Friday, August 6, 2010

The Swiss Revolutions I

I've been reading a book with the unattractive title "The Constructive Revolutionary: John Calvin and his Socio-Economic Impact," by W. Fred Graham from the early 1970s. Despite it's dry title, it's one of the most engaging accounts I have read of the economic thoughts of the reformers in the Swiss city states of the 16th Century. I've wanted for a long time to find out more about the economics of that period, and now I'm particularly interested as Doug has been talking about charter cities, and also as we are finding out about the importance of political contestability in our on-going work on corruption in the LAPD. One of the notable features of this part of the Protestant revolution was it's concentration in the autonomous city-states of the time and region.

Graham documents that that Calvin and the Swiss reformers made two breaks with the traditional European/Christian view towards markets. First, following the earlier breakthroughs of the Italian merchant cities, Calvin and the Reformers (in contrast to Western values going back through Luther, the Catholic Church, and ancient Rome) taught that commerce and manufacturing were not "second class" occupations. This aligns well with Calvin's idea of the priesthood of all believers, and that everyone can find their calling from God in their life.

Secondly, Calvin did an extensive amount of work on an actual New Testament theology (although, given that it is Calvin, it's really more of a sermon) of borrowing and lending. The most famous part of this theology was the rehabilitation of commercial lending at interest. However, when I read Calvin's words as quoted in the book, I was struck by the forcefulness in which Calvin concluded that it was a positive responsibility of Christians to help those in need, and this might frequently involve lending to them at no interest. Nevertheless, Graham paints a picture of a Christian worldview in which lending to a poor person to buy seed was different than lending to a wealthy manufacturer to buy a new machine, and this worldview would have major consequences for Western and Northern European civilization.

However, it appears that the Pastors of Switzerland (including Calvin) could not get past the centuries old idea* of a "natural" or "just" price. The problem, according to Graham, was that the price level in Europe was inflating because of the influx of gold and silver from the New World, and the Reformers (like almost everyone else in Europe at the time) seemed to try to do everything in their power to stop it with wage and price controls. (Of course, they failed, as even church workers began to rebel). I was thinking of this when reading about the recent 40 percent increases in world wheat prices due to the drought in Russia. All over the world, bakers, chefs, and industrial cooks will be thinking about using other grains rather than wheat. Shoppers will move to corn or potato chips from wheat crackers for their football parties this fall. Farmers will move land from other crops to wheat (perhaps, one might hope, getting past the outrageous government-driven bubble in corn cultivation put into place to satisfy the American ethanol lobby). This is the invisible hand at work. It's not that extraordinary that a city planner in Geneva or Zurich or Bern in the 1500s could abstractly see the need to "deal with" a drought in wheat production. But today, all across the world, tens of millions of people will be doing the right thing (conserving on wheat consumption, increasing wheat production) because of the pricing system.

*One needs to note, however, that early church father Lactantius correctly criticized the price control efforts of the Roman Emperors. His critique reads like a modern economics textbook. It's too bad that his insight didn't spread to all Christian moral philosophers.

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