Mother AND Teacher: The Church, Financial Reform, and Realism

It has occurred to me that Europe doesn’t give a damn if Greece goes down. The EU concern is not for Greece, but for all the banks that lent all those Euros to Athens and now stand to lose them. The cradle of Western Civilization is expendable, but the vaults of the bankers must be protected at all costs. Of course, we imagine the banks as teeming with technicians, well able to tell a good loan from a bad one. But in fact they are teeming with people operating under a reward system that books its profits today and worries about its losses tomorrow, and tomorrow, as we all know, never comes. The profit for selling a bad bond is as great as it is for selling a good one, and the profits are enormous. And even when tomorrow does come, the bankers—make that banksters—have sufficient political cover to insure that the public will pick up the tab. Pro-life demonstrators can be prosecuted under RICO, but there is no law capable of reaching the banksters; fraud and failure bring increased rewards. Their actions are perfectly rational, given the system they work with, a system that is largely “self-regulated,” which is to say, “The foxes are in charge of the hen-house.”

Into this environment of rationalized madness comes the Pontifical Council for Justice and Peace document, “Towards Reforming the International Financial and Monetary Systems in the Context of Global Political Authority.” Reading the reaction (and especially, it must be said, the reaction from the Right), you would think a Stalinist cabal had taken control of the Vatican, or that the Pope was about to make a visit to Zuchotti Park to pass out free marijuana. “Vatican Calls for One-World Government” proclaimed some headline, or “Vatican Sides with Occupy Wall Street.” People who are professionally ignorant of economics proclaimed that we don’t have to listen to the Church on economic issues. Phil Lawler, whose expertise is in journalism, proclaims that the Church should “leave economic analysis to the economists.” Well, even a journalist should know how well that has worked.

The main gist of the dissent is that this document is not “doctrinal,” and therefore we don’t have to heed it. And besides, it’s not from the Pope, but from Church “bureaucrats.” True, it is not from the Pope, but neither is it from just some bureaucrats, but from a group of bishops, bishops appointed by the Pope specifically to give guidance to the People of God on prudential matters, matters such as the application of the Social Teaching to specific situations. And per the Catechism, we do need to listen to the Bishops when they are teaching in union with the pontiff, which I presume a pontifical commission is doing, or the note would not have seen the light of day.

That being said, Lawler and similar critics do have a point. For while the Church is authoritative on such applications, She is not infallible; prudential statements may be discussed and critiqued when they fall within one’s area of expertise. But they may never be ignored nor may we encourage others to ignore them. Such statements must be given respect even if—or especially if—they challenge our deepest political and economic ideologies.

In reading the document, it seems to me that far from being naïve or calling for “one-world government,” the document is sophisticated in its analysis, and modest in its recommendations. Its most contentious recommendation, for a world-wide authority to govern global transfers of goods and funds, is merely realistic. Indeed, this already happens; you do not move that much in goods and money without some institutional framework, both formal and informal. However, as the document points out, the existing framework is prejudicial to the interests of small and developing nations; they violate the principles of solidarity and subsidiarity.

This happens, the document notes, because we have surrendered to economic liberalism, which acknowledges no moral law, but only a utilitarian motive of individual interest. But the money “made” in such pure finance is totally unconnected with the flow of real goods and services. The banksters multiplied the money faster than the growth of real goods, and multiplied it solely for the purpose of fueling speculative bubbles. The liberalist approach refused to accept any regulation. This is not quite true; all markets are regulated, “spontaneous order” being a mere Darwinian fantasy. The only question is, “Who gets to write the rules?” In this case, the banksters wrote their own rules, with predictable results.

The Commission calls on us to take responsibility for the common good, as opposed to the purely utilitarian ethic that currently rules the world, and points to our ethical vocation to take the lead. They do acknowledge the efficiency of markets—under certain conditions—in allocating goods, but note what should be obvious to anyone who understands how financial markets work. Namely, that financial markets do not work the same way, and easily become disconnected from real goods. So far, this analysis accords with all sound economic theory, whether neo-classical, Keynesian, Austrian, or institutionalist.

However, where sound theory fears to tread, ideology boldly ventures. And this is precisely what the document means when it speaks of “apriorism,” ideologues who push economic abstractions without ever looking at actual results. And the specific brand of apriorism it mentions is economic liberalism, which treats everything as a technical problem, unconnected with the moral order. As such, it is merely functional materialism. And far from being a “science” it is in fact a faith. Or rather, a superstition, “the idolatry of the market” of which John Paul II spoke.

The dominance of utilitarian thinking devoid of any connection to the common good makes this a moral crisis as much as a financial one, the Commission notes, and it requires a moral approach, a recognition that the common good transcends particular goods—and indeed is the only thing that makes particular goods possible over any appreciable length of time. But the market makers are never in a position to fully appreciate the common good. Their claim to self-regulation is an invitation to corruption. This is simply realism.

As long as there is a globalized economy, there will be a need for some global authority. Or more accurately, there is a need to update the authorities that are already in place. The Commission is not calling for innovation; it is calling for reform. But it is realistic enough to note that the reform cannot be imposed by force, but must arise over time with agreements in support of sustainable development, free and stable markets within suitable legal frameworks, and a fair distribution of the world’s goods.

The immediate audience for this document is the G20 summit, and the Commission reminds these leaders of the decline of the Bretton Woods agreements, which meant the world lost the ability to control the world-wide growth of the money supply. In its place, there must develop shared, minimum rules to manage financial markets that can grow faster than real goods. In support of this, the Commission offers three rather modest suggestions: a “Tobin Tax” on financial transactions, especially in secondary markets, to support a reserve fund for developing nations; making any public recapitalization of the banks (“bailouts”) dependent on their good behavior; and a sort of world-wide “Glass-Steagall” act, to separate the domains of ordinary credit and investment banking, along with the management of “shadow” banking markets. These are hardly “revolutionary” suggestions. Indeed, one might better critique the Commission on the grounds that they were too modest rather than too bold.

The Commission notes that we need a reform not just of institutions, but of “life-styles”; more is at stake than mere banking: there is the cure of souls, a cure that often takes it cues from the surrounding culture rather than from Holy Mother Church. This is why it is particularly important for Americans to read this document with prayerful attention.  As (then) Archbishop George noted in 1997, Americans, even American Catholics, are culturally Calvinist, a culture which “is the civil counterpart of a faith based on private interpretation of Scripture and private experience of God.” Such a culture easily losses sight of the common good. The common good is always manifested in particular situations and it is these concrete situations which the Church and Catholics everywhere—even in America—must address. The Church is both Mother and Teacher, to be heard not just on Sunday, but in the workday, and the work-place, as well. Certainly, one may critique such statements from within the ambit of one’s expertise, but to simply tell fellow Catholics to ignore it is to encourage a destructive disobedience, and a weakening of Catholic Culture, a culture that has to confront the predominant Calvinist individualism.

As long as the world is highly interdependent, there will be a need for global structures, but these structures must be guided by the principles of the common good, subsidiarity, and solidarity. There must be new “polyarchic” structures that respect the identity of peoples within a single humanity. As long as the world cares more for its bankers than for Greece, more for Goldman than for Ghana, there will not be peace. And that is just simple realism.

John Médaille is an adjunct instructor of Theology at the University of Dallas, and a businessman in Irving, Texas. He is the author of The Vocation of Business, and Toward a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More.