FIRST, CREATE THE RULES THAT BIND THE FREE MARKET:

It was the church more than any other agency, writes historian Randall Collins, that put in place what Weber called the preconditions of capitalism: the rule of law and a bureaucracy for resolving disputes rationally; a specialized and mobile labor force; the institutional permanence that allows for transgenerational investment and sustained intellectual and physical efforts, together with the accumulation of long-term capital; and a zest for discovery, enterprise, wealth creation, and new undertakings.

The people of the high Middle Ages (1100--1300) were agog with wonder at great mechanical clocks, new forms of gears for windmills and water mills, improvements in wagons and carts, shoulder harnesses for beasts of burden, the ocean-going ship rudder, eyeglasses and magnifying glasses, iron smelting and ironwork, stone cutting, and new architectural principles. So many new types of machines were invented and put to use by 1300 that historian Jean Gimpel wrote a book in 1976 called The Industrial Revolution of the Middle Ages.

Without the growth of capitalism, however, such technological discoveries would have been idle novelties. They would seldom have been put in the hands of ordinary human beings through swift and easy exchange. They would not have been studied and rapidly copied and improved by eager competitors. All this was made possible by freedom for enterprise, markets, and competition-and that, in turn, was provided by the Catholic Church.

The church owned nearly a third of all the land of Europe. To administer those vast holdings, it established a continent-wide system of canon law that tied together multiple jurisdictions of empire, nation, barony, bishopric, religious order, chartered city, guild, confraternity, merchants, entrepreneurs, traders, et cetera. It also provided local and regional administrative bureaucracies of arbitrators, jurists, negotiators, and judges, along with an international language, "canon law Latin."

Even the new emphasis on clerical celibacy played an important capitalist role. Its clean separation between office and person in the church broke the traditional tie between family and property that had been fostered by feudalism and its carefully plotted marriages. It also provided Europe with an extraordinarily highly motivated, literate, specialized, and mobile labor force.

The Cistercians, who eschewed the aristocratic and sedentary ways of the Benedictines and, consequently, broke farther away from feudalism, became famous as entrepreneurs. They mastered rational cost accounting, plowed all profits back into new ventures, and moved capital around from one venue to another, cutting losses where necessary, and pursuing new opportunities when feasible. They dominated iron production in central France and wool production (for export) in England. They were cheerful and energetic. "They had," Collins writes, "the Protestant ethic without Protestantism."

Being few in number, the Cistercians needed labor-saving devices. They were a great spur to technological development. Their monasteries "were the most economically effective units that had ever existed in Europe, and perhaps in the world, before that time," Gimpel writes.

Thus, the high medieval church provided the conditions for F. A. Hayek's famous "spontaneous order" of the market to emerge. This cannot happen in lawless and chaotic times; in order to function, capitalism requires rules that allow for predictable economic activity. Under such rules, if France needs wool, prosperity can accrue to the English sheepherder who first increases his flock, systematizes his fleecers and combers, and improves the efficiency of his shipments.

In his 1991 Encyclical Letter Centesimus Annus, Pope John Paul II points out that the main cause of the wealth of nations is knowledge, science, know-how, discovery-in today's jargon, "human capital." Literacy and study were the main engines of such medieval monasteries; human capital, moral and intellectual, was their primary economic advantage.

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