Wednesday, October 26, 2011

The Vatican On Financial Reform

The Vatican recently released a statement on financial reform and unsurprisingly, it's based upon Aristotle. For example, with FLG's emphasis:
In material goods markets, natural factors and productive capacity as well as labour in all of its many forms set quantitative limits by determining relationships of costs and prices which, under certain conditions, permit an efficient allocation of available resources.

In monetary and financial markets, however, the dynamics are quite different. In recent decades, it was the banks that extended credit, which generated money, which in turn sought a further expansion of credit. In this way, the economic system was driven towards an inflationary spiral that inevitably encountered a limit in the risk that credit institutions could accept. They faced the ultimate danger of bankruptcy, with negative consequences for the entire economic and financial system.

Here's Aristotle:
Hence men seek after a better notion of riches and of the art of getting wealth than the mere acquisition of coin, and they are right. For natural riches and the natural art of wealth-getting are a different thing; in their true form they are part of the management of a household; whereas retail trade is the art of producing wealth, not in every way, but by exchange. And it is thought to be concerned with coin; for coin is the unit of exchange and the measure or limit of it. And there is no bound to the riches which spring from this art of wealth getting.

But then they reference Hobbes too, which somewhat surprised FLG:
Given the complexity of the phenomena of concern, the importance of ethical and cultural factors cannot be overlooked or underestimated. In fact, the crisis has exposed behaviours such as selfishness, collective greed and the hoarding of goods on a mammoth scale. No one can be content with seeing man live like a wolf to his fellow man, according to the concept discussed by Hobbes. No one can in good conscience accept the development of some countries to the detriment of others. If no solutions are found to the various forms of injustice, the negative effects that follow on the social, political and economic level are destined to create a climate of growing hostility and even violence, and ultimately undermine the very foundations of democratic institutions, even the ones considered most solid.

But then we get to the recommendations, which as expected disappoint FLG:
Financial transaction tax
Recapitalize banks
Separating commercial and investment banking

The issue, as FLG sees it although he may be wrong, is that the Church's focus on human unity and justice is necessarily short-term oriented. People are either together or they are not. Now, as always, is the time for people to come together. But unity in human affairs is never permanent. It is always a series of moments of unity, which results in well-meaning but ultimately short-term oriented economic and financial recommendations. Indeed, some of the Church's thinking scares the shit out of FLG:
It is the task of today’s generation to recognize and consciously to accept these new world dynamics for the achievement of a universal common good. Of course, this transformation will be made at the cost of a gradual, balanced transfer of a part of each nation’s powers to a world Authority and to regional Authorities, but this is necessary at a time when the dynamism of human society and the economy and the progress of technology are transcending borders, which are in fact already very eroded in a globalized world.


The Ancient said...

The Vatican and the banking industry. What could go wrong?

Anonymous said...


Mrs. P

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