light on the methodological problems and on the philosophical roots of the school’s texts.

NOTES

I THE MEDITERRANEAN TRADITION 1 ‘Von dem, was damals geschaffen und gedacht wurde, lebt die Menschheit bis heute. In jedem ihrer neuen Aufschwünge kehrt sie erinnerend zu jener Achsenzeit zurück, läszt sich von dorther neu entzünden’ (Jaspers 1949:17). 2 The papers written by participants were published as: ‘Wisdom, Revelation and Doubt: Perspectives on the 1st Millenium BC’, Daedalus, 1975, vol. 104, pp. 1–17. 3 For a comment on Max Weber’s importance in the postmodernist debate, see Hennis (1987). 4 In 1925 Chayanov wrote, in Russian, his Theory of the Peasant Economy. This important work had to wait forty years to be translated into a European language. 5 In his essay on the utility of ancient philosophy today, Bubner formulates this as follows: ‘wenn es darum geht das Staunen neu zu lernen, dann bietet historische Kentnis ein nahezu unerschüpfliches Reservoir nützlicher Verfremdung’, Bubner (1992:12).

II THE NEAR EASTERN PRECURSORS 1 For the development of script, we refer the reader to an interesting collection of studies, published by Editions de la Réunion des Musées Nationaux, Naissance de l’écriture, cunéiformes et hiéroglyphes, Paris, 1982. 2 Good economic histories of the Near East in which the mass of detailed information is ordered in a systematic way are rather rare. Some of the best studies on the state and temple economies of the Near East are collected in the proceedings of an international conference (Lipinski 1979). 3 In Mesopotamia this prosaic worldview has been stressed by a specialist of the literature: ‘La Mésopotamie ancienne se caractérise par une attitude verbale et mentale carrément prosaïque, rigide et froide, mais logique, precise, férue d’analyse et de savoir, et étrangement rationnelle; une sorte de passion pour 1’inventaire et le classement des phénoménes; un temperament de comptables’, in Bottéro and Kramer (1989).

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4 Each technical innovation cannot be traced to its source, but Mesopotamia undoubtedly played an important role in providing a social context which favoured the exploitation of new potential. See Postgate (1992:225). 5 A very detailed account of the importance and regulation of markets with reference to the non-official economic and financial circuit in the different Mesopotamian societies was published by Archi (1984). 6 In his famous sociological study of the Old Testament, Max Weber referred to this dualism and drew the distinction between Binnen- und Auszen Moral, in Gesammelte Aufsätze sur Religionssoziologie (Weber 1920:357). A more recent study shed new light on the opposition in the law traditions between ‘brotherhood versus otherhood’: see Nelson (1949).

III THE CONTRIBUTION OF THE GREEK ESSAYISTS AND PHILOSOPHERS 1 The political, social and economic history of Greece in the fourth century BC has been studied by a great number of scholars; the most important are M. Austin, J. de Romilly, O. Ebb, V. Ehrenberg, M. Finley, Ph. Gauthier, S. Humphreys, P. Isnardi, C. Meier, C. Mossé, K. Polanyi, P. Vidal-Naquet, E. Will. 2 For a good survey of these debates, see Humphreys (1978). 3 The Greek word chreia covered a complex family of concepts which according to the literary context may be translated as common need, use, utility, necessity, exigency, indigence, want and desire. With Democritus and the Sophists the term chreia stood as a substitute for ‘impetus towards development’; with Plato, community life and the polis evolved out of chreia; that is, common or mutual need of each other’s capacities. In Aristotle’s discourses on the origin of money as well as in his analysis of the terms of trade in an exchange situation, chreia figured as a pivotal concept. In his commentaries, Cicero translated chreia in Latin by usus, utilitas and consuetude, specifying that in a ‘development context’ like with Democritus, the term necessitatis inventa would fit better. For more details, see Hollerbach (1964). 4 The pan-Hellenic idea has been studied in its political and geopolitical aspects with a certain neglect of the economic aspects. Illuminating studies include Bringmann (1965), Ryder (1965) and Luccioni (1961). 5 From the fifth century BC, the term polypragmosyne appeared rather frequently in the political and historical literature. To the historian Herodotus it means meddling or plotting in another’s affairs. Thucydides broadened the meaning. He used the word also as an incentive for imperialism which meant meddling and plotting in the affairs of other states. In the fourth century the term was associated with the growing interference of busybody people in governmental affairs, a characteristic of radical democracy. For more details on this etymological evolution see Ehrenberg (1947:46–67). 6 For specific references, see Panegyricus 36, 173, 182; To Philip 123; Panathenaicus 43, 165, 190. 7 See for example, Helen, 5: ‘Likely conjecture about useful things is far preferable to exact knowledge of the useless, and that to be a little superior in important things

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8 9 10

11 12

13

14

15

16 17 18

is of greater worth than to be pre-eminent in petty things that are without value for living’. The didactic nature of his work is especially underlined by Jaeger in his study ‘Xenophon: the Ideal Squire and Soldier’ in Jaeger (1986:156–81). The special place occupied by Xenophon in classical Greek literature has been the subject of a great number of studies. A good survey is given in: Luccioni (1953). ‘Xénophon est un des mal-aimés de la littérature grecque, comme historien, il est médiocre continuateur de Thucydide dont il n’a ni la hauteur de vue, ni le sens politique. Comme disciple de Socrate, il paraît n’avoir retenu de 1’enseignement de son maître que des formules banales et il fait bien pâle figure aux côtés de Platon’ (Mossé 1978:169). These two opposing views are documented in Breitenbach (1966) and Wellman (1976:307–18). In his interpretation of Xenophon’s Socratic discourses, the political philosopher Leo Strauss formulated his praise in almost lyrical terms: ‘Our age boasts of being more open to everything human than any earlier age; it is surely blind to the greatness of Xenophon. Without intending it, one might make some discreteries about our age by reading and re-reading Xenophon’ (Strauss 1971:84). From the point of view of historians of economic thought Xenophon received a high rating in the interesting studies of Lowry (1987) and Karayiannis (1992), who rightly perceive him as a pioneer in the study of management and entrepreneurship. ‘Xenophon’s book also shows the land to be the imperishable and eternally young root of all human life. It shows also how truly alive and permanent Socrates’ educational ideal was: it was able to penetrate the world outside the city walls’ (Jaeger, 1986:173). For the thematic and detailed exegesis of the Oikonomikos the interested reader has the choice between different translations with extensive introductory comments. Besides the Loeb Library edition by E. Marchant and the already mentioned work by L. Strauss, the following are also useful: Xenophon, Economique, Paris, 1949 ed. P. Chantraine; Senafonte, l’amministrazione della casa, ed. C. Natali, Venice: Marsilia Editori, 1988; S. Taragna Novo, Economia ed Etica nell’ Economico di Senafonte, Torino: Unione Tipografica, 1968. Xenophon’s concern for technical terms and for professional language is striking in all of his writings. This capacity to introduce and innovate by the use of specific terms illustrates the manifest aim to conceptualize his subject matter into a coherent terminological and intellectual unity. In a recent study on his linguistic inventiveness, Higgins remarks: ‘It is not surprising, therefore, given Xenophon’s taste for the right word at the right time, his sense of definition so to speak, that he should also show a penchant for specifically technical terms’ (Higgins 1977:4). This entrepreneurial function has been underlined by Karayiannis (1992:67–93). Besides the Loeb Library edition, the Badei Giglione (1970) translation and commentary is useful. The French historian Gauthier opens his well-documented study with the following line: ‘Les choix opérés par Xénophon et la sollicitude qu’il manifeste à l’égard des riches Athéniens montrent assez bien qu’il n’a pas eu besoin de renier ses convictions aristocratiques: le programme des Poroi a certes, pour but de faire prospérer la démocratic athénienne, mais sans que soit ni modifiée ni la structure

