The Hispanic world and the Christian Economic Order

Part One of Two

We are delighted to feature this guest essay from Professor Arturo Salazar Santander, from the Law School, Universidad Bernardo O’Higgins y Centro de Estudios Históricos y Humanidades Universidad Bernardo O’Higgins.

I am very honored to write again for “The New Digest,” this time on a topic that has often been overlooked: the economic conception in the Catholic tradition, and particularly in the Hispanic and Indian world (Spanish America in the 16th and 18th centuries). Without idealizing this world, which certainly had its vices and problems, I want to make clear that the theological conception of existence and life, so deeply alive in the Hispanic world, generated a different way of understanding the relationship between man and economic exchanges, very distinct from the liberal conception that originated in the Anglo-Saxon world and that expanded throughout the world in contemporary centuries. The Hispanic-Indian world was a projection on American soil of the medieval Christian order at a time when it was being under harsh attack by the Protestant Reformation and Renaissance humanism, which had repercussions on legal-economic institutions and principles very different from those of modern economic liberalism (Eyzaguirre, Jaime, Hispanoamérica del dolor, (Cultura Hispánica, 1979), 69).

If one studies the genesis of modern and contemporary economic thought, one agrees that it is a product of the 18th-century Enlightenment, and that other social and economic experiences existed before, in which existed another way of understanding the relationship between man and exchange. Furthermore, Julio Alvear has pointed out bluntly that the modern market arose as an imposition, based on the legislation imposed by the “free trade” of the late 18th and early 19th centuries, that is, the absolute freedom of economic movement. This eliminated all fundamental limitations on economic exchange and translated into the freedom to produce, buy, sell, transport, or lend without exogenous regulations from political authorities, from the propiedades vinculadas (tied-properties), and corporate guild associations. Indeed, under the Ancien Régime, there were numerous restrictions on the free movement of goods and labor, such as monopolies, taxes, fees, and numerous regulations that intervened in the economy with local norms and customs. In addition, there were moral and theological obstacles to business, such as the prohibition of usury and limits on profit (Alvear Téllez, Julio. “El mercado moderno: variaciones sobre un problema económico”. Verbo, 553-554(2017), 283).

A rich theological conception of life and society severely limited the emergence of anything comparable to the modern capitalism of the 19th-21st centuries. In the Middle Ages and the Ancien Régime, especially in the Hispanic world, until well advanced the 18th century, everything was governed by a theological conception, and the transcendent and otherworldly end was understood as the most decisive moment for humankind. Everything was intended to be ordered in view of that spiritual purpose. This generated a series of institutions rich in Christian wisdom and controls aimed at the common good, which prevented or at least partially contained the rise of the modern capitalist spirit. Harold Laski, offering lucid reflections on the arrival of liberalism and premodern society, has written that, prior to the birth of the spirit of capitalism, “men lived within a system in which effective social institutions—State, Church, or guild—judged the economic act by criteria foreign to that act itself. Individual interest was not presented as a conclusive argument. Material utility was not accepted as a justification for economic conduct. These social institutions sought to impose, and in part did impose, a body of rules to govern economic life, the animating principle of which was respect for social welfare in connection with the health of the soul in the life to come. In the face of this consideration, the economic interest of the individual was willing to be sacrificed, since this assured his heavenly destiny. With this end in view, competition was controlled, the number of customers for each merchant was limited, there were prohibitions on trade for religious reasons, prices and interest rates were prefixed, holidays were obligatory, They regulated wages and working hours, and speculation was avoided within certain limits (Laski, Harold, El liberalismo europeo, (Fondo de Cultura Económica, 1961), 23).

It was not only the institutions and norms that regulated and limited profit as the driving force of the economy, it was a complete mentality, theological and even theocentric in the Indian world, which, as has been highlighted, did not know anything comparable to the secularization and methodical doubt of Rene Descartes. That is why Miguel Ayuso has spoken of the Indian world as a Christianitas minor, the “Cristiandad menor” of Baroque Spain and the Indias, as opposed to the greater Christendom of the medieval European world, and in confrontation with the new ideas of modern Europe. Even, of a “Baroque Middle Ages” in the words of Bernardino Bravo Lira.

