Saturday, 28 March 2009

The Ethical Dimension

A Catholic perspective on the ongoing financial crisis is provided by Edward Hadas, whose booklet on the Credit Crunch is being published by the CTS as the first in a new series edited by Stratford Caldecott on Catholic Social Teaching. At a talk in Milan recently, Hadas concluded as follows:

"The ongoing financial crisis, which I study carefully as a professional commentator, provides an excellent example of the danger of ignoring the ethical dimension in economic descriptions and policies.

"Finance is not, as often claimed, chiefly concerned with profits. It is primarily a technique for using the monetary system to express social solidarity. The money I deposit in a bank account or invest in a security represents a sharing of my resources with the community – with the firms which borrow from the bank or which issue the security. My financial sharing need not always take the form of a gift, though; in a well run financial system, I am able to reclaim the resources (perhaps after some delay) and receive some sort of income while the sharing lasts.

"The genius of the modern financial system is that it relies on and develops the human desire to work together for the common good but takes the human inability to be perfectly generous into account. For the system to work well, the rewards for sharing must be neither too small to entice or so large that greed is encouraged to grow. Further, unless those who labour within the financial system are carefully supervised, the large sums of money (representing large claims on resources) which pass through their hands will nourish the noxious forces of greed and recklessness.

"This moral portrayal of the financial industry does not lead directly to specific guidelines for bank regulation. It does, however, make clear why there are so many more financial crises than industrial breakdowns. The greed and foolishness of bakers, automakers and airlines are constrained by careful regulation and a well established ethos of quality and service. In finance, such regulation needs to be particularly firm, for all involved but especially for those in the industry, because money has an especially powerful intoxicating effect on men’s moral faculties. In fact though, financial regulations have almost always been inadequate, and “free market” economists deserve much blame for encouraging a loosening of these regulations over the last generation.

"I do not think the current financial crisis will destroy industrial economies. They are built on too firm a foundation of trust for that. The reconstruction of the financial economy can, however, be an opportunity for economists to make more room in their discipline for a pearl of great price – the good. "

Monday, 23 March 2009

Introductory remarks

By the end of 2008 the world had found itself in a financial crisis, teetering on the brink of a global recession. At the same time, many scientists are convinced that the present century will witness climate change of catastrophic proportions, partly due to human activity and resulting in the death or displacement of millions. Urgent, clear and profound thinking is required.

The hundred years from 1891 to 1991 saw the development of a systematic papal teaching on society that has proved helpful and influential well beyond the Catholic Church. This teaching revolves around certain key principles and themes: beginning with (1) the inalienable dignity of the human person as created and called to perfection by God, on the basis of which it emphasizes (2) solidarity, or the intrinsic relationship of the person to the family, the community, and the common good; (3) subsidiarity, the maximization of human freedom and responsibility at the lowest and most local level compatible with the common good; and (4) sustainability or stewardship, or our responsibility for maintaining and cultivating the resources that have been entrusted to us.

On these pages we want to explore those principles, their possible applications, and the new paradigms they might inspire. All rights are reserved. The new-look Economy section of our main web-site can be found by following the link in this sentence, or by using the 'Economy' button on our main menu at the Second Spring website.

Please bear in mind that in these site titles we are using the word 'Economy' in a broad sense. The word originally comes from L. oeconomia, from Gk. oikonomia meaning "household management" (oikonomos "manager, steward," and oikos "house").

Meanwhile this blog invites comments from readers. Please note that we also have the facility for more extended conversion at