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19 20 21

22 23 24 25

26

27

28

29

sociale de la communauté ni entamée ou détruite la fortune des aristoi’ (Gauthier 1976:3). For an interesting discussion see the reader published by Marchaise (1992) and Bubner (1992). The terms techne and episteme are not neatly distinguished and are sometimes used one for the other. The following publications offer interesting commentaries on Plato’s social and economic thought: Parente (1982:225–73); Fabris (1982:49–117); Campbell (1985: 187–97); Klever (1986); Lowry (1987); Karayiannis (1990: 3–45). For an analysis of the basic concept chreia in the Greek literature of the fifth and fourth centuries BC, see Hollerbach (1964). For an analysis of the historical and linguistic roots of these concepts, see Ehrenberg (1947:46–67), Adkins (1976:301–27). In classical Greek, the term nomisma (money) is derived from nomos. Gadamer underlines Aristotle’s metaphysical opposition to Plato’s identification of the good with knowledge. Consequently Aristotle also rejects the idea of the philosopher-king: ‘Dasz die Erkenntnis der Prinzipien des Seins (Ideenlehre) und die Anleitung richtigen Handelns (Ethik) auf einen Nenner lauten, beweist für Aristoteles, wie wenig die Besonderheit der Struktur von Praxis begriffen wurde. Die Erhebung des Guten, das Ziel allen Handeln ist, zu einer Idee musz daher ebenso verworfen werden wie die politische Führerrolle des höchsten Wissens in Gestalt der Philosophenkönige’. (Gadamer 1978:7) The Greeks were unaware of the Christian concept of conscience. According to its etymological root, the word ethos refers to custom and law sanctioned by social traditions and norms. In Aristotle’s world, ethos represents the historically sedimented conventional wisdom of past generations which are believed to be the common bond of community. For a semantic history of the concept, see Verbeke (1969:403–30) and Natali (1980:99–122). The interested reader has a great choice between excellent Greek versions and translations. For Politics we used the Loeb Library Edition with a translation by H. Rackham, as well as the translations edited by S. Everson (Cambridge, 1988) and a French version by P. Pelegrin (Paris, 1990). For Nicomachean Ethics besides the Loeb Edition we consulted F. Dirlmeier’s German translation (Berlin, 1969) as well as the French version edited by R. Gauthier and J.jolif (Paris, 1970). Their introductory comments offer precious insights into the semantic problems raised by the conversion of antique texts into modern language. Aristotle’s practical philosophy is not concerned with the being of man and the polis, but with their becoming. The genesis of practical philosophy results from the development of the polis: ‘Die Praktische Philosophic erweist sich als Philosophie des Endes, nicht des Ursprungs and Anfangs. Sie gewinnt der in sich fertig gewordenen Polis ab, was Ethos und Nomos in ihrem Wesen sind; sie Begreift ihren Beginn wie den Prozess ihres Werdens aus dem, was in seiner Wahrheit hervortritt, wo die Polis geworden ist, was sie zu sein vermag’. (Ritter 1988:126) In the successive reformulations of the argument the bifurcation between the double meaning of chrematistics is blurred by the sometimes confusing vocabulary. The author employs the term chrematistike sometimes as synonymous with ktetike, which refers to the natural art of acquisition. This forms an integral part of estate management, while in other passages it is defined as an unnatural

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30

31 32 33

motivation. The sometimes confusing interplay of words has given rise to controversial interpretations by different commentators. For Pellegrin there is no possible doubt that the term is always used in the pejorative sense: ‘Je prétends centre tous les traducteurs en quelque langue que ce soit que j’ai pu consulter, que dans ce chapitre le terme chrematistike est toujours, à une exception près dans un sens péjoratif qui désigne cet art pervers d’acquisition, et jamais dans le sens d’art d’acquérir en général’ (Pellegrin 1982:639). On the other hand, according to Natali (1990:310), Aristotle makes a clear distinction between natural and unnatural chrematistics, the latter being the mere commercial form. According to my understanding of the text, Natali’s thesis is the correct reading. In Koslowski’s view the deviation toward a chrematistic mentality provokes the separation of the economy from its ethical and political norms. This was clearly disapproved of by Aristotle: ‘Die Wirtschaft ist kein von der Politik und Ethik unabhängiger Bereich, der eigenen Gesetzen folgt. Eine solche Eigengesatzlichkeit wird von Aristoteles als Chrematistik verurteilt und für den Bestand der politischen und sittlichen Gemeinschaft als gefährlich angesehen’. (Koslowski 1979:62) For a discussion on the age and composition of the different parts, based on painstaking philological and philosophical research, see Kenny (1978). For a detailed analysis of the parallels and differences between Plato’s and Aristotle’s ethical theories in Book of NE, see Dirlmeier (1969:397–439). Modern editions, like Rackham’s, render the complex concept chreia as ‘demand’, which is modern, but a poor term for Aristotle’s concept. In this text, I prefer to use the Greek term chreia.