The economy of the pre-modern world was rather one of static wealth, and private property evidently existed, but was understood very differently. Indeed, many properties were subject to the system of entailments(vinculaciones) and amortizations, with charges that impeded the free circulation of goods. Indeed, the real property of families, regular and secular clergy, local communities, guilds, and associations did not belong to natural persons but to the legal universitas that endured over time. It was property that fulfilled a communal rather than individual function, the alienation of which was either prohibited or severely limited. Nineteenth-century liberals called it “dead-hand property”(propeidad de manos muertas) and suppressed it, causing disastrous social results, to impose the liberal free market, plundering propiedades vinculadas through desamortizaciones laws in Spain, France, Germany, Italy, and Latin America. In the Ancien Régime and especially in the Middle Ages, there existed what Paolo Grossi calls “real situations,” often para-proprietary, which allow the legal approach to focus not so much on formal ownership but on the forms of exploitation and enjoyment. Specifically, the legal construction of the ius commune, the division of ownership into direct and useful ownership(dominium directum sive utile), a topic we cannot explore in depth here. However, in summary, we can state that dominium directum is that of the formal owner who holds the property, and dominium utile is the transformation into ownership of real situations of exploitation that go beyond formal ownership. Thus, many peasants could, by paying a moderate rent subject to the doctrine of the just price, acquire a right of useful ownership (and not mere rent or leasing) over the goods they exploited in the context of feudal relations. There was no unitary, individualistic, absolute, and exclusive ownership. There were also innumerable limitations derived from consuetudo, privileging the common use and exploitation of forests, water, pastures, livestock, etc. More than a collective property right, it was a right to use, enjoy and exercise common lands and things, which could even belong to the nobles(Grossi, Paolo, “La proprietá e le proprietá nell’officina dello storico”, en Il dominio e le cose. Percezioni medievali e moderne dei diritti reali, Paolo Grossi(ed.), (Giuffré, 1992), 611 y ss; Segovia, Juan Fernando, “La economía católica antes de la doctrina social de la Iglesia”, en Derecho natural y economía, Miguel Ayuso, (ed.), (Marcial Pons, 2021), 86).

Spain and the America Indiana did not experience the rupture of European Christian unity, and what’s more, the Hispanic world actively fought against the ideas of the rising modern Europe. The conquistadores and missioners brought pre-modern Catholic institutions and mentality to the Americas and found fertile soil for generating a brilliant Indian civilization based on these principles. In the conquest of the Americas, however, the undoubted economic and political interests, the religious and missionary purpose, emerged as the great objective and permeated everything, beginning with the granting of the papal bulas by Pope Alexander VI to the Catholic Monarchs.

The missionary and apostolic spirit inherited from the Spanish Reconquista predominates in sharp contrast to the European expansion of England, France, and the Netherlands, marked by the predominance of the commercial interests of booming capitalism. This Catholic sense of conquest, translated into countless norms and institutions protecting indigenous peoples and promoting evangelization, created a common culture without denying the great differences between Europeans, mestizos and indigenous peoples. However, it maintained a common basis of mutual understanding based on a religious foundation that relativized differences in race, culture, social position, wealth, etc. Instead, it exalted what was common, the Ius Gentium, human dignity, and the divine vocation of all peoples. Therefore, it has been argued that coexistence and the creation of a distinct culture on European foundations were possible thanks to this unity fostered by the predominance of the religious element. For this reason, the entire institutional framework was destined for the evangelization of America, so that the Indian political form has been rightly called a Estado Misional, a Missionary State, to which everything else is subordinated, salus animarum suprema lex esto. So much, so that the human and economic efforts of the Indian Monarchy have been compared to those of the Carolingian Monarchy in the evangelization of Europe (Bravo Lira, Bernardino, “Situación jurídica de las tierras y habitantes de América y Filipinas bajo la Monarquía Española”, en Derecho común y Derecho propio en el Nuevo Mundo, Bravo Lira, Bernardino (ed.), (Editorial Jurídica de Chile,1989).196-197).

