Notes on Economic Justice

THE world’s greatest thinkers since Aristotle and the Scholastics treated economics, like other intellectual disciplines such as physics or chemistry, as a discipline with a moral or ethical component. One theologian tells us that economics deals with “social provisioning with those human relationships necessary to the material sustenance and continuation of the social order”, meaning that economics, when used as a practical tool to safeguard healthy and moral societies, must depend on other disciplines that deal with human welfare, among them ethics, sociology, and psychology. Each discipline mentioned as a surrogate to economics finds its nourishment from religious doctrine, theology and philosophy; these disciplines, in turn, aims to provide a complete picture of the human being.

Economic justice, as Aristotle viewed it centuries before, concerns itself with two significant spheres of influence: “commutative” and “corrective” justice. “Distributive” justice concerns itself with how a political state distributes “common [material] goods” to all society members. “Corrective” justice deals with “justice in exchange” or “transactions” between individuals and is reflected in procedural law (the courts) for the rectification of wrongs between individual parties. Economic justice is a fusion of distributive and corrective justice. It concerns itself with how to achieve an economic “equilibrium” for a moral society; it seeks to apply virtue to economic issues, which in turn allows for a fair and equitable distribution of wealth for all.

Virtue, a central ingredient for economic justice, governs an individual’s relationship to him-or herself along with all relationship between human beings. Aristotle locates “economics” within relationships between human beings. Economics concerns itself with the “monetary value” of an individual’s worth vis-à-vis her or his relationship with another.

The Scholastics, or “School-men” were philosophers who instructed its adherents to infuse virtue into economic doctrine through Christian, Jewish and Muslim religious influences. During the Medieval period of history the Catholic church, whose members directed political affairs for the welfare of society, enforced the Christian dictum “love thy neighbor as thyself” through law in order to decrease economic gaps between rich and poor. Muslim rulers enforced one of the five essential pillars of Islam, Zakat. All Muslims, whether rich or poor, must by law commit 2 ½% of her or his wealth to benefit others.

The European Enlightenment, beginning at the beginning of the 17^th century and achieving its peak in the 18^th century, instituted a radical view of economics. Now a reality for the past four centuries, its political philosophy is associated with a decline in religious authority. Its philosophers now viewed economics as a “science”, that is, as a field of empirical inquiry that is answerable to human reason alone. Its progenitors treated ethics and economics as separate ontological spheres of influence, like apples and oranges. Ethics no longer has any connection to economic doctrine. For these thinkers, and others who continue to be influenced by them, economics is a “positive” science that describes reality as we observe it.

Today’s economists would rather relegate talk of ethics or morality, along with other “unscientific” talk to religious authorities who concern themselves with issues of justice, or whoever else wants to talk about it.

As “natural” political institutions became a reality in Europe and grew in strength, the progenitors of a “science” of economics treated “distributive” justice as unworthy of attention. Nation-states now question all talk of a “balanced” or “equitable” means of exchange between human beings. All talk of the subject of “economic equilibrium” is denied.

Many of us will recall stories about the crafty adventures of “Robin Hood”, a character who dedicated himself to a project of “stealing” from the rich and “giving” to the poor. Perhaps the authors of this story reacted to an emerging economic gap between rich and poor.

This rise of an “economic gap” between rich and poor is associated with an exchange of virtue, which concerns itself with an individual’s contribution to social welfare through economic activities, for vice, a modern moral vision that denotes self-interest (here I speak of greed). The Enlightenment project now viewed virtue as part of an old established moral code that stifled individual pursuit of wealth.

Bernard Mandeville, a Scottish physician who was interested in moral issues at the time, published an influential text, The Fable of the Bees: or Private Vices, Publik Benefits (1724), in which he asserted (paradoxically) that private vices will benefit the “public good” a version of “commutative” justice. Today’s economists now associate the “public good” with government welfare policies.

Adam Smith, a Scottish philosopher, extended Mandeville’s ideas by writing The Wealth of Nations (1776). He proposed an “individual hand” theory that emphasized the idea that “corrective” justice, through individual wealth production, will consequently benefit the public good through “commutative” justice. “Corrective” justice, when taken in the aggregate, will eventually provide enough momentum for “distributive” justice. However well-intentioned his ideas were, he could not reconcile the relationship between the two.