IV THE ECONOMIC THOUGHT OF CLASSICAL ISLAM AND ITS REVIVAL 1 Ibn Taymiyyah’s work has been edited and translated into French by H. Laoust, Beyrout: Editions Muh, 1968. 2 An English translation of al-Farabi’s Al-madina al-fadila, with commentary, is available, edited by R. Walzer, Oxford: Clarendon Press, 1985. 3 The interaction between kalam and Greek philosophy has been studied in some detail. The synthesis of Anawati and Gardet offers a handsome introduction to this Islamic scholastic tradition (Anawati and Gardet 1970; Leaman 1985). 4 For an English translation, see Rosenthal, Averroës’ Commentary on Plato’s Republic, Cambridge: Cambridge University Press, 1965. 5 For an analysis of the history of the Greek texts in Arabic, Latin and Hebrew, see Berman (1978:287–322) and Gauthier and Jolif (1970:107–11). For the medieval Latin translation of Ibn Rushd’s commentaries, see Aristotelis Opera cum Averrois Commentariis, vol. III, Venice: 1562, esp. vol. III with In Moralia Nicomachia Expositio and vol. VIII with In Metaphysicorum commentaria. 6 In his commentary on Aristotle’s Metaphysics (Book IV, paraphrase 2:65) Ibn Rushd introduces not only a logical but also an ontological dimension in cases of proportionate measurement (the Greek kat’analogian becomes in the Latin paraphrase analogia entis). This interpretation, initiated by the Andalusian scholar, was picked up fifty years later by the Latin scholastic Albertus Magnus.

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7 The ascendancy of the Romance languages in the official and in the scholarly literature, accompanied the intellectual emancipation of a lay and bourgeois culture from the monastic texts written in Latin. 8 For more details, see Monneret de Villard (1944), Kaufmann (1977), Romano (1977), Vernet (1985), Gardet (1986). 9 The Egyptian Sayed Qutb, a militant of the Muslim Brotherhood, was one of the first to publish a diatribe against this intellectual degradation in his plea for reIslamization; see Qutb (1970).

V THE ECONOMIC IMPACT OF THE CISTERCIAN ORDER 1 His vehement denunciation of Abélard’s philosophy was not an act of chivalry, and his spiritual fight against the Cathars was a failure. 2 In his study of Cistercian art, Dimier (1982) states that in the western Islam of alAndalus, under the initiative of the almohad religious leader Ibn Touber, a similar austerity in lifestyle evolved: ‘Comme chez les cisterciens, cet ascétisme austere cut sa repercussion dans les arts, et en particulier dans 1’architecture’. 3 Suger, the abbot of St Denis, was one of the few religious leaders to introduce a reform in the production system of his abbey. Due to this reform he was able to complete his cathedral without restriction in the splendour which he considered to be God’s will. Petrus Venerabilis, abbot of Cluny and a contemporary of Bernard, was less successful in a similar attempt to increase the splendour of Cluny. See Duby (1952:155–71). 4 On specific forms of exploitation by the Cistercians, which varied from region to region and which also showed differences according to whether the area of exploitation was arable or cattle farming, wine production, wool processing, metallurgy, handicrafts, etc., an extensive volume of historiographical literature has been published over the years. This short study does no more than sketch the characteristics of the underlying production system. For a detailed bibliography up to the end of the seventies, see Rochais and Manning (1977). 5 Right from the start, the capitula posited the enlargement of the stock of rural resources as a central activity of the order: ‘Monachis nostri ordinis debet provenire victus de labore manuum, de cultu terrarum, de nutrimento pecorum, unde! et licet nobis possidere ad proprios usus aquas, silvas, vineas, prata, terras a saecularium hominum habitatione semotas, et animalia.’ Thus, the monks had to live from their own labours (manual labour, arable and cattle farming), and they were permitted to take possession of rivers, woodlands, meadows, lands and vineyards in order to do so.

VI MEDIEVAL THOUGHT IN THE LATIN WEST 1 The most recent and reliable version of Grosseteste’s translation of Ethica Nicomachea has been edited in the series Aristoteles Latinus, under the direction of L. Minio-Paluello, with an historical and philological introduction written by R. Gauthier. The original text was published in volume 26, part three, in 1972 and the

212 NOTES

2

3

4 5

6

reworked text appeared in 1973, volume 26, part four; both edited by E.J. Brill, Leiden. Since 1973 the continuation of the Aristoteles Latinus has been the responsibility of the Centre De Wulf-Manson in the Institute of Philosophy at the Leuven University. Moerbeke’s translation of Politics, the translatio imperfecta as well as a corrected version, appeared in the series Aristoteles Latinus under the editorship of P. Michaud-Quantin and was edited in 1961 by Deslée De Brauwer: Bruges. For an insightful study of Moerbeke’s method of translation as well as a philological comparison of the two versions, see G. Verbeke, ‘Moerbeke, traducteur et interpréte: un texte et une pensée’ in Brams and Vanhamel 1989. For the editions of Albertus’s comments on Aristotle’s Ethics we consulted Opera Omnia(Borgnet edition, Paris, 1907, vol. 7) and the more recent Cologne edition (Münster, 1951). For the reading we used the various volumes of the Opera Omnia, Leonine edition, Rome, 1969. The recent edition of the Tractatus by Todeschini has been criticized in the Kirshner and Lo Prete study (1984) on minor details of formulation. In fact these two commentators are inclined to diminish the innovative role of Olivi’s economic works, calling their study ‘Minorite economics or minor works?’ We agree gladly with the conclusion reached at The Peter Olivi Colloquium in Mönchengladbach (cf. Franziskanische Studien, vol. 65, 1983, 393–6) where David Flood remarks, ‘the text-critical method has developed beyond the ken of reason’. It is better to follow his reasoning to grasp the outstanding originality of his thought. Spicciani, keen reader and connoisseur of Olivi’s economic writings, has edited an Italian version of the Tractatus (1990). In another passage on campsoria Oresme notes: Et quant monnoie eut esté jadiz faicte pour nécessité de faire commutation chez choses nécessaires à vie humaine, après ce fut faicte une autre espèce de pécuniative laquelle est en changer monnoie.

