Getting a Handle on the Economic Crisis
As Greece’s economic woes deepen and threaten to spread to other countries, the Vatican has offered a timely reminder of the underlying causes of the global economic crisis and analysed ways forward out of it.
During five days of discussions, members of the Pontifical Academy for Social Sciences, joined by a number of leaders in industry and finance, examined the situation under the theme “Crisis in a Global Economy. Re-planning the Journey” – a phrase inspired by Benedict XVI’s social encyclical Caritas in Veritate. (A summary of the highlights of the meeting can be found here).
“Looking into the crisis we considered it to be most of all a moral as well as an economic crisis,” Professor José T. Raga, coordinator of the academy’s April 30-May 4 plenary session, told a Vatican press conference this afternoon. “The common denominator, in its different aspects, is a craving for materialism,” he continued. “Everyone wants to live beyond their means.”
“If you look at the actors of the crisis, there were families used to being in debt…financial institutions giving loans without guarantees, and governments who didn’t care so much about what was happening,” he explained. “But if we are to use a logical method in examining the causes, we need to also look into spiritual values.”
Professor Mary Ann Glendon, president of the Academy, warned during the press conference that the phenomena of low birth rates and ageing populations are about to present the world with another serious global financial crisis – one which has so far been largely overlooked in the current economic upheaval.
Answering a question about the importance of inter-generational solidarity, Professor Glendon said: “There is a dimension that has been overlooked in the alarm about the present crisis. A few years ago our academy had a session on inter-generational solidarity. We predicted that an economic crisis was coming in countries with low birth rates and ageing populations. As the baby boom generation starts to retire, the pressure on social security and healthcare systems in these same countries is going to reach breaking point. So I think it’s still fair to say that there is a crisis coming on top of the present crisis.”
She continued: “It’s going to be a more gradual crisis, it’s not going to be so dramatic, but it’s going to have very sinister implications and it’s going to test the relations among the generations because, as the social security systems begin to crack, who is going to take of the old people, the disabled?”
The burden, Professor Glendon believes, “will be thrust back on families but is our present family structure capable and willing of meeting that challenge? Will there be increased pressures for euthanasia? There are very serious problems coming because of this [second] economic crisis that is only two or three years away.”
The Academy president said the voice of the Church “was ahead of the thinking of much of rest of world” on this concern, but she couldn’t say if the academic and scientific world are listening or coming closer to realizing the danger.
Professor Glendon underlined a number of other interesting points during the question and answer part of the press conference today:
• The poor had no part in bringing about the current economic crisis but the crisis has nevertheless fallen very heavily upon them. Much of the suffering fell upon those who were already suffering; a worldwide goal to lift many millions out of poverty by 2015 is receding.
• Roots of the current crisis can also be found in the prevalent view in higher education that there are no objective standards of morality, the social deregulation of the 60s and 70s, and the collapse of many traditional moral restraints. These probably prepared the ground for the economic deregulation, the ‘anything goes’ attitude and atmosphere in the economic world of the 1980s.
• Planning a way out of the crisis depends on education and the role of government, vis-à-vis helping intermediate institutions of civil society. “If governments cannot actively support and promote the family, schools, churches, and voluntary associations then they can at least stop policies that harm them.”
• On subsidiarity: “As decision-making power seems to go further and further away from citizens, people have a sense that their lives are being affected by economic and political forces they can’t control. How do men and women regain control over setting conditions of the way we live, work and raise our children? The Church again in her wisdom keeps calling us back to the doctrine of subsidiarity: We mustn’t let too much power over setting the conditions of our lives escape to higher levels where there’s no transparency, democratic control, or checks and balances.”
• On regulation: “Centesimus Annus told us that the creative energies of market have to be tamed and disciplined within a moral and juridical framework. We all agree on that, but how do you construct a juridical framework that permits the enormous wealth creating possibilities of the market to operate, and yet correct for the enormous destructive capability of the market? This is a real art and science that no one has mastered, not all the Nobel Prize winners in economics - they were some of the many the people who didn’t see the signs of what was coming. So if the best and brightest do not understand what’s wrong, it means we don’t know very much about regulation. But what we do know is that there are unintended consequences from regulation. Sometimes a very good intentioned regulation can actually create harm – for example, regulations in the US that encouraged lending to poor families in order to increase the opportunity of home ownership…So part of the failure is political, and part of it to do with the lack of real knowledge of what works and what doesn’t work in the area of regulation.”
Professor Raga stressed the following points:
• Public deficits, such as the one afflicting Greece and other countries, mean future generations will be left to pick up the tab. “We are shifting our aims of satisfaction and present needs on to future generations who aren’t able to satisfy those same needs because they will need to repay the debt we left them.”
• He questioned the validity of financial instruments which he described as “opaque”; he criticized some, such as rating agencies which gave misleading results, for “defrauding society”.
• The best way to help developing countries is not to give money but to “create links” and improve the efficiency of international organizations. “Look at the WTO (World Trade Organisation) - every meeting, every year, they repeat the same conclusions: we should do ‘X’ but this ‘X’ is never done.”
• Protectionism must be abolished. “This is a real question of concern and only in this way can we enlarge the participation of the human family.”
At the end of the press conference, Professor Glendon announced that over the next two years, the Academy will be preparing for the 50th anniversary of John XXIII’s encyclical Pacem in Terris, to take place in 2013.
The next two plenary meetings will therefore look at how the issues addressed by Pacem in Terris appear today, 50 years later. Topics will include how John XXIII tried for the first time in an encyclical to reach out to all people of good will and embraced the Universal Declaration of Human Rights. It will also look at “positive and negative” secularisms, just war theory, freedom of thought, freedom of conscience, and freedom of religion. It will also examine governance: what can best be done, and needs to be done, at different levels of governance - national, regional, local and international.