The social structure and political organization responded to medieval institutions that were transferred to America, at the same time that these sociopolitical principles were being questioned and in crisis in Europe, in the American Indias they enjoyed great vitality, that is, the corporate organicism that is the base and matrix of the juridical-political culture of the Indian and Hispanic world in general. It was a Iurisdictionalis matrix of political power characteristic of the Ancien Regime, based upon the image and concept of the Iudex perfectus and the Iurisdictio of every Corte, guild, estamento, corpora, universitas, not only the king. (Wiarda, Howard, “Toward a Framework for the Study of Political Change in the Iberic-Latin Tradition: The Corporative Model”, World Politics 25 n°2 (1973), 206-235). This Corpus Mysticum Politicum, a terminology used by Francisco Suárez among many other authors, was not a group of individuals under a contractually formed State, but rather a rich communal and organic associativity between numerous groups and estamentos (Brazos del Reino), in the context of an estamental society, as described by Mario Góngora, as an organic conception of the State: “the political community, according to the dominant Aristotelian notion in Spain, is a product of human nature, of its natural sociability: the very conservation of human groups and the achievement of the common good appropriate to the specific needs and qualities of the people becomes unthinkable outside the State. The common good is not understood as general utility in a purely economic sense, but as the good of human nature in all its fullness, philosophically conceived (...). The end of the State is the satisfaction of the vital needs of men, but also virtue in all its aspects”. In this context, the Telos of the political community was not the increase of wealth and trade, but the reasonable maintenance of each person in his or her status and within their natural community, in the context of a divinely ordained estamental society, by divine and natural law.

The problem of mercantilism in relation to the Indian world has also been discussed and heavily criticized by modern economists, mostly liberal and as a result of an insufficient understanding of the Spanish-Catholic mentality, if not contempt. It is true that the Hispanic Monarchy was based on the extraction of precious metals and falls within the definition of mercantilism. We cannot study a complex topic in a brief space; instead, we would like to highlight how mercantilism, rather than being studied from the principles of modern scientific economics, can be understood as part of pre-scientific and pre-modern economics, and not as a lower stage of development of capitalism. But in a context totally different from the medieval one, characterized by the massive influx of precious metals and the emergence in northern Italy and in Holland and England of proto-, or already full scale, capitalist and bourgeois institutions. In this sense, mercantilism is not so much a new spirit as an adaptation of traditional medieval and ancient oikonomia, as the management of the household, in this case, the “great house”(Casa grande) of the Monarchy. This Aristotelian oikonomia, by definition, is casuistic and resists generalization and the supreme rule of calculation. Not surprisingly, economists in the modern sense did not exist until the 18th century; rather, it was theologians and jurists, especially those from the School of Salamanca, who dedicated themselves to studying economic matters, sub specie aeternitatis, from the perspective of the eternal and the salvation of souls.

It is in this sense that the encomienda must be understood, for example, as an institution dedicated to regulating indigenous labor and, above all, seeking their evangelization, not as a form of exploitation nor as a mere replica of European feudalism. This is true given that the monarch expressly intended to avoid a feudal class and therefore did not hand over serfs and lands in perpetuity, but instead entrusted a group of free Indians, free vassals of the Crown, to a Spaniard (encomendero) for his life and that of his immediate heir. These free Indians, vassals of the Crown, might be entrusted with religious instruction and pay the encomienda holder the contributions they owed the Crown as subjects, without losing their personal freedom and the enjoyment of their property. The monarch, through the authorities, directly intervened in the regime and practice of the encomienda, especially the amount of tribute required of the indigenous people. The primary purpose of the encomienda was not economic, but religious, and therefore, the indigenous people under encomienda were established in Indian villages, which had an ejido (common land) and communal lands for livestock. Numerous provisions and regulations prohibited or attempted to contain potential abuses by the encomendero, such as personal labor. Each member of the encomienda was guaranteed ownership of his property, but the village as a whole held collective ownership of the lands its inhabitants worked in common, the fruits of which were used for public purposes. The surplus harvest was sold, and the profits were deposited into communal funds managed by royal officials. These funds were used for charity, the creation and maintenance of hospitals, and aid to orphans, widows, and the sick. Basically, within the corporate logic of the Ancien Régime, a system of social assistance and protection was established, framed not within the logic of the modern central State, but rather by local corporations and communities.

While reality varied greatly from place to place, even within the same kingdom and region, and from time to time, sometimes even reaching abusive situations, in general we can understand the Hispanic work in America as a work of humanization and authentic Christianity, which enhanced the dignity of the indigenous people, sustained by the Catholic Faith and the common destiny of humanity in the ultimate End. Sometimes this struggle was dramatic, like a Baroque novel or tenebrist, Quixotic, or Quevadesque art, but it was a mark of honor for the Spanish Crown in America to have waged this struggle for more than two centuries, although it never fully established all Christian ideals, and evidently, the Indian world was far from perfect. Jaime Eyzaguirre has called this conflict “the long struggle between morality and economics,” in which the Catholic Church held the forefront, often managing to triumph over human greed and cruelty (Eyzaguirre, Jaime, Hispanoamérica del dolor, (Cultura Hispánica, 1979), 63-65).