VII IBERIAN MONETARISM AND DEVELOPMENT THEORIES OF THE SIXTEENTH AND SEVENTEENTH CENTURIES 1 In the public debate on the intrinsic rights of the conquered indios, the school developed its famous and original doctrine of international law and human rights; for more details see Brufau Prats (1989) and Pereña (1986). 2 For a lucid analysis of the Salmantino’s methodological and epistemological innovations in regard to traditional Thomistic concepts see Brufau Prats (1962, 1984). 3 Of the many historians who have written on the great inflation of the sixteenth century, the most prominent are E. Hamilton, B. Bennassar, J. Braudel, J. Elliot, A.Kamen, J.Le Flem, P.Leon, J.van Klaveren, A.Ortiz, P.Vilar, J.Vilar Berrogain, E.Rich, C. Wilson, J. Mauro, J. Vicens Vives. 4 In the literature this group of scholars has been identified by different titles, like Late Scholastics, or in Spanish Escolásticos tardíos, in German Spätscholastik. In his study, the Spanish historian Pereña (1954) calls the schoolmen by the collective name of escuela salmantina. M. Grice-Hutchinson (1952) initiated the name in the

NOTES 213

5 6 7 8 9 10 11 12 13 14 15

16 17 18 19

20 21 22

23

24 25 26

English language. For an historical survey of the name and the concept, see also Grice-Hutchinson 1989. The Inquisition kept a watching brief on the Salamanca professors and some audacious innovators, like Luis de Leon, lost their licentia docendi. ‘The value of money is determined mainly by our own will (evaluation).’ The size of the population also shot up steeply. In one generation the number of inhabitants of the city grew from 25,000 to 150,000. ‘Depending on whether there is a shortage or surplus of money on the market.’ ‘Money is a public (official) measure of vendable items (merchandise).’ ‘As money can be sold, bartered or exchanged (for goods and services), it is merchandise.’ ‘Money indicates price or is numeric.’ Money pays better in the hands of merchants and money changers who invest it ‘actively’ than in other hands in which it may end up being hoarded. ‘We see that much still (e.g. equipment) needs to be bought for the Indias.’ ‘I assure you that I have never read this (theory) in other works.’ B. Gordon (1975) has much praise for the first Flemish economist. He calls Lessius ‘a master of scholastic economic analysis, who used the conclusions of his Spanish predecessors as points of departure for further extensions of work and for new directions of his own’. For more detailed analysis see the work of R. Beutels. ‘The serious and humiliating exploitation at the hands of foreign businessmen.’ ‘The solution is contained in prohibiting unrefined goods (raw materials) leaving the kingdom and refined products entering.’ The French historian J. Vilar Berrogain (1973) wrote an entertaining book on the satirical profiles of the economists of the seventeenth century. The origin of the crisis lay not only in the abundance of precious metals, but also in the inadequate use (wrong goal) towards which it served, namely the disregard for the (national) production.’ ‘The only solution for Spain was for the country to transform its own raw materials.’ ‘The economic plight of Spain is a result of the discovery of the Americas.’ In his study on Spanish mercantilism, J. Larraz surmises on the drawbacks for Spain of Struzzi’s imperial strategy. A recent commentator, however, takes his defence: R.Quérillac, ‘Un economista moderno del siglo XVII: Struzzi’ in Hispania, 157, 1984. Some economic historians have called the seventeenth-century decline of Spain an historical myth. For the two opposing theses, see Kamen (1978) and Israel (1981). The historian Kamen formulates the Latin American centre—pheriphery thesis ‘en vogue’ in the development literature of the sixties, in reverse: the political centre Spain, being economically underdeveloped, had been exploited by its colony (las Indias), as well as by the industrial suppliers (Flanders, Holland, England). Its problem was not decline but dependence. The English historian Parker called the exhausting religious war of Philip II in Flanders and Holland his Vietnam. See Parker (1977). ‘I fear that Lisbon’s policy, brings perfume of cinnamos but stimulates depopulation.’ For a representative selection of texts, with introductory notes, see Sergio (1974).

214 NOTES

27 According to statistics provided by Severim de Faria, many seafarers died during the arduous voyages to the Orient; during some of the long trips only half of the passengers arrived.

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CHAPTER II Altenmüller, H. and Wildung, D. (1975) Studien zur Altaegyptischen Kultur, Hamburg: Buske. Archi, A. (ed.) (1984) Circulation of Goods in Non-Palatial Context in the Ancient Near East, Rome: Ed. dell’Ateneo. Assmann, J. (1990) Maat: Gerechtigkeit und Unsterblichkeit im Alten Aegypten, München: Beck. Bottéro, J. (1987) Mésopotamie: l’Ecriture, la Raison et les Dieux, Paris: Gallimard. Bottéro, J. and Kramer, S. (1989) Lorsque les Dieux Faisaient l’Homme: Mythologie Mésopotamienne, Paris: Gallimard. Bright, J. (1981) A History of Israel, London: SCM Press. Coggins, R. (1982) Israel’s Prophetic Tradition, Cambridge: Cambridge University Press. Damdamaev, M. (1984) Slavery in Babylonia, De Kalb, Ill.: Northern Illinois University Press. de Vaux, R. (1978) The Early History of Israel, London: SCM Press. Donner, H. (1963) ‘Die soziale Botschaft der Propheten im Lichte der Gesellschaftsordnung in Israel’, in Oriens Antiquus, 2, 229–45. Epsztein, L. (1986) Social Justice in the Ancient Near East and the People of the Bible, London: SCM Press. Frick, F. (1985) The Formation of the State in Ancient Israel, Sheffield: Almond Press. Garelli, P. (1969) Le Proche-Orient Asiatique, Paris: PUF. Hayes, J. and Miller, J. (1977) Israelite and Judean History, London: OLT. Hopkins, D. (1985) The Highland of Canaan, London: Almond Press. Horning, E. (1989) ‘Gerechtigkeit für Alle?’, in R.Rigsema (ed.) Wegkreuzungen, Eranos Foundation. Husson, G. and Valbelle, D. (1992) L’Etat et les Institutions en Egypte, Paris: Armand Colin. Jagersma, H. (1982) A History of Israel in the Old Testament Period, London: SCM Press. Janssen, J. (1975) ‘Prolegomena to the Study of Egypt’s Economic History during the New Kingdom’, in Altenmüller, H. (ed.) Studien zur Altägyptischen Kultur, Hamburg: Buske, vol. 3. Janssens, J. (1975) Commodity Prices from the Ramessid Period, Leiden: Brill. Kadish, G. (1973) ‘The Complaints of Kha-Kheper-Re-Senebu’, in The Journal of Egyptian Archaeology, 59, 77–90.

