Feature Article

Capitalists at bay

The Vatican and the global financial crisis

As protesters demonstrate against corporate greed and politicians struggle with the eurozone crisis, the Pontifical Council for Justice and Peace has published proposals for reforming international finance. It is a document that puts morality back into the heart of economics, says one expert

While the New Testament tells us to “render unto Caesar the things that are Caesar’s”, the Church, and Churches, understandably take a close interest in the effect that governmental economic and social policies have on the well-being of the flock. Apart from anything else, the Church has close contact with both the citizens of what are known as the “advanced economies” as well as with the emerging nations of the developing world.

There is also a sense in which David Cameron’s ambitions for his rather nebulous concept of the Big Society may be based on something that already exists: the good works in local communities that are associated with churches up and down the land. This point may have been underestimated in recent years as so much attention has, quite rightly, been focused on the appalling scandals, such as abuse of children by priests, which have come to light.
But governments do not take kindly to advice on economic and social matters from the Churches. The Church of England may be jocularly known as “the Conservative Party at prayer”, but when the social consequences of the harsh economic policies of the 1980s were highlighted in the report “Faith in the City”, the Thatcher Government did not appreciate the criticism; indeed it did its best, in the vernacular, to “rubbish” the report.

The Catholic Church has a long tradition of issuing encyclicals on social matters. But the Pontifical Council for Justice and Peace has now entered the fray of the big Group of Twenty and the International Monetary Fund, with the publication this week of a document ambitiously entitled “Towards reforming the international finance and monetary systems in the context of global public authority”.

Datelined “Vatican City 2011”, the report is prompted by the onset of the financial crisis: this has been with us since 2007, but the authors must be congratulating themselves on the timing of publication, coinciding as it does with the demonstrations against financial greed and corruption which began in Wall Street and have recently arrived at the steps of St Paul’s Cathedral in London.

The Pontifical Council begins by saying that the economic and financial crisis “calls everyone, individuals and peoples, to examine in depth the principles and the cultural moral values at the basis of social coexistence. What is more, the crisis engages private sectors and competent public authorities on the national, regional and international level in serious reflection on both causes and solutions of a political, economic and technical nature”.

The report is not an anti-globalisation tract: indeed, the authors sing the praises of the way that the broader trading and overseas investment links which go by the rather tiresome term “globalisation” have spread prosperity: “It should be reiterated that the process of globalisation with its positive aspects is at the root of the world economy’s great develop­ment in the twentieth century”.

The problem, of course, is that “the ­distribution of wealth did not become fairer but in many cases worsened”. In which context it notes that way back in 1967 Pope Paul VI, in his encyclical letter Populorum Progressio, “clearly and prophetically denounced the dangers of an economic development conceived in liberalist terms because of its harmful consequences for world equilibrium and peace”.

The commonly accepted term for the extreme free-market doctrines that have contributed to the financial crisis is “neo-liberalism”. This is often a cipher for what the Pontifical Council calls “an economic liberalism that spurns rules and controls”. They argue that the dogma “runs the risk of becoming an instrument subordinated to the interests of the countries that effectively enjoy a position of economic and financial advantage”.

This may well be so, but the interesting thing is that the economic liberalism of recent years has not proved to be in the interest of many people in the countries that are supposed to have benefited either. It is the very rich, not least the more ruthless bankers, who have won the prizes of neo-liberalism.

One should not commit the error of generalising, and demonising all bankers. But the behaviour of the more ruthless continues to be shocking: with their effective state guarantee against failure, and even when in state ownership, they are still paying themselves obscene bonuses.

The authors add “utilitarian thinking” to economic liberalism as one of the factors aggravating inequality. They define this not as Bentham’s “the greatest good of the greatest number” but the belief that “what is useful for the individual leads to the good of the community”. What is useful for the individual does not necessarily contribute to the common good. Again, certain bankers come to mind.

This brings them to cite Pope Benedict XVI’s social encyclical, Caritas in Veritate, which identified the roots of the crisis as not only economic and financial “but above all moral in nature” in that, to function correctly, “the economy needs ethics” while “the crisis has revealed … selfishness, collective greed and the hoarding of goods on a great scale”.

At this point, I fear, we encounter an ­idealism bordering on the naive. Can any realist place much hope in the authors’ ­prescription that “all forms of petty ­selfishness” should be abandoned?

However, they are not unaware of the more practical obstacles to their main proposals, which are: first, the need for an authority over globalisation; and, secondly, reform of the international financial and monetary systems – both of which aims are, of course, embodied in the title of the report.

As one who has followed the snail’s pace course of international financial and trade negotiations for decades, I can only hope that my natural scepticism about the chances of further progress will be belied by a sudden realisation that the crisis is now so great that something will have to change.

The authors recognise that “regulations and controls, imperfect though they may be, already often exist at the national and regional levels; whereas on the international level, it is hard to apply and consolidate such controls”.
As far as this observer is concerned, they can write that again. They recognise that, although the interdependence of modern states has grown, with some integration and elements of “a shared system”, nevertheless “a worse form of nationalism has lingered on, according to which the state feels it can achieve the good of its own citizens in a self-sufficient way”.

As one witnesses the tortuous negotiations involved in current attempts to resolve the crisis of the eurozone, and the anti-European disease afflicting the British body politic in general and the Conservative Party in particular, one must resist the temptation to despair.