Adam Smith’s contribution to political economy, as reflected in his “invisible hand” theory of economics, disallowed nation-states from interfering or “regulating” economic transactions between each other. He wrote his treatise at the height of mercantilism, where nation-states who benefitted from the African Slave Trade aimed to “block” each other from an “equal” trade in slaves. The French, who borrowed Adam Smith’s economic treatise and applied the doctrine of “Laissez-faire”, is commonly associated with the modern doctrine of “free-trade”, where nation-states decline from interfering with economic production. The rise of a “commercial” society, with its bankers and investors, benefitted the rising nation political states tremendously, as they often directed economic policies in parliamentary proceedings. Eric Williams, the first democratically-elected Prime Minister of Trinidad and Tobago, has written a brilliant Ph.D. dissertation out of Oxford University, now expressed in a text entitled Capitalism and Slavery, detailing the political influence these rising bankers and investors, called “mercantilists”, had on the expansion of the African Slave Trade between rising nation-states such England, France and Portugal, and the United States.

The Enlightenment project, with its emphasis on individual wealth and property acquisition, allowed for nation-states to devise legal mechanisms that separate political institutions from what is now called “civil society”. The notion that the political state should distribute wealth equally (a form of commutative justice) to all is frowned upon with all strength and heralded the most vigorous ideological battles of the 20^th century between capitalism, communism and socialism. Karl Marx, whom conservatives view as one of the most reviled philosophers of political economy of the 20^th century, has detailed an intricate relationship between wealthy individuals, who “exploit” workers for self-interest, and the political state. Economic justice is a utopia.

As I write this column the U.S. Senate gears up to vote on revised legislation designed to infuse $700 billion dollars into the troubled U.S. financial markets, after the House of Representatives voted down the Bush administration’s proposed $700 billion dollar financial rescue plan a few days earlier. Among the reasons for the U.S. House’s failed attempt to pass the first proposed legislation is the question of whether to commit ordinary taxpayer money to buy hundreds of billions of dollars of toxic loans and other mortgage-related securities from banks and Wall Street firms.

Had the U.S. House of Representatives passed legislation the first time, middle-income families would have shared the burden of averting an economic crisis that some experts say is attributable to unscrupulous Wall Street financial bankers and investors.

I and many ordinary folks understood that an economic crisis loomed over the horizon some four months earlier, as millions of immigrant and minority homeowners across the country were forced to abandon their homes because they defaulted on their mortgage (loan) payments. Lured by the “American dream”, many of them agreed to sign loan agreements that mortgage brokers were all to ready to deliver. One wife of a homeowner recently committed suicide with her husband’s shot-gun soon after faxing a message to the bank assigned for foreclosure: “By the time you get this message, I will be dead”. Some hours later the police arrived at the property to investigate the incident while potential home-buyers arrived for auction!

The borough of Queens in New York City, where I reside, has seen a significant rise in home foreclosures.

A total of 665 properties in Queens are in foreclosure for the third quarter of this year alone, for a total of 1,339 home foreclosures. Citywide, 2,216 residents have lost their homes to foreclosure this year. The psychological effects of foreclosure are ominous: one child in every classroom in America is at risk of losing her or his home because their parents are unable to pay their mortgage. On the other hand, Washington Mutual chief executive Alan Fishman, who had been on the job for just three weeks when the bank “bellied” up, stands to walk away with $18 million in salary, bonuses and severance.

George W. Bush, the current president of the United States, appeared on network and cable television to inform the American people about the plan, devised by his “economic advisors” and sent to the legislative body for consideration and approval to “bail-out” the financial markets. However, his non-verbal posturing told the whole story: it is as if he stepped out of a war zone. Bob Herbert, columnist for the New York Times, remarked that it is as if he’d just stepped out of a car-wreck.

The modern economic doctrine of “free-trade” is akin to “de-regulation”, where political institutions (and I speak of the United States government) decline to regulate economic transactions stemming from bankers and investors on Wall Street.

Many pundits say that the political leaders here are responsible for the economic discord reverberating throughout its financial institutions, which in turn leads to a degeneration of global financial markets world-wide. They say that political leaders here failed to regulate or monitor the outrageous behavior of financial lenders that guaranteed loans to potential home-owners without hesitation.

But this is certainly not the main issue. The main issue concerns the fact that modern nation-states fluctuate wildly in its decision to “regulate” or “de-regulate” financial institutions as the need warrants it. Common sense alone tells us this practice is dangerous.

Political commentators decline to mention this fact and this omission is no accident. And no-one takes seriously its devastating economic effects on the American society, or the rest of humanity.

The writer is a recent revert to Islam and can be contacted at: drummondhugh@verizon.net