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CHAPTER III Adkins, A. (1976) ‘Polypragmasune and Minding One’s Own Business’, in Classical Philology.

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CHAPTER VII Abellan, J. (1979) Historia Critica del Pensamiento Español, Madrid: Espasa-Calpe.

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INDEX

Abellan, J.L. 182 Abu Hanifa, founding legal school 100 Abu Shafi’i, founding legal school 100 Accursius 146–7; metallist position 147, 170 acquisition of goods, in Aristotle 78 ‘added value’ doctrine, in canon law 149 Admonition of Ipuwer 28 Afzal-ur-Rahman 123 agriculture: in Huguccio 149; in Leruela 199, see also estate management al-Biruni, mirror literature 107 al-Dimashqi, price theory 107–8 Al-e Ahmad 122 al-Farabi, political philosophy 108–9 al-Ghazali, Abu Hamid, social and economic teachings 109–11 al-Maqrizi, monetary theory 105–7, 114 Albertus Magnus 155, 156; exchange 157–8; justice 157; money 158–9, 205 Alexander of Alexandria 169 Alhaji, Ajijola 123 allage (barter) 78–9 alvitrismo 180, 201–44i, 207 Amos 29, 34; justice 35–6 Amzalak, M. 202 Andrade, Miguel Leitao de 202 Andrea d’Isernia 144, 170 Anes, Gonzalo 200 Appleby, J. 205 Aquinas, Thomas 155,156, 159–60, 162–3;

exchange 161; profit 161–2 arbitristas 5, 180, 191–3, 194–5, 208; crisis syndrome 196–201; as example of thematization 8; ideology 193–4; quantity theory 181–2; rediscovery 209–10; strategy 206–7, see also Ortiz, Luis Aristotle 4, 67, 72–6; in Albertus Magnus 156–9; in Aquinas 160–3; in Buridan 171; discourse on justice 84–8; discourse on politics 76–84; influence 92–4, 154; justice in exchange 88–91, 181; in Oresme 172–4; in Salamanca School 178 Arkoun, M. 124 Arrow, J. 94 Assmann, A. 8 Assmann, J. 8, 27 Athens 43–4; intellectual scene 46–7 atlantization of the modern world 5, 192 Averroës see Ibn Rushd Averroism 159 Avicennes (Ibn Sina) 108 Avimpace (Ibn Bajja) 111 axial-age hypothesis 6–7 Azpilcueta, Martin de 183; quantity theory 187–8 Azzo 144–6, 157

230

INDEX 231

Baeck, L. 94, 150 Baldwin, J.144, 148 Barrientos Garcia, J. 178 barter: in Aristotle 78–9, 83; in Egypt 30–1 Bartolo de Sassoferrato, on money 170 Bataillon, M. 177 Bazzichi, O. 165 Beloch, J. 12 Berdiaïev, N. 14 Bernard of Clairvaux, leadership of Cistercians 127–9 Berthoud, A. 93 Berti, E. 19, 93 Bible 32–5; Exodus 37, 38, 39; Leviticus 37, 38; Deuteronomy 37, 38, 39–40; Isaiah 36–7; Amos 35–6; Matthew 138, 152; Luke 149, 152 Blaug, M. 15 Böhm-Bawerk, E. 205 Bologna see Roman legists Boniface VIII, dispute over debasement 170 bookkeeping, invention by Italians 126 Botero, Giovanni, development philosophy 193–4 Bottéro, J. 24 Brams, J. 159 Brants, V. 140 Braudel, F. 204 Bravo, R. 189 Brenon, A. 152 Bridrey, E. 172 Bright, J. 32 Bruton, H 18 Bubner, R. 17 Bücher, K 12 Buridan, John (Buridanus), monetary theory 104, 170–2, 185 Calvet de Magelhaes, J. 202 Canaan 32–3

canon law 148 Canonists 147–53 canonization, in tradition building 10 Cantillon, Richard, velocity of circulation of money 205 capital 151, 165, 168 Capitani, O. 165 Cassel, Gustav 190 Castro, A. 202 Catalonia, transmitting Islamic thought 120 Cathars, opposition to feudal system 139, 152–3 Cervantes Saavedra, Miguel de 197 Chalmeta, P. 103 Chapra, M. 123 Chayanov, A. 14 Cheneval, F. 159 Chenu, M. 154, 159 Choudhury, M. 123 chreia (common need) 45, 90, 91 chrematismos (household and business matters) 1, 55 chrematistics 78, 80–4, 156, see also kapelike chrematistike Church Councils, prohibition of usury 151 Church Fathers, view of economic activity 4, 137–8 Cicero: influence in twelfth century 154; translation and adaptation of Greek texts 92, 169 Cino de Pistoia 144, 170 Cistercians 126; corporate culture and structure 131–4, 139; historical background 127–8; prototype multinational agri-business 129; and rural economy 128–9; shift in economic activities 134–6 city regulation, in Islam 101–2 Cluny Abbey 125, 126, 127 codification, in tradition building 8–9 coin debasement see debasement Colmeiro, M. 209 commercial money 151, see also capital commercial type of society 13

232 INDEX

commodity standards, in Egypt 25, 26, 31 The Complaints of KhaKheperResenebu 29 ‘conspicuous consumption’, in twelfth century 130–1 Corbin, H. 98 cosmological worldview, in Near East 22, 24 Couteau-Begarie, H. 128 credit economy, involvement of Cistercians 135–6 Curto, D. 201 da Susa, Enrico (Cardinal Hostiensis) 151, 170 Damdamaev, M. 26 Dasgupta, A. 16 Dawood, N. 114 Dawson, C. 142 de Andrade, Miguel Leitado 202 de Azpilcueta, Martin see Azpilcueta, Martin de de Faria, Manuel Severim 202, 203 de Fieschi, Sinibaldi see Innocent IV de Herrera, Christobal Pererez 197 de Leruela, Miguel Caxa 197, 199 De Libera, A. 159 de Lugo, Juan 183 de Macedo, Duarte Ribeiro 202 de Mata, Francisco Martines 197, 199–200 de Mercado, Tomás see Mercado, Tomás de de Molina, Luis see Molina, Luis de de Moncada, Sancho see Moncada, Sancho de De Roover, Raymond 165 de Soto, Domingo 178 de Vaux, R. 32 de Vitoria, Francisco see Vitoria, Francisco de debasement 170; in al-Ghazali 111; in Ibn Taymiyyah 104; in Mariana 191; in Oresme 173–4 debt slavery: in ancient Israel 37; in Mesopotamia 25–6

