Faith and the Financial Crisis
by Jim Consedine
Jim is the Editor of The Common
Good, the newspaper of Christchurch Catholic Worker in New Zealand.
There is no easy way to write about the
financial crisis which has hit the global economy these past months. In
New Zealand, more than 20 financial institutions have gone to the wall.
Investors have lost everything. The pain of people who have lost life's
savings is intense and real. For many, the very reason for their living
and their trust in the bounty of life have been undermined. Often there
is a sense of failure, of guilt, of shame. And an often unexpressed
sense of anger. Many carry a sense of betrayal. They feel they have been
duped by financial institutions. To a large degree they have been.
Unbeknown to the average Joe and Betty
investors was the fact that they were sinking their money into sand
castles. Even Alan Greenspan, former chairman of the US Federal Reserve
(1987–2006) admitted as much. He always believed that markets worked
best so let them. He always argued that Government intervention would be
a problem, not a solution. He has always advocated less regulation, not
more, with voluntary oversight. How wrong he was.
On 23 October 2008 before the US House
Government Oversight and Reform committee, he admitted a ‘flaw' in his
ideology of ‘market forces'. He confessed his faith in deregulation was
shaken and said he was in a ‘state of shocked disbelief.' He suggested
that what went wrong was, ‘securitizing home mortgages. Excess demand
for them. And failure to properly price them.' He failed to mention
unbridled greed, huge fraud and no oversight. It was a predictable and
preventable crisis – except if you were leaving the solution to ‘the
The Market Heresy
Greenspan's thinking, which reflects the
ideology of global capitalism is fatally flawed and a disaster for the
worldwide economy. He said he had miscalculated the willingness of the
banks and other financial institutions to look after their shareholders,
clients and staff. What he failed to spell out was that the real evil of
this collapse lay at the feet of the most educated and privileged people
on the planet who were trusted with other's investments and cold
bloodedly used the system for their own gain. In this ‘free market'
framework, people who worked thus lost their soul. Like the Israelites
in the time of Moses, they chose the golden calf. The covenant with God
to love their neighbor was forgotten. The common good was simply
In effect Greenspan accepted ‘the
market' doesn't have a soul. It doesn't have the ability to respond to
human need. It doesn't respond to the need for compassion, mercy,
healing, forgiveness, tolerance, generosity, social justice. These are
the core values which give meaning to life. ‘The market' sees only the
need for continually increased profit. Financial disaster is what
happens when economics is separated from theology and ethics.
It's a pity Greenspan and other American
economists hadn't listened to one of their founding fathers, Thomas
Jefferson, who in 1802 said, 'I believe that banking institutions are
more dangerous to our liberties than standing armies. If the American
people ever allow private banks to control the issue of their currency,
first by inflation, then by deflation, the banks and corporations that
will grow up around the banks will deprive the people of all property
until their children wake-up homeless on the continent their fathers
Jefferson was right. At the heart of the
philosophy of ‘market values' lies the sin of usury – increasing wealth
through non-productive means. We have created a global system built on
usury. It's a monster and will never be just because its foundation
stone is greed. For nineteen centuries the Church recognized this evil
and usury was condemned as a mortal sin. In the past 150 years, the
Church has varied its opposition to usury and allowed for reasonable
interest to be generated on loaned capital. But at what cost to its
moral authority and to the world generally? Third World economies locked
into structured debt and unable to feed and educate their people
probably give the most graphic answer to that question.
The emperor has no clothes. Relying on
‘the market' to regularise itself in the interests of the common good
and justice is a false premise. It was always a lie, will always be a
lie. It never did regularize itself. It never can.
Some of the underlying reasons for the
crisis are theological. At the heart of the issue lies the flawed nature
of humanity, as expressed in the Church's concept of original sin. This
undermines social relations. Underpinning the whole idea of redemption
is the notion of the new elevated status of humanity, redeemