A global Authority?

The document issued by the Pontifical Council for Justice and Peace (PCJP) under Cardinal Turkson on the global economy and the reform of monetary and financial systems in October 2011 generated a storm of controversy, and has since been roundly repudiated by the Vatican Secretary of State and pulled to pieces in L'Osservatore Romano. Presented as merely a “reflection” and not an authoritative statement binding on the conscience of Catholics, it may still be helpful to look and see what was asserted here.


The document’s analysis is clearly critical of “liberalist” or “neo-liberal” ideologies. It looks back to Popes John XXIII, Paul VI, and John Paul II, pointing out that, “After the Second Vatican Council in his Encyclical Letter Populorum Progressio of 1967, Paul VI already clearly and prophetically denounced the dangers of an economic development conceived in liberalist terms because of its harmful consequences for world equilibrium and peace.” Economic liberalism is here linked to individualism and utilitarianism and defined as “a theoretical system of thought, a form of economic apriorism, that purports to derive laws for how markets function from theory, these being laws of capitalistic development, while exaggerating certain aspects of markets.” The document immediately adds: “An economic system of thought that sets down a priori the laws of market functioning and economic development, without measuring them against reality, runs the risk of becoming an instrument subordinated to the interests of the countries that effectively enjoy a position of economic and financial advantage.” It points out that Pope John Paul’s social teaching emphasized the ethic of solidarity, and the dangers of an “idolatry of the market”, an idolatry “which ignores the existence of goods which by their nature are not and cannot be mere commodities”.

Caritas in Veritate, the main social encyclical of Benedict XVI, is interpreted in the context of this tradition in modern Catholic social teaching, although it adds certain new ideas and themes. One of these is the critique of a “technocracy ideology: that is, of making technology absolute, which tends to prevent people from recognizing anything that cannot be explained in terms of matter alone, and minimizing the value of the choices made by the concrete human individual who works in the economic-financial system by reducing them to mere technical variables.”

The PCJP document has a tendency to slip into an exhortatory tone:

“Recognizing the primacy of being over having and of ethics over the economy, the world’s peoples ought to adopt an ethic of solidarity as the animating core of their action. This implies abandoning all forms of petty selfishness and embracing the logic of the global common good which transcends merely contingent, particular interests. In a word, they ought to have a keen sense of belonging to the human family which means sharing the common dignity of all human beings. Even prior to the logic of a fair exchange of goods and the forms of justice appropriate to it, there exists something which is due to man because he is man, by reason of his lofty dignity.”

The Guts of the Document
In the third section, the document makes its most controversial recommendation. Basing itself on John XIII’s hope in 1963 for a “true world political authority” reiterated by Benedict XVI:

“The purpose of the public authority, as John XXIII recalled in Pacem in Terris, is first and foremost to serve the common good. Therefore, it should be endowed with structures and adequate, effective mechanisms equal to its mission and the expectations placed in it. This is especially true in a globalized world which makes individuals and peoples increasingly interconnected and interdependent, but which also reveals the existence of monetary and financial markets of a predominantly speculative sort that are harmful for the real economy, especially of the weaker countries.”

However, the qualifications that the document attaches to this recommendation are very significant:

“A supranational Authority of this kind should have a realistic structure and be set up gradually. It should be favourable to the existence of efficient and effective monetary and financial systems; that is, 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. It is a matter of an Authority with a global reach that cannot be imposed by force, coercion or violence, but should be the outcome of a free and shared agreement and a reflection of the permanent and historic needs of the world common good. It ought to arise from a process of progressive maturation of consciences and freedoms as well as the awareness of growing responsibilities. Consequently, reciprocal trust, autonomy and participation cannot be overlooked as if they were superfluous elements. The consent should involve an ever greater number of countries that adhere with conviction, through a sincere dialogue that values the minority opinions rather than marginalizing them. So the world Authority should consistently involve all peoples in a collaboration in which they are called to contribute, bringing to it the heritage of their virtues and their civilizations.

Thus the document stresses the importance of subsidiarity as a fundamental principle of Catholic social teaching: “As we read in Caritas in Veritate, ‘The governance of globalization must be marked by subsidiarity, articulated into several layers and involving different levels that can work together.’ Only in this way can the danger of a central Authority’s bureaucratic isolation be avoided, which would otherwise risk being delegitimized by an excessive distance from the realities on which it is based and easily fall prey to paternalistic, technocratic or hegemonic temptations.”

In the fourth section, the document continues:

“With regard to the current global economic and financial systems, two decisive factors should be stressed. The first is the gradual decline in efficacy of the Bretton Woods institutions beginning in the early 1970s. In particular, the International Monetary Fund has lost an essential element for stabilizing world finance, that of regulating the overall money supply and vigilance over the amount of credit risk taken on by the system. To sum it up, stabilizing the world monetary system is no longer a ‘universal public good’ within its reach. 

“The second factor is the need for a minimum, shared body of rules to manage the global financial market which has grown much more rapidly than the real economy. This situation of rapid, uneven growth has come about, on the one hand, because of the overall abrogation of controls on capital movements and the tendency to deregulate banking and financial activities; and on the other, because of advances in financial technology, due largely to information technology.” 