Delebecque, E. 54 demand interpretation, in Albertus 158 Democritus 44–5 Dempsey, B. 209 dependencia school 207–8 devaluations see debasement development economics, in crisis 18 development trap: in Spain and Portugal 204; in twelfth century 129–31 The Dialogue between the Man and his Soul 29 Dionysius of Halicarnassus, on Isocrates 48 d’Isernia, Andrea 144, 170 distribution theory, in Ibn Khaldun 117 distributive justice 86–7 Donkin, R. 133 Dumont, L. 6 Dundabin, J. 159 Duns Scotus 165 Dupuy, C. 170, 171, 172 Echevarria, M. 196 economic humanism 17–19 economic science 5–6 economic thought 5–6; as a subject of study 1–2 Egypt 27–8; development of civilization 20–3; economic system 30–2; impact of traditions 10; ‘system crisis’ 105–6; wisdom literature 28–30 Eisenstadt, S. 7 entrepreneurship: in Olivi 167–8; in Xenophon 57–8, 59–60 episteme approach, in history of economic thought 16 equity: in ancient Israel 35; in Mesopotamian legal codes 24; in Persia 40, see also justice estate management: by Cistercians 131–2, 133; in Xenophon 54–6, 58

INDEX 233

ethical radicalism, of Israelite prophets 24, 35–40 exchange of goods and services, in Aristotle 88–91 exchange, see also barter; money falsafa (Greek philosophy) 108, 111–14 Faria, Manuel Severim de 202, 203 Fau, Jacqueline 172 Fernández, A. 182 feudal system 141–2; coin debasement 170; opposed by Cathars 139, 152–3 Fieschi, Sinibaldi de see Innocent IV Finley, M. 93 fiscal practices see taxation Fisher, Irving 190 Flanders, notions of time 153 Flood, D. 165 Foucault, Michel 15–16 Franciscans 163–4 Fransiscans, see also Olivi, Petrus Johannis Frick, F. 32 Gardet, L. 98, 110 Garelli, P. 26 Garin, E. 175, 176 Gaudemet, J. 149 Gerard of Cremona, translation of Islamic texts 119 German Historical School 11–12 Ghanzanfar, S. 110 Ghazalla, I. 123 Gilchrist, J. 140 Gillard, L. 172 Gislain, J. 15 Glaber, Raoul 127 grangiae, of Cistercians 131–2 Gratian, Decretum 147–8, 149 Greece: emergence of rationalism and secularism 42–6, see also Athens Gregory of Nianza, doctrine on usury 138

Gresham’s Law 106 Grice-Hutchinson, M. 181, 210 Grosseteste, Robert, translation of Aristotle 156 Grunebaum, G. 8 Guy, A. 178, 182 Habsburg Empire 4–5, 179, see also Spain Hamilton, E. 209 Hanbalites 100, see also Ibn Taymiyyah Hanifa, Abu see Abu Hanifa Hanson, B. 122 Hayek, Friedrich August von 1, 15 Hayes, J. 32 Heisterbach, Caesarius von, complaining of usury 136 Henry of Ghent, licit profit for businessmen 166 Heraclitus, ‘doctrine of the flux’ 43 Herman the German (Hermannus Allemannus), translation of Islamic texts 112, 119–20 Herrera, Christobal Pererez de 197 Herzog, R. 58 Hesiod, Works and Days 42–3 Hirschman, A. 18 historical relativism, in economic thought 15–16 Höffner, J. 209–10 Hopkins, D. 32 Horning, E. 29 Hostiensis, Cardinal (Enrico da Susa) 151, 170 Hourani, G. 107 household management see oikonomike Huguccio, ‘added value’ doctrine 149 Husson, G. 31 Iberian Peninsula see Portugal; Spain Ibn al-Mukaffa, mirror literature 107 Ibn al-Qayyim, monetary theory 104–5 Ibn Ali, Zaid, usury 101 Ibn Anas, Malik, founding legal school 100 Ibn Bajja (Avimpace) 111

234 INDEX

Ibn Hanbal, Ahmad 100 Ibn Khaldun 114–15, 122; economic thought 115–18 Ibn Rushd (Averroës) 111, 171; commentaries on Aristotle 92, 112, 157; monetary theory 113–14, 158, 170 Ibn Rushd see also Averroism Ibn Sina (Avicennes) 108 Ibn Taymiyyah 102–3, 123; analysis of market mechanism 100, 103–4 Imbach, R. 159 imperialism thesis 207–8 ‘impossiblity theorem’ 94 indigenization, in Islamic countries 121–4 industrialization: in de Faria 203; in Ortiz 196 inflation, in Spain 180–2, 186–9 inheritance law, in Islam 99 Innocent IV 146, 149; socioeconomic thought 150–1, 170 institutionalization, in tradition building 9– 10 The Instruction of Ptahhotep 27 Instruction to King Merikare 28 interest: in Accursius 146; in Aristotle 83–4; in Azzo 145–6; in Bible 38–40; in Greek thought 81–2; in Lessius 190; in Mesopotamia 26; in Salamanca School 205–6, see also usury Isaiah 36–7 Isernia, Andrea d’ 144, 170 Islahi, A. 103, 105, 110 Islam 4; debate on money 169–70; as a force in history 95–8; kalam and falsafa 108–14; law, jurisprudence and hisbah 101–7; Persian tradition 107–8; revival of tradition 18, 121–4; sources and interpretation 17, 98–100;

translation centres 118–20; transmi Isocrates 9; educational and political philosophy 50–1; pan-Hellenic themes 47–50 Israel, emergence and development 23–4, 32–3 Italy: economic expansion 142; ‘modern’ capitalist features 126 Jaeger, W. 54, 73 Jagersma, H. 32 Janssen, J. 30, 31 Jaspers, Karl, axial age thesis 6–7, 22, 41 Jeremiah 36 Joachim of Fiore, Cistercian countermovement 134, 152 John II, debasement 170 Johnson, Charles 172 Jolivet, J. 112 jurisprudence: in Islamic schools 98–100; in Western universities 143 justice: in Albertus 157; in Aristotle 84–91; in Islam 98, 102, 107; in Israel 35–6; in Mesopotamia 24; in Persia 40, see also maat Justinian: Corpus Juris Civilis 143–4; rediscovery 139–40 kalam (apologetic theology) 108–11 kapelike chrematistike (profit motive) 78, 79, 80, 156 kapeloi (peddlers), in Plato 69, 70 kata logon 80 Katouzian, H. 123 Kepel, G. 121 Kern, W. 93 Keynes, John Maynard 1 Khurshid, A. 121

