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An Essay on the Economic Effects of the Reformation

An Essay on the Economic Effects of the Reformation

by George O'Brien

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This work offers a unique perspective on the rise of capitalism and socialism and the effect of the Reformation. Specific topics include consequences of belief in the private judgment of scriptures; separation of spiritual and secular life; difference between Lutheran and Calvinist teachings on economics; the Calvinist concept of vocation; its perception of material


This work offers a unique perspective on the rise of capitalism and socialism and the effect of the Reformation. Specific topics include consequences of belief in the private judgment of scriptures; separation of spiritual and secular life; difference between Lutheran and Calvinist teachings on economics; the Calvinist concept of vocation; its perception of material success as a sign of divine election; its praise of frugality and disdain for beauty. Also covered is socialism as a reaction to excesses of capitalism; the manner in which Protestantism had strengthened secular authority; diminuation of charity toward the poor following Reformation; materialism underlying socialism abetted by Protestant emphasis on earthly prosperity; egalitarian ideas traceable to Protestantism; and the ease with which socialism blended into Protestant thought. This is a unique work of economic philosophy in that it examines the ideological causes of the economic changes of the period, thus offering a refreshing philosophical perspective rather than merely the mathematical or statistical sides of the question.

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An Essay on the Economic Effects of the Reformation

By George O'Brien

IHS Press

Copyright © 2003 IHS Press
All rights reserved.
ISBN: 978-1-932528-95-4



The more the study of economic history is pursued, the more clearly emerges the connection between religious and economic ideas. So long as the economist was content to confine his speculations to the needs and activities of a scientifically abstracted economic man, he could afford to neglect all aspects of human life except the acquisitive, and all springs of emotion and action except the avaricious. Such a method of dealing with economics was perfectly legitimate, and led, in fact, to many valuable discoveries and useful results. In every science it is necessary to study the actions of particular forces apart from disturbing factors, and accurate experiment and deduction are frequently impossible, unless a real or imaginary elimination of such disturbing factors can be attained. The danger of the method arises from the failure to remember that the disturbing forces are, in fact, liable to disturb, and from applying the results of such abstract and ideal experiments to real problems without allowing for the restoration of the factors which have been temporarily left out of account. It was because the classical economists committed this error that their teaching fell into such unpopularity, not to say disrepute. Having constructed for purposes of experiment an ideal economic man, wholly composed of self-interest and avarice, and recognizing no measure of value but the pecuniary one, they wrongly concluded that the perfectly correct results at which they had arrived by their experiments on this creature were applicable to real men composed of flesh and blood. They abstracted from the object of their observation all motives of honour, patriotism, and religion, and they forgot to restore these motives when stating the results of their investigations. Naturally, the actions and thoughts of such an abnormal monster would not be influenced by ethical and still less by supernatural considerations; and, equally naturally, the economic science constructed on the observation of a world peopled exclusively by such creatures would not find it necessary to pay any attention to the cultural, moral, or supernatural aspects of life.

It was this elimination of all but the avaricious motives from economic life which produced the sterility of classical political economy; and the restoration of the forgotten motives of love, duty, and religion into the study of political economy was the principal aim of the German or historical school. As soon as economics, and in particular economic history, came to be studied from this new standpoint, it became at once apparent how deeply the economic life of man was coloured and influenced by his religious beliefs and surroundings; and the connection between these two great departments of human activity would not be questioned by anybody at the present day.

The influence of religion on economic life and thought will naturally not always be equally powerful, but will vary with the relative stages of development of religious and economic activity. In an age in which people are generally irreligious, and in which no strong dogmatic institution is universally recognized, the influence of religion in the economic sphere will be less pronounced than in an age when everybody is deeply penetrated with faith, and when all are obedient to a single religious and moral teacher. On the other hand, the economic department of human life will be more or less deeply influenced by religious considerations in proportion to the state of development which has been attained by an independent economic science. A people in possession of an extensive literature and tradition, dealing with the economic side of life from a scientific or rationalist standpoint, will be less subject to the influence of religious thought than one which is accustomed to look for guidance in all its daily problems exclusively to ecclesiastical authority. Consequently, the influence of religion on economics will be far less felt in a community of low religious and high economic development than in a community of high religious and low economic development. Now, it may be said generally that the eighteenth century, which witnessed the birth of an independent science of economics, also witnessed the beginning of a widespread decay of European religious belief. If this be so, it follows from what we have just said that the influence of religion on economics was greater in the centuries preceding than in the centuries following the eighteenth.