The scholastic doctrine of restitution played a prominent role there, a topic we cannot go into in detail here. In short, it consisted of a serious duty—moral, theological, and juridical—to restitute all illicit and immoral gains (turpe lucrum) in order to be absolved of sin in the tribunal or forum of conscience, that is, the juridified confession at the time of the Council of Trent, a topic that legal theologians such as Domingo de Soto and Luis de Molina studied in its most minute details. Roman institutions such as restitutio in integrum were extensively applied in favor of miserabile people like the indigenous people, surpassing the limits of Roman law through canonical influence (Cuena Boy, Francisco, Restitutio in integrum (Diccionario de Derecho Canónico del Max Planck Institute for Legal History and Legal Theory Research Paper Series, https://ssrn.com/abstract=4981253, 2-6, 15-22).

The doctrine of the just price was not only a very important topic for theologians and jurists, but its moralizing influence on the economy permeated many institutions and legal norms, among them, that of the tribute that had to be paid for the encomienda. There were numerous institutions that sought to ensure that contracting was oriented to the just price, such as alhóndigas, almacenes y pulperías where trade was carried out, so that the authorities monitor the rate charged by merchants, eliminating the need for intermediaries who speculate or raise the prices of essential goods in particular. The doctrine of the just price, which had a very great expansion in the pre-modern world, before liberalism and codification, was used by analogy for wages and taxes, understood as relations of justice (Brown, Leonardo, “La casa de la contratación y el monopolio real del comercio interocéanico. Etiología de la decadencia de la Monarquía Hispánica en la Edad Moderna”. Tesis para obtener el grado de Licenciado en Derecho, Universidad Panamericana, 2022, 271).

Once the encomienda began to decline until it was formally abolished at the end of the 18th century, due to the reduction of the indigenous population, and based on the Indian Tasas, and regulations, mestizo and even indigenous labor began to grow strongly on the haciendas. The Tasa de Esquilache around 1621 stipulated that tenants should work on the haciendas no more than 160 days a year and receive in specie the wage of one real per day, in addition to land and seed for their maintenance. It became customary to draw up the employment contract by notarial public deed, in the presence of the corregidor, in the monarch’s name, looking after the interests of the weaker party and with the charge of ensuring that the conditions imposed by the employer were not too onerous for the employee. The mestizos, for their part, were exempt from taxes and services. In these standards, we see a Christian seed of labor law that would gain great strength in the 20th century, applying the same principles of wage justice and protection of the weak, in a totally different context of industrialized and capitalist society, under the legal paradigm of the modern State.

Although it is generally an unknown and little-studied subject, the corporate guild system also existed in Spanish America, although perhaps less strongly than in Gothic Europe. The artisans carried out their activities in the cities through associations, and the activities of the period were dictated by rigorous regulations of the town Cabildos, which set the price of goods to prevent speculation and also maintain strict control over the artisans, understood as a guaranteed function (officium) for the community. The apprentice-journeyman-master system was replicated in America, whereby the future artisan was entrusted to the master craftsman for approximately five years, for learning the trade, religious instruction, and food and clothing for the pupil, who obtained the rank of journeyman after a rigorous examination before the guild, just as was the case in Europe. The town Cabildo appointed overseers (veedores) to supervise the regulations. This is a topic that merits further research, but in general, it can be said that the Indian economic structure was corporate rather than bourgeois-capitalist, albeit within a context of a mercantilist and metal-extracting economy, with the caution we have regarding this term, with a significant presence of the encomienda until the 17th century, later replaced by the hacienda. In all these instances, efforts were made, as much as possible within a human existence filled with misery and corruption, to align economic demands with those of the Gospel and natural law (Eyzaguirre, Jaime, op.cit., 67-69).

Finally, note that in the Indian world, there was no financial and banking system as we know it today. Rather, the Church and institutions such as cofradías, Montepíos, and corporations in various localities were responsible for granting consumer loans, at low interest rates understood as a stipend and not for profit (Brown, op.cit., 265).