INDEX 235

Kirshner, J. 165 Klengel, H. 25 Knowles, D. 154 koine eirene 48–9 Koran see Qur’an Koslowski, P. 93 Kramer, S. 25 Kraus, F. 24 Krop, H. 171 Kuran, T. 124 Kuttner, S. 138 labour, in Plato 68–9 labour interpretation, in Albertus 158 labour theory of value, in scholasticism 162–3 labour, see also manual labour laesio enormis 144, 170 Lambert, W. 7 The Lament of the Eloquent Peasant 29 Lanczkowski, G. 29 Langholm, O. 148, 156, 157–8, 165, 171, 172, 185, 190 Languedoc 165; links with Islamic culture 120, 167 Laoust, H. 103 Lapidus, A. 148, 172 Laroui, A. 114 Larraz, J. 210 Latin West 137–41, 174–5, see also Canonists; Roman legists; scholastic theology Latini, Brunetto, translation of Ibn Rushd 112 law: in Islamic schools 97–8, 99–100; in university curricula in Latin West 143, see also canon law; legal codes; Roman legists Le Bras, G. 148 Le Goff, J. 126 Leclercq, J. 135 Leff, G. 155

legal codes, in Mesopotamia 24–6 Leruela, Miguel Caxa de 197, 199 Lessius, Leonardus 169, 183; money and credit market 190 Lewis, T. 93 Lichtheim, M. 28 Lo Prete, K. 165 Locke, John, velocity of circulation of money 205 Lope de Vega Carpio, Félix 197 Lowry, S. 93 Lowry, Todd 17 Lugo, Juan de 183 Lusignan, S. 173 maat 23, 27, 41; ethical deepening 28, 29, 31; as example of thematization 8 Macedo, Duarte Ribeiro de 202 McEvoy, J. 156 McLaughlin, T. 148 madrashas 9, 99–100 Magnus, Albertus see Albertus Magnus Makdisi, G. 98 Malakites 100 Malik, U. 123 management models, in Xenophon 52–61 management science, promoted by Moncada 198 Mannan, Mohamad 123 Manselli, R. 134, 148, 156, 165 manual labour, Cistercian upgrading 132 Maravall, J.A. 178, 182, 193 marchanderie 142, 143, 148 Marchant, E. 58–9 marginalism 171 Mariana, Juan de 183; debasement analysis 191 market process: in Accursius 146; in Azzo 145; in Islam 102, 103–4 Marx, K. 80 Marxists: controversy over value theory 93; process of canonicity 10 Mata, Francisco Martines de 197, 199–200

236 INDEX

Medinian school 100 Meikle, S. 93 Mellaart, J. 20 Menjot, D. 172, 174 Menut, A. 172 Mercado, Tomás de 183, 188–9; monetarism 185, 189 mercantilism 2, 191–3, 205; in Spain and Portugal 203 Mesopotamia: development of civilization 20–3; impact of traditions 10; legal codes 23, 24–6 Meyer, E. 12 Micah 36 Miller, C. 113 Miller, J. 32 mirror literature (Persia) 107–8 ‘modernism’, approach to Aristotle 93 Moerbeke, William of, translation of Aristotle 156–7, 173 Molina, Luis de, economic liberalism 182– 3 Moncada, Sancho de, political economy 197–9 monetarists: dispute with arbitristas 182, 208; in Salamanca School 184–5, 187–8 monetary theory: in Aristotle 79–80, 83, 89–90; in Islam 104–7, 111, 113–14, 158, 169– 70; in Latin West 146–7, 158–9, 160, 169– 74, 185; in Mercado 185, 189; in Plato 71 money debasement see debasement money-barter, in Egypt 31 Montchrfétien, Antoine de, Traité d’Economie Politique 1 Morenz, S. 31 mortgage loans 136 Moulin, Léon 129 muhtasib (head of commercial court) 102, 103 Naqvi, S. 123

narodniki 14 Nassar, N. 114 Natali, C. 93 Navarrus, Doctor see Azpilcueta, Martin de Nederman, C. 154 Nelli, R. 152 neo-classical marginalism, controversy over value theory 93 neo-classicism, version of economic history 15 NeoThomism 93 Nicolet, C. 169 Noonan, J. 148 notarial acts 144 Nuccio, O. 143, 148, 175 numéraire 25, 26, 31 Nuyens, F. 73 Odefredus 144; money value 146–7 Odonis, Gerald 171 oikonomike (household management): in Aristotle 1, 77; transformation into chrematistike 78, 82 oikonomikos (estate manager) 53, 55, 56, 57 oikonomos (subsistence farmer) 1, 55, 56 Olieu, Pierre Jean d’ see Olivi, Petrus Johannis Olivi, Petrus Johannis 164–5; economic thought 151, 166–9, 171, 185; economic value of time 165, 205; link to Lessius 190 Oresme, Nicholas 172–3; monetary theory 104, 170–1, 173–4, 185 Ortiz, Luis, industrialization 195–6 Oulalou, F. 105 Pacetti, D. 169 papacy 138, see also Innocent IV Paradisi, B. 170 Paris university, impact of Aristotle’s Ethics 154

INDEX 237

Partee, C. 165 Paul (legist), on money 169 peddlers, in Plato 69, 70 Pellegrin, P. 93 Perena, L. 181, 210 Persia: influence on Bible’s theology 33; influence on Islamic thought 107–8; tradition of law and economic management 40 Peter Lombard 154, 157 Peters, F. 112 Pharaonic Egypt see Egypt Philip II, dispute over debasement 170 Philip IV, debasement 170 Pierre de Paris, translation of Aristotle 172 Pistoia, Cino de 144, 170 Plato 4, 9, 61–2, 71–2; influence 62–3; material base of society 66–7; money 71; moral and social crisis of the opulent state 67–8; philosophy 63–6; production and trade 69–71; social division of labour 68–9 plenitudo potestatis 138, 150 Polanyi, K. 93; primitivist thesis 12–13 political economists see arbitristas political economy, origin of term 1 Popescu, O. 184 population: in Ibn Khaldun 117; in Moncada 198–9 populism, in Russia 13–14 Portugal 176, 178, 201 Pozo, C. 182 ‘prestige economy’, in Egypt 31 Pribam, K. 16 price regulation, opposition by Salamanca School 182–3 price theory: in Accursius 146; in Aquinas 160; in mirror literature 107–8; in Roman law tradition 143–4

