Friday, November 4, 2011

Pontifical Council Reflects on the Global Economy

Cardinal Peter K. A. Turkson and Monsignor Mario Toso, President and Secretary of the Pontifical Council for Justice and Peace at the Vatican, released a note last week entitled "Towards Reforming the International Financial and Monetary Systems In the Context of Global Public Authority."

The PCJP shares its reflections on the demands that integral development, globalization and the financial crisis make on society.  It expresses the considered opinions of its authors and the Council.

As with all communique's involving Catholic Social Doctrine, this one focuses on the common good and human dignity, the pillars on which CSD conceptually rests.  Like all, it urges a spirit of solidarity for the sake of the common good exercised practically through the principle of subsidiarity in furtherance of human dignity.

Beyond that, it is a startling reflection, even radical (as in going to the root), and controversial both for its content and timing.

It censures classical liberal political economy for causing the financial crisis, and calls for one world authority to govern money and credit creation through assorted levels of regional and local bureaucracy.

It was aimed at informing the upcoming G20 meetings as Europe and the US suffer through grave debt crises, and increasingly violent protesters the world over demand more tax revenues from others to support greater redistribution by a a more powerful state.

Noman synopsizes it for the reader without comment and with limited explanatory notes in the interest of disseminating the PCJP's opinions in a brief format.  The document is linked above for those wishing to read it in its entirety.

Noman will share his opinions on the note's principles, premises and perceptions in a different post.

The PCJP's reflection is delivered in a multi-part statement:
  1. Preface
  2. Presupposition
  3. Economic Development and Inequalities
  4. The Role of Technology and the Ethical Challenge
  5. An Authority over Globalization
  6. Towards Reforming the International Financial and Monetary Systems in a way that Responds to the Needs of all Peoples
  7. Conclusions

  • Preface:

The authors wish to carry forward the work of Christ without involving themselves in the political affairs of any nation.  Nevertheless, they view the ongoing financial crisis as an opportunity to examine the principles and values--cultural and moral--that underlie social coexistence.

Following Pope Benedict XVI, they wish to formulate new rules and discover new forms of commitment, building on the good and rejecting the bad.  They offer their reflections to world leaders (e.g., at the G20) and all people of good will.

  • Presupposition:

All are responsible for promoting the common good, which is "the good of every man and of the whole man."  Catholics are called upon to take the lead "in asking whether the human family has adequate means at its disposal to achieve the global common good."
(n.b. The common good thus includes goods of a social, cultural and spiritual nature as well as of a material one.   
In Catholic social thought economic arrangements and business activity serve the common good. 
The distribution as well as creation of wealth is of primary importance and proceeds according to distributive justice which governs the exercise of political power.   
The concept of distributive justice relates to that of commutative, or contract, justice as geometric proportion does to arithmetic proportion.   
In Catholic teaching, the factor common to all justice--that each and every person must be given his due--transcends the quid pro quo of commutative, or contractual, justice and obliges particularity, i.e., taking the recipients of justice into consideration, making distinctions between them.)

  • Economic Development and Inequalities:
The authors believe that ethical breakdowns rooted in utilitarian and materialist philosophy intertwined with technical breakdowns to cause the financial crisis.

Banks, operating in an inefficient market, receive censure for expanding credit and driving a proliferation in money and credit instruments that since the 1990's grew faster than revenues.  The result was excessive liquidity and a speculative bubble in real estate.

Because the US dollar is the world's reserve currency, the crisis occasioned by its bursting was exacerbated.

"A liberalist approach, unsympathetic towards public intervention in the markets, chose to allow" Lehman Brothers to go bankrupt resulting in economic contraction, especially in those places that could least afford one due to the baneful affects of inequality.

Pope Paul VI denounced "the dangers of an economic development conceived in liberalist terms," which overlooks essential aspects of overall development such as "the defense of life and the promotion of people's cultural and moral development."

The International Monetary Fund has mismanaged the process of globalization, resulting in great material inequalities and mass migrations.  While per capita wealth grew more rapidly than population in the past century, distribution grew less fair (dispersed).  This threatens peace.  

The fault is that of an economic liberalism, a form of economic apriorism, that spurns rules and controls and fails to measure its notions against reality.  The result is a system that subordinates all to the advantaged.

Utilitarian thinking lies at the root of capitalist inequalities and distortions.  Individual utility does not necessarily lead to the good of the community.  The spirit of solidarity frequently calls us to transcend mere personal utility for the sake of the common good.

These theories have become "prevailing ideologies and practices on the international level."  One result has been the crisis.  The economy needs people-centered morals, now as always.

  • The Role of Technology and the Ethical Challenge:
Neo-liberal thinking leads us to see problems in merely technical terms, giving rise to the danger of technocratic ideology.  At bottom, the error is one of reducing everything to matter.  

The antedote is to stress the importance of ethical and cultural factors, and to combat selfishness, collective greed and the hoarding of goods on a grand scale.

Man cannot be a wolf to his fellow man.  Nor can he in good "conscience accept the development of some countries to the detriment of others."

Just as the order of being takes primacy over the realm of having, ethics takes primacy over economics.  The ethic of solidarity must animate action.

The logic of a global common good transcends that of particular interests.  All must be aware of "belonging to the human family which means sharing the common dignity of all human beings."  

Human dignity trumps the logic of fair exchange.  We must always be on guard against an idolatry of the market, because not every good can be commodified.

  • An Authority Over Globalization:
Blessed Pope John XXIII noted the world's progress towards unification, and a true world political authority.  

It's goal should be to guarantee a free, stable world economic financial system at the service of the real economy by managing the economy and development policies, migratory flows and food security.  

Growing interdependence calls more urgently for development of a world political authority rich in solidarity and subsidiarity geared towards the universal common good.  It must be endowed with structures and adequate, effective mechanisms to curb speculative monetary and financial markets, which are harmful to the real economy.

The authors call for the gradual, realistic implementation of this authority to favor "free and stable markets overseen by a suitable legal framework, well-functioning in support of sustainable development and social progress of all, and inspired by the values of charity and truth."

Establishment cannot be imposed, but rather must be the result of shared agreement based on reciprocal trust, autonomy, participation and  sincere dialog that values minority opinions.

A preliminary phase of consultation is needed to establish this authority at the service of the good for each and every person, consonant with human dignity and that of every member country. During this phase, perspectives must be raised above that of any particularistic vision.  Neither can developed countries be allowed to dominate the process.

"[T]he principle of subsidiarity should regulate relations between the State and local communities and between public and private institutions, not excluding the monetary and financial institutions.  So, on a higher level, it ought to govern the relations between a possible future global public Authority and regional and national institutions."
(n.b., the principle of subsidiarity requires that "a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good" (Centesimus Annus). 
The government's exercise of power to regulate and direct economic activity towards the common good is thus modulated by the principle of subsidiarity, which requires that a body of higher order (e.g., government) must not arrogate to itself the function of a body of a lesser order (e.g., business).  Human initiative, ingenuity and creativity are thereby safeguarded. 
This principle also safeguards the existence of intermediate associations--societies intermediate to the individual and the state (e.g., the corporation)--permitting them to fulfill their mission and enjoy their proper sphere of autonomy.  Without these intermediate associations, the common good cannot be administered properly.)
Subsidiarity is the basis of freedom, and responsibility.  The responsibilities of subsidiarity, for instance, require that members must not be weakened by systemic deficits in public finances and GNP.

Coupled to the principle of solidarity whereby decisions are made with a view to the global common good, the logic of subsidiarity protects against the danger of central authority's bureaucratic isolation, or its falling prey to paternalistic, technocratic or hegemonic temptations.

Dangers notwithstanding, a public authority along the lines of the United Nations, but enjoying universal jurisdiction, is necessary.

"The establishment of a global political Authority cannot be achieved without an already functioning multilateralism, not only on a diplomatic level, bur also and above all in relation to programs for sustainable development and peace."

  • Towards Reforming the International Financial and Monetary Systems in a Way that Responds to the Needs of all Peoples:

Critical economic and financial difficulties arise from a lack of (1) effective structures and (2) a system of government for the economy and international finance.

The structures established at Bretton Woods intended to serve those purposes gradually broke down.  The IMF, for example, cannot control the money supply and credit risk taken on by the overall system.

New rules are necessary to govern the global financial market, which experienced rapid, uneven growth by permitting capital to flow too freely, deregulation, and advances in financial technology.  As a result, the quality of credit decreased exposing institutions to unreasonable, unsustainable risk.

The need to heed the voices of less developed and emerging nations makes it necessary to expand relevant groups, e.g., the G7 has expanded to become the G20.

The international monetary system must be reformed by the creation of global monetary management.  Existing exchange systems must also be put on the table for discussion.  A body must emerge to function as the central world bank that regulates the flow and system of monetary exchanges.

Commencement of a staged process of development is necessary (though future changes cannot be predicted), which will prioritize spiritual and ethical needs over material ones, and politics over the economy and finance.  These latter disciplines must be brought back to the limits of their social function and real vocation.  

Taxation on financial transactions, especially those in the secondary market, would be beneficial and could contribute to the creation of a world reserve fund to be used in cases of future dislocation.

Banks in trouble must be recapitalized with public funds, conditioned and premised on virtuous behavior.  Tighter domains of credit and investment banking must be established to eliminate shadow markets.

Universities and other institutions must educate people in discernment of the global public good, and the connection between practical doing (praxis) and boundless human striving (poiesis).

We will need enlightened opinion-making the world over to "brave this new world, no longer with anxiety but in hope and solidarity."

  • Conclusions:
The social capability to mobilize immense means calls for a corresponding cultural and moral reflection adequate to the achievement of appropriate ends.

Balances of power that prevail over the weakest must be destabilized.

We are all called to serve the common good by living an upright life.  Beyond that, we are called to exercise forward-looking imagination.  

Modern states look only to their own self-sufficiency and are outmoded.  They operate in a state of nature (along Hobbesian lines).

In order to "ensure the citizens of all countries--regardless of their size or power--peace and security, development and free, stable and transparent markets," the "archaic struggles between national entities" must cede to "a more cohesive, polyarchic international society that respects every people's identity within the multifaceted riches of a single humanity."

"Vital goods shared by the entire human family are at stake, goods which the individual States cannot promote and protect by themselves."

A "Westphalian" international order in which states cooperate but fail to integrate their sovereignties for the universal common good is insufficient today.  Nations will gradually and in a balanced manner transfer part of their powers to a world authority and regional authorities for the common good of humanity.

A new society will be born and new institutions will be built having "a universal vocation and competence."  To help is everyone's duty.

For Christians especially, the Spirit calls to help channel developments towards fraternity and the common good.  The Kingdom of God is vitally concerned with a social contribution to the better ordering of human society.

Rapid globalization is driving us towards a world Authority: a development that will only come about with anguish and suffering due to wounded human nature.

The Tower of Babel cautions us as to "how the diversity: of peoples can turn into a vehicle for selfishness and an instrument of division."  It "also warns us that we must avoid a "unity" that is only apparent where selfishness and divisions endure because the foundations of the society are not stable."  Both defects arise form a failure to recognize man's "intrinsic transcendent dignity and brotherhood."

The Spirit of Pentecost bids us rather to "unity in truth." 

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