Organic Society & Capitalism - Part III
What to Do with the Surplus of Currency
Plinio Corrêa de Oliveira
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What should be the proportion between the money that circulates in a country and the surplus put aside and used in investments and speculation?
Money is a practical way to allow exchanges of goods. One person has a horse to sell; another has a certain number of bags of corn. Instead of having to lug his bags of corn to exchange for the horse, the farmer sells his corn to the best buyer; then with the money he receives, he can buy the horse he needs wherever he chooses.
In principle, money can be anything that is agreed upon to allow such exchanges: a coin, a paper issued by a trusted authority, a small piece of wood engraved with the stamp of a king or an emperor, an animal tooth, or any other standard a society agrees upon as a means of exchange.
Gold was agreed upon as the means to back currency
Gold’s ‘intrinsic value’
I am a little skeptical about the affirmation that a gold coin has an intrinsic value due to its rarity and durability. For a long time it was held that gold and silver, which is also rare although less so than gold, should be the currency of every country, or at least back the currency. Everyone knows that a gold or silver reserve is a practical way to preserve the treasury of a country or person.
It seems to me that this presupposition - that gold has intrinsic value - worked well for a long time because the Old World - Europe and Asia - had exploited almost all their known mines. However, with the Discovery of the Americas, the situation changed. In the 16th century, the quantity of gold shipped from the Americas to Europe was so enormous that it broke the established patterns.
Without being an expert, I would say that in this first phase of discovery, the gold from the Americas made Spain a power and, to a certain degree, Portugal. In the second phase, I imagine it gradually fell into the hands of those who controlled international finances, which was just being structured at that time. Thus, gold maintained its value, I believe, not because of its rarity, but thanks to an artificial containment of it.
For a long period, the gold coming from the Americas flooded Europe. I read about a farmer from the State of Minas Gerais – when Brazil was still a colony – who wanted to show the Portuguese Monarch the shape of bananas, a fruit they didn’t have in Europe. However, the banana wouldn’t last on the long trips by sea. So, the farmer ordered an entire cluster of bananas to be molded in pure gold [a cluster of bananas is about 3-feet high and a gold cluster could easily weigh 200 pounds] and brought it personally to the King. Thus, just to satisfy the curiosity of the King, he offered this splendid gift. It is an example that shows how much gold was being extracted here and sent to Europe. It also shows that at that time gold had in many ways lost its “intrinsic value.”
Gold from the Americas filled the coffers of Spain and Portugal
In the 19th century Europe colonized Africa, and again a new wave of gold would have flooded Europe if most of the gold market had not already been controlled. Perhaps an exception to this rule was England, which benefitted from the African gold to expand the British Empire while promoting the industrial revolution.
We know that in Brazil - where because of a socialist law below-ground mineral reserves belong to the State - there are many unexploited gold mines. If they were mined, they would lower the price of gold around the world. South Africa also has very rich gold mines that – if mined - could produce a similar effect.
So, even a country whose currency is based on gold and which considers itself stable and secure for that reason, should keep in mind that gold is being artificially controlled today.
In the colonies, the new churches were ornamented with gold, like St. Francis Church in the city of Salvador, Bahia, Brazil
Objectively speaking, it is not its rarity that sustains the value of gold. We know that there are enormous reserves of gold that have already been exploited and are kept out of circulation to maintain its price, just as there are many gold mines purposely unexploited.
Who establishes the amount of gold that should circulate and fixes its price? I believe that these are things established by an agreement between the heads of international finance.
Proportion between the circulating currency & investments
What should be the proportion between the money needed to circulate for proper exchanges in an organic society and the surplus of currency that is saved or invested in banks? This surplus is what ‘Wild’ or ‘Savage’ Capitalism starts with in its speculations process. It isn’t hard to figure out that the surplus of gold coming from the 16th and 19th centuries ended in the service of those who controlled this Wild Capitalism. So, what should be the proportion between the circulating money and the surplus of currency saved? Should it be used in speculation or something else?
Further, what should the Church say on the matter of regulating excessive speculation? How should a Catholic State act in face of this problem? I don’t have precise answers for these questions. Let me offer an example, however, that may help the search for a solution.
The epic Spanish poem The Song of My Cid, tells us how El Cid had to sustain all those who would follow him to fight for a cause that served the common good of Spain. He needed money, so he sought out in Burgos two Jewish money lenders who provided the necessary amount.
El Cid fought wars for the common good of Spain.
Were his methods to fund them justified?
