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THE UNIVERSITY of SALAMANCA – THE ROOTS OF CAPITALISM
by Porfirio Cristaldo Ayala

The Catholic Church in Latin America tends to reject capitalism because it believes that it is more appropriate to Protestant and Anglo-Saxon. This error was created with Max Weber, founder of modern sociology. In his work the Protestant ethic and the spirit of capitalism (1905), Weber warns that, unlike the Nordic countries, Mediterranean Europe was doomed to backwardness because of their Catholic bases. It was wrong. In recent times, the European Catholic countries progressed with capitalism rather than the Protestant countries.

Max Weber was also wrong about the origins of capitalism. Apparently unaware that economic liberalism came not with the Calvinists, but much earlier. Already in the 16th century, the Jesuits and Dominicans, Spanish Scholastics teaching morality and theology in the University of Salamanca discovered the foundations of capitalism and the competitive market principles. Came in over one century to Adam Smith, as revealed by Murray N. Rothbard in his history of economic thought.

Most important, the Scholastics did not fall into the classic error of Adam Smith, who ran the “labour theory of value”, according to which the work invested in producing a good determines its value. It is not. If the product is not demanded in the market, despite have cost a lot of work, not worth anything. Smith error had disastrous consequences. A century later led Marx to expose its famous “theory of operation”, according to which the capitalists unfairly appropriate the value produced by the workers.

The scholastic Diego de Covarrubias y Leyva (1512-1577), Bishop of Segovia, exhibited the proper subjective theory of value three centuries earlier than the economists. “The value of a thing - taught - does not depend on its nature, but the subjective estimate of men, even if such estimation is crazy”. This theory solves the paradox of courage explaining that diamond is worth more than the water - essential for life – due to its greater scarcity and demand.

Another Scholastic, Luis Saravia de la Calle, demonstrated in 1544 prices to determine the costs and not the other way round, as some are still holding. “The fair price is the abundance or lack of goods, merchants and money, and not costs, work and dangers”, he explained. I knew that what determines the value in the market for goods and services offered are the everyday actions.

The Jesuit priest Juan de Mariana (1536-1623) developed the doctrine of tyrannicide as a natural right. The ruling is not owner of the property of citizens; Therefore, cannot impose taxes without the consent of the citizen, or arbitrarily expropriate your property, or creating State monopolies. The tyrant “everything runs it and everything has by his own,” he said.

Mariana describes the serious effects of the devaluation of the currency (by reducing the content of gold or silver in them), which leads to the increase of the prices. A perverse government manoeuvre. To avoid this tax - inflation—which disrupts economic life, proposed to reduce spending and eliminate the purchase of favors political in Exchange for privileges, as they continue today our leaders.

The Scholastics knew the importance of free competition. Jerónimo Castillo de Bobadilla formulated the law of supply: “commodity prices fall with the abundance and the concurrence of sellers”. They explained the futility of trying to fix prices or plan the economy. The Jesuit Cardinal Juan de Lugo said that the price depends on so many special factors that only God could know it. They warned that no person or group can understand and accurately evaluate all available information that uses a free market. That is why Governments cannot plan the economy or market order.

If Latin American Catholics accept the rich legacy of economic freedom of the Spanish Scholastics, they would enable capitalism to shed the Horn of plenty over the peoples of the continent.