But even in the earlier period the influence was not at all times of equal strength. The great development of economics as an independent science, which culminated in the work of Adam Smith, had begun in the previous century, and the breaking down of the unity and authority of Christian dogma had been progressively increasing since the first half of the sixteenth century. The further we go back, therefore, the more marked becomes the influence of the religious on the economic life of Europe, until we reach the Middle Ages, the period at which it exerted its greatest strength. What renders the Middle Ages so important in this respect is that it is the only period in history in which economics was regarded altogether from the standpoint of ethics, and in which ethics was included within the jurisdiction of the universal and infallible religious authority. In the Middle Ages anything approaching economic science in the modern sense was unknown. The great doctor of the thirteenth century, who dealt with every department of Christian life and duty, knew nothing of a science of political economy, either in the sense in which it was understood by the mercantilists, as aiming at increasing the prosperity of the state, or in the sense in which it was understood by the classical economists, as stating the principles upon which people do habitually act in their economic affairs. St. Thomas Aquinas, insofar as he deals with economic life at all, deals with it simply as a branch of general ethics. When it is remembered that the science of ethics was at that time dealt with exclusively by ecclesiastics in the light of revelation as well as in that of natural reason, and that the moral life of the individual was controlled by ecclesiastical legislation enforced by spiritual sanctions, it will be understood how intimate must have been the connection between the religious and the economic life of Europe in the Middle Ages.

This close connection between the material and the spiritual life of man was productive of very many important consequences. The strict subordination of all commercial and industrial activities to the moral law must necessarily have had the result of maintaining a certain standard of business honour and good faith. Moreover, the insistence on the unbroken unity of man's career before and after death must have powerfully influenced the medieval conception of economic values. The knowledge that good would be rewarded and evil punished in another world, and that man's earthly existence was but the most fleeting phase of his career, must have operated, on the one hand, to render the poor and unfortunate less discontented with their lot, and, on the other hand, to detach the rich and successful to some extent from avarice both in the acquisition and in the use of their wealth. The Church's insistence on the superior importance of spiritual riches must have had the effect of subordinating material and pecuniary standards of success and of happiness, and of breeding in the individual a sense of the correct proportion of things. It was never forgotten that worldly wealth was but a means to an end, and that the economic function of society was but a single function, which could not be suffered to occupy too large a share of attention without detriment to other and more vital functions.

While the mediaeval conception of life strictly confined economic activity to its correct and proper place, it did not run to the extreme of universal or unreasonable asceticism. The schoolmen fully realized that material wealth, like everything else in the scheme of creation, was good in itself, and might be made the means of virtuous and profitable use. From the very first ages of its existence, the Church had been constantly assailed by and had constantly combated the heresy of Manichaeism, which was ever appearing under novel and unexpected forms. One of the commonest aims of these heretical parties was community of goods; and on this subject the Church declared itself again and again in favour of private property. Thomas Aquinas and the other doctors of the Church insisted that private property was justified because it acted as a spur to economic endeavour; and the medieval Church had as little sympathy with the fanatics who wished to ignore this world in order to fix their eyes exclusively on the next, as it had with those avaricious and worldly people who ignored the next world in order to fix their eyes exclusively on this.

The Church was, therefore, no enemy of material progress, but, on the contrary, approved and encouraged legitimate business endeavour. The religious orders set the example of arduous and unremitting toil for the laity, and many legitimate associations for economic activity — for example, the guilds — were under direct ecclesiastical patronage. The much misrepresented and misunderstood prohibition of usury contained nothing calculated to discourage or to act as a check on business enterprise, and, indeed, a very great development of capitalist trading grew up in Italy without in any way infringing the strict teaching of the Church on this point. If any refutation were needed of the libel that the medieval Church acted as a bar to economic progress, it would be supplied by a mere examination of some of the magnificent survivals of the period.

It would be out of place further to labour this point in an essay which, after all, does not profess to be an economic history of the Middle Ages. The point to which we do wish to direct attention is that the whole fabric of medieval civilization rested upon a religious basis. The regulation of every activity of secular life was regarded as a matter to be approached from the standpoint of the general Christian ethic, which, in its turn, was regarded as a matter to be pronounced upon by the Church. In this way, the universally accepted ideas of commercial men and of people generally of the time were ideas founded upon a religious basis; and the whole complexion of everyday life was coloured by these ideas, just as the whole complexion of present-day life is coloured by certain ideas of its own. The importance of such underlying — often imperfectly realized and subconscious — ideas is excellently explained by Professor Foxwell: "That there are such underlying ideas of right and wrong, and that the whole tenor of legislation is silently, unconsciously, moulded by these accepted views as to what is economically and constitutionally fair and just, will not be disputed. Crystallized into catching phrases, we meet with these current ideas of equity at every turn. One man one vote; a living wage; a fair's day wage for a fair day's work; equality of opportunity; à chacun selon ses oeuvres; property is a trust; a man may do as he likes with his own; caveat emptor; laissez faire — these and many others will be familiar to us as effective instruments of economic and political movement. If they are modified, the legislation of all free countries will reflect the change; until they are modified, no forcible revolution will leave more than a superficial and transient effect."