As a pledge, El Cid gave them two heavy, locked chests supposedly containing his treasure, but actually filled with sand and stones. One condition El Cid established was that the Jews could not open the chests for a year or they would forfeit payment of the loan. If no payment would come after one year, they could open the chests and take from them what they had lent. I don't remember reading in the poem that he ever paid back those Jews.
It is a curious story with several moral implications that I won’t address here. I will focus only on one question. Was it just for El Cid to take the money of those speculators who were playing with it for their personal benefit and use it for the common good of Spain? The answer to this question can shed light on our problem today.
When can the public good require the individual speculator to give his money to the State? I believe that in times of crisis, in extraordinary situations, the State can ask this of individuals. But what precisely is an extraordinary situation? Would it be religious, political or social? Who has the authority to establish the criteria for such situations? I know that an external war, according to Natural Law, is an extraordinary political situation and a State can ask its citizens to give their surplus and even what is necessary to save the country.
But can it also ask the same in ordinary situations? When a country is living in peace, does the speculator have the right to indefinitely use his money for his own benefit? What are the limits? We need more study on the topic.
How a Catholic State should use its surplus wealth
What should a Catholic State do with its surplus currency? What did Spain and Portugal do with that extra gold that came from the Americas?
In many ways Spain and Portugal used it to expand and defend the Catholic Faith. Both countries were just closing the long parenthesis that opened in 722 with the Reconquista of the Iberian Peninsula from the Moors.
More than seven centuries had passed from the time that Don Pelayo had gathered together his heroes at Covadonga until 1492, when Ferdinand and Isabella expelled the last Moors from Granada. During that constant fight against the Muslim invaders, the spirit of Chivalry was preserved in those two Catholic countries. Long after the rest of Europe had lost the medieval mentality, Spain and Portugal maintained it untarnished and fresh.
Spain and Portugal used their new wealth to spread and defend the Catholic Faith
This reserve of medieval spirit was the foundation not only for the Age of Discovery but also for the Counter-Reformation. When we analyze the spirit of St. Ignatius of Loyola, we see that he was a medieval knight, and with this spirit he founded the Society of Jesus. All that extraordinary blossoming of saints and religious orders in 16th century Spain was, in my opinion, a fruit of the medieval mentality that was preserved on the Iberian Peninsula for centuries and found then a new expression.
Thus, Spain spent a great deal of that extra gold promoting the expansion of the Catholic Faith and Christendom in Spanish America, while Portugal was doing the same in Brazil, parts of Africa and India. The money was also used in the religious wars and constant fights against Protestantism in Europe led by Spain, and for the defense of Christendom in the Mediterranean. We should not forget that it was Philip II who shouldered the principal expenses of the Battle of Lepanto, which saved Europe from another invasion of the Muslims.
One sees, therefore, that that extra gold was in many ways providential for Spain and Portugal to bring the Catholic Faith and Christian Civilization to the New World.
This is, then, a good way for a country to use its surplus currency - to promote the Catholic Cause. On the contrary, it is not difficult to imagine that other countries such as England and Prussia used their extra money to promote the Revolution and attack the Catholic Church. It is also easy to figure out that the persons who control today’s international finances openly promote the Revolution.
How did Portugal and Spain lose their heroic spirit?
Why didn’t Spain and Portugal continue their fight for that noble ideal? Camões, the great Portuguese poet who in The Lusiadas sang of the glory of Portugal of that age, attributes the loss of the spirit of chivalry to a change of mentality. The heroic Portugal of old set aside its noble ideal, Camões affirms, because of “greed and desire for riches,” which produced in the entire people “an austere, tedious and vile sadness.”
Portugal and Spain gave up their fight for the Catholic ideal because of a change of mentality. One mentality is focused on the glory of God and on virtue; the other on the love of gold.
Posted November 10, 2008
Organic Society was a theme dear to the late Prof. Plinio Corrêa de Oliveira. He addressed this topic on countless occasions during his life - at times in lectures for the formation of his disciples, at times in meetings with friends who gathered to study the social aspects and history of Christendom, at times just in passing.
Atila S. Guimarães selected excerpts of these lectures and conversations from the trancripts of tapes and his own personal notes. He translated and adapted them into articles for the TIA website. In these texts fidelity to the original ideas and words is kept as much as possible.
Related Topics of Interest
Critique of Capitalism from an Organic Perspective - Part I
The Harmful Mentality of Borrowing Money - Part II
The Role of Economy in the Collapse of the Medieval Mentality
The Decay of the Medieval Guilds
Proportion between the City and the Man
Vocations of the European Peoples
La Conquistadora - Our Country's Oldest Madonna
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