Juan de Mariana on the Evils of Inflation – Misconceptions

Juan de Mariana

“Before we form our own opinion we should do well to listen to the old Spanish economists, who were often shrewd observers and who felt the effects of the inflation at first hand.”
Marjorie Grice-Hutchinson (Early Economic Thought in Spain, 1177-1740)

One of the last proto-Austrian Spanish scholastics was Juan de Mariana (1536-1624), a Jesuit known for his history of Spain (Historiae de rebus Hispaniae), his defense of tyrannicide (De rege et regis institutione), and his treatise on the debasement of money (De monetae mutatione). This last work should be significant for all those interested in economic thought, especially libertarians opposed to the Federal Reserve.

His Treatise on the Alteration of Money not only lays out an economic analysis of the value of money similar to that of the Austrian school, but is also a hard-hitting condemnation of Spanish officials debasing their currency. This work did not earn him any friends among these officials. It led to his imprisonment by the Inquisition, and the work was added to the List of Prohibited Books.

Mariana argued the necessity of stable currency for maintaining the economic order. When a prince or king debases currency, he “cannot profit without the suffering and groan of his subjects.” He declared “that money is hardly ever debased without calamity to the state: Profit for the moment is intimately connected with manifold ruin along with rather great disadvantages.”

Citing Aristotle, he argues that debasing currency makes trade more difficult, and trade is the purpose of money. Referencing the quantity theory of money (which states that an increase in the money supply increases prices) developed by scholastics before him, he points out that people will not want to trade with debased money, which will make trade more difficult.

Because debasement hurts trade and impoverishes the nation, the King will also be impoverished because tax income will be lower. And because the King has impoverished the nation through debasement, the people will come to hate their King for the damage he has done.

But these consequentialist arguments were not the brunt of Mariana’s criticism. Intermingled with these arguments are merciless moral condemnations of the act of debasement itself. To Mariana, debasement is inherently evil, because the King is the director, not the master, of his subjects’ property, and thus he cannot arbitrarily take anything from them without their consent. And since debasement is a form of taxation without the people’s consent, it is “against right reason and natural law,” is a form of fraud and thus inherently sinful. He even mentions that it is fraudulent to repay a debt with debased money when it was originally made with sound money. Applying this argument to the modern day, he would argue that when repaying debt, one must account for inflation or it is not paid.

Mariana referred to those that allowed the King to abuse his power with the “barbaric” practice of debasement as “a plague in the republic.” He declared that “these most pestilent of men are not concerned with honesty,” and that “those who are in power seem less educated than the people because they pay no attention to the disturbances and evils frequently caused by their decisions, both in our nation and beyond.”

In the first chapter of his treatise, he contemplated the nature of power, explaining that it is like food. Just as a body strains when it has either too much or too little food, a nation strains when royal power is increased beyond its limits, and will become tyrannical. His description of power resembles that of Lord Acton, who was aware of the Spanish scholastics, and likely read Mariana.

In determining exactly how much power the King can justly have, Mariana argues that the role of the King is to protect the property of his people and maintain a peaceful and stable society. The King is therefore allowed to collect taxes to accomplish this, but cannot impose new taxes without the consent of the people. He can even debase currency when absolutely necessary in times of war, but must compensate his people for their loss.

Mariana ends his treatise with a warning and a final plea. He warns that even if the people consent to their King debasing currency, it is still “in many ways fatal.” He then pleads to God that if what he says is true, then he wishes that the right people listen and agree to take his advice, adding that the truth can often be bitter. If he is mistaken, he asks for pardon based on his sincere desire to help.

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Nathan A. Kreider is author of the Misconceptions column for Being Libertarian, and has written for the Austrian Economics Center, the Foundation for Economic Education, and the Liberalists. He also occasionally publishes a blog and video content, including short book reviews, which can be found on his website, nkreider.com. He can be contacted by email via [email protected]