Thus the document insists:

“Specific attention should be paid to the reform of the international monetary system and, in particular, the commitment to create some form of global monetary management, something that is already implicit in the Statutes of the International Monetary Fund. It is obvious that to some extent this is equivalent to putting the existing exchange systems up for discussion in order to find effective means of coordination and supervision. This process must also involve the emerging and developing countries in defining the stages of a gradual adaptation of the existing instruments. In fact, one can see an emerging requirement for a body that will carry out the functions of a kind of ‘central world bank’ that regulates the flow and system of monetary exchanges similar to the national central banks.”

These would be “first steps” towards the creation of an Authority having global jurisdiction, in establishing which “the primacy of the spiritual and of ethics needs to be restored and, with them, the primacy of politics – which is responsible for the common good – over the economy and finance.” Various measures are mentioned, including the taxation of financial transactions, the conditional recapitalization of banks with public funds, and increased regulation of credit and investment banking.

Conclusions
It is quite tempting to dismiss much of this as unrealistic. Several neo-liberal critics have already done so. The financial disaster of 2008 was, on their view, the result of ideological interference by government in the economy, insisting that the banks should lend to poorer classes of people who would be unable to repay their “sub-prime” mortgages. But on another view, the real problem was caused by the banks, who, in order to protect their short-term interests, bundled up these sub-primes and derivatives and sold them on to others, thus injecting a fatal poison into the financial system.

Intuitively, it seems that while economic growth measured in terms of production and consumption is an important goal (though not the only important goal for a human economic system), to pursue it at the cost of financial realism and responsibility is extremely foolish and dangerous. Economic growth may require the borrowing of resources along the way, but surely cannot be run on an expanding bubble of credit and interest that is likely never to be repaid, in the expectation that nothing will ever go wrong (a giant “ponzi” scheme).

As an interested but non-expert observer on the sidelines, I can see problems with both kinds of optimism: the optimism that systems will right themselves if given sufficient freedom to do so, and the optimism that more careful regulation and coordination by a central authority will solve the problem in favour of the common good.

The document rightly points out that the Nation State is a relatively modern development which in some ways may have outlived its usefulness, and is being steadily eroded by globalization:

"Modern States became structured wholes over time and reinforced sovereignty within their own territory. But social, cultural and political conditions have gradually changed. Their interdependence has grown – so it has become natural to think of an international community that is integrated and increasingly ruled by a shared system – but 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…. With dynamics similar to those that put an end in the past to the ‘anarchical’ struggle between rival clans and kingdoms with regard to the creation of national states, today humanity needs to be committed to the transition from a situation of archaic struggles between national entities, to a new model of a more cohesive, polyarchic international society that respects every people's identity within the multifaceted riches of a single humanity.

But is it really true that conditions now exist “for definitively going beyond a ‘Westphalian’ international order in which the States feel the need for cooperation but do not seize the opportunity to integrate their respective sovereignties for the common good of peoples”? Human history certainly shows an accelerating tendency towards globalization, largely mainly to the development of technologies of communication and transport, but it provides few if any examples of centralized authorities that are not rapidly corrupted by power – even when taking that power in the name of the people and the common good.

That is why, I believe, the Pope was more cautious in Caritas in Veritate when he spend much time and effort encouraging us to think about the deeper spiritual and philosophical roots of the present disorder, which would be likely to contaminate any new economic proposal at an early stage. He also directed our attention at alternative types of economic enterprise, and at the role of civil society as well as market and state.

Alongside profit-oriented private enterprise and the various types of public enterprise, there must be room for commercial entities based on mutualist principles and pursuing social ends to take root and express themselves. It is from their reciprocal encounter in the marketplace that one may expect hybrid forms of commercial behaviour to emerge, and hence an attentiveness to ways of civilizing the economy. (C in V, 38)

The PCJP document seems not to have taken these and other indications fully on board, and the solutions proposed, despite the emphasis it gives to subsidiarity, solidarity, the common good, and the need for creative thinking, appear too conventional. We need to think more about the conditions that are needed to support the development of a global civil society, and to transform in a practical manner the existing economic structures by allowing for the human dimension of “gratuity”. Without this, subsidiarity will remain an empty word and financial and political power will continue to be sucked into the hands of those who are most likely to abuse it.

“Truth, and the love which it reveals, cannot be produced: they can only be received as a gift. Their ultimate source is not, and cannot be, mankind, but only God, who is himself Truth and Love. This principle is extremely important for society and for development, since neither can be a purely human product; the vocation to development on the part of individuals and peoples is not based simply on human choice, but is an intrinsic part of a plan that is prior to us and constitutes for all of us a duty to be freely accepted. That which is prior to us and constitutes us — subsistent Love and Truth — shows us what goodness is, and in what our true happiness consists. It shows us the road to true development.” (C in V, 52)

[I have drawn on the provisional English translation of the PCJP document made available through the Zenit news agency in Rome.]