The maxims given by Professor Foxwell in the passage quoted are excellent examples of the sort of maxims that underlie and form the groundwork of thought in the modern unregulated, competitive age. The medieval man possessed quite as many maxims of this kind as the modern man, but they were essentially different in outlook. As Professor Foxwell puts it: "It would be hard to say whether the average man of today would be more astonished at the medieval ideas of corporate responsibility and vicarious punishment than the medieval would be at our anarchical competition and flagrant usury. But it is certain that each would find the other's notion of fairness positively scandalous." If we were to attempt to discover the essential difference between the two points of view, we should find that the modern point of view rests upon an individualist and rationalist basis, while the medieval rested upon a solidarist and dogmatic basis. In other words, whereas modern society is fundamentally scientific in its ideas, medieval society was fundamentally religious. "The medieval man had an idée fixe, religion, which entered as a blend into all his thoughts, political, economic, scientific or artistic."

It follows that a society penetrated throughout, as mediaeval society was, by the ideas and teaching of a dogmatic religion will continue essentially unchanged so long as no change occurs in the religion on which it is based. In order, therefore, to effect any far -reaching social change in such a society, it is necessary to attack the religion in which it is rooted; and conversely, any attack on the religion entails, as a necessary consequence, serious social and economic changes. When in the extreme case the attack on the old religion is directed against its very foundations, and when the old faith is shaken from top to bottom, the social and economic consequences are bound to be correspondingly deep and revolutionary. The religious movement known as the Reformation was essentially an attack of this kind. It aimed at subverting the basic foundation upon which the prevailing order rested, and at dismembering the whole edifice of existing belief and tradition. Can it be a matter of surprise that such a movement should have been accompanied by social and economic consequences of the gravest kind? It is the aim of the present essay to give some account of these consequences.

We are perfectly aware of the difficulty of the task undertaken, and of the very inadequate degree to which that task has been achieved. Our only excuse for the publication of the present essay is the paucity of the existing literature on the subject in the English language. It is not pretended for a moment that the present volume fills, even partially, that lacuna in economic history; all it aims at doing is to suggest lines of study to students interested in the subject, and to supply some bibliographical indications, which, it is hoped, will lead to the subject being dealt with more fully and more competently by some other hand.

It is important that we should make it quite clear that our inquiries will be directed exclusively to the effects of the Reformation on economic thought and theory, and that we shall not attempt to deal with its effects on actual economic life. To give any adequate account of the consequences of the Reformation on the economic and social life of the people of Europe, it would be necessary to write a general economic history of Europe since the middle of the sixteenth century. At the same time, of course, it is impossible to separate these two kindred topics into absolutely watertight compartments, and some reference will necessarily be made to the very important economic and social changes which followed the Reformation; but we shall be scrupulous in confining such references to cases where the actual practical changes had consequences in the realm of economic theory and thought, or where they are necessary as illustrations of the growth and direction of such theory and thought. For example, the dissolution of the monasteries in England and the confiscation of ecclesiastical land was followed by consequences of the gravest character to the condition of the poorer classes; but we shall refer to this very important historical event only insofar as it resulted in the encouragement of an individualistic and irresponsible conception of the functions of property, or insofar as it points to a revolutionary and socialistic spirit, displaying itself in a contempt for vested and prescriptive rights.

This limitation of our subject saves us from the necessity of discussing the highly controversial subject of the comparative progress of Catholic and Protestant countries. While there is probably no one topic in economic history which has provoked so much acrimony and heat as this, there is probably no subject upon which more indefinite, unsatisfactory and inconclusive results have been reached. The reason for this is simply that no agreed basis of comparison exists, and that it is not possible to isolate the part played by religious belief from that played by other factors sufficiently to ensure that some non-religious influence is not being left out of account. The few remarks which we think it advisable to offer in passing on this subject are designed, not to aid either side in the controversy, but to show how impossible it is for any satisfactory conclusion to be reached on the question, and thus to discourage its further discussion by Catholic and Protestant students alike.


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Meet the Author

George O'Brien authored numerous works in the field of economics including An Essay on Medieval Economic Teaching, Labour Organisation, and Agricultural Economics. His work on the economic history of Ireland, published in 1921, has not been superceded to date. He occupied the post of professor of national economy at University College, Dublin, for 35 years, and also participated in debates on economic matters in the Irish Senate. Edward A. McPhail is an assistant professor of economics at Dickinson College in Carlisle, Pennsylvania.

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