primitivist thesis, in economic thought 12– 13 production: in Ibn Khaldun 116; in Plato 69–71; in twelfth century 129–30 profit: in Aquinas 161–2; in Salamanca School 205–6 profit motive: in Aristotle 78, 79, 80, 156; in Plato 70 The Prophecy of Neferty 29 prophets 9, 33–7 Protagoras 45 Ptahhotep 27 public finances, in Xenophon 58–61 purchasing-power parity, in Salamanca School 190–1, 205 quantity theory, in Spain 181–2 Quevedo, Francisco de 196, 197 Quillet, J. 172 Qur’an: as basis for Islamic law 100; social and economic guidelines 98–9, 101, 102 rationalism, in Greece 42–6 reciprocal type of society 12–13 redistributive type of society 13 reference money 25, 26, 31 relativism 15–16 retail trade: in Aristotle 81; in Plato 70 retrospective approach 15 riba (interest on money loans) 99, 101 Riedel, M. 19 Ritter, H. 108 Roman Empire, view of economic activity 4 Roman legists 141–7 Roscher 172 Rosenthal, F. 107, 114 Ruggiu, L. 93 Ruphinus, on usury 149

238 INDEX

rural economy, and Cistercians 128–9 Russia, populist movement 13–14 Sabbagh, S. 123 St Augustine 137 Salamanca School 4, 177, 178; intellectual contribution 205–6; monetary analysis 179–80, 181, 184–9; perspectives and accents of study 183– 4; purchasing-power parity 190–1; rediscovery 209–10; scholastics economics 182–3 Salmantinos see Salamanca School Samuel, A. 93 San Bernardino of Siena, use of Olivi’s work 165, 166, 169 Sassoferrato, Bartolo de, on money 170 Schacht, J. 97 Schmoller, Gustav, historico-ethical approach 11 scholastic economics, rejuvenation 182–3 scholastic theology 153–5; interpretations 155–6; process of canonicity 10, see also Albertus Magnus; Aquinas, Thomas; Olivi, Petrus Johannis Schumpeter, J. 1, 5, 15, 93, 155, 172, 209 Scott, Michael, translation of Islamic texts 119–20 scribal schools 21–2; as institutionalization 9 script, invention 21 secularism, in Greece 42–6 Sen, A. 19 Servet, J.M. 15 Shafi’i, Abu see Abu Shafi’i Shahrukh Khan 123 shariah see Qur’an; Sunnah Siddiqi, M. 123 Silver, M. 35 silver production, in Xenophon 60 Simpson, W. 28 Sismondi, Simon de 11 slavery:

in Aristotle 77, see also debt slavery Slavophiles, in Russia 14 social welfare, in Islam 110 socialists, recognition of Thomas Aquinas 155 society, in Plato 66–9 Socrates 4, 63; in Xenophon 51–2, 54–6 Soggin, J. 32, 36 Solis, Duarte Gomes 202 Sophists 3–4; ideas 45–6, 47, 67; loss of texts 9 Soto, Domingo de 178 Southern, R. 138 Spain 176, 177, 204–5, 208–10; inflation 180–2, 186–7, see also Habsburg Empire special justice see justice Spengler, J. 5–6 Spicciani, A. 148, 156, 165, 190 Stadter, E. 165 Stagirite see Aristotle Steinert, H. 126 storage and redistribution economy: in Egypt 23, 27, 30; in Mesopotamia 23 structuralism 182 Struzzi, Alberto 200–1 Sufi movement 104 Sunnah: as basis for Islamic law 100; social and economic guidelines 98 supply and demand, in Ibn Taymiyyah 103 Susa, Enrico da (Cardinal Hostiensis) 151, 170 Szlechter, E. 25 tadbir al-madina (city regulation) 101–2 Tale of the Oasis Man 29 taxation: in Ibn Khaldun 117; in Islam 99, 100; in Xenophon 59 Ternus, P. 184 textualization, in tradition building 8–9

INDEX 239

thematization, in tradition building 8 Thomas see Aquinas, Thomas time concept: evolution 126, 153; in Olivi 165, 205 Todeschini, G. 165 Tolstoy, Leo 14 Tordesillas, A.M. 177 trade: in Aristotle 79, 81; in Plato 69–71, see also retail trade tradition 7–10 translation centres, of Islamic texts 118–20 Treiber, H. 126 Trigger, B. 31 Ullastres, A. 187 Ullman, W 143 Urvoy, D. 111 usul al-fiqh (jurisprudence) 98–100 usury: in Accursius 146; in Aquinas 162; in Azzo 144–5; in canonists 148, 149; in Church Fathers 138; depicted in sculpture 151–2; in Enrico da Susa 151; in Innocent IV 150–1; in Islam 99, 101; in Olivi 168 utility, in Aquinas 161 Valbelle, D. 31 Valla, Lorenzo 175 value theory: in Albertus 158; in Aquinas 161; in Aristotle 90; nineteenth century controversy 92–3; in Olivi 166 Van Ess, J. 98 Van Regemorter, J. 14 Van Roey, E. 140 Van Steenberghen, F. 154 Vanhamel, W. 159

Vasconcelos, Luis Mendes de 202 velocity of circulation of money 205 Verbeke, G. 163 Verhelst, M. 163 Viano, C. 93 Vieira, Antonio 202, 203 Vitoria, Francisco de 178; economic liberalism 182–3 Voegelin, E. 22 voluntarism, in al-Ghazali 110 von der Lieck, L. 58 von Guttenberg, E. 134 Walicki, A. 14 Walsh , J. 171 Weber, Max 11–12, 125–7, 204 Weber, W. 182, 210 Weisheipl.J. 159 Westernizers, in Russia 14 Wieland, G. 154 Will, E. 93 William of Moerbeke, translation of Aristotle 156–7, 173 wisdom literature (Egypt) 17, 28–9 Worland, S. 93,140 Xenophon 9, 51–2; fiscal and budgetary policy 58–61; models of management 52–61 Yahveh cult 32, 33 Zahra, M. 101 Zaid Ibn Ali 101 zapadniki 14 Zianuddin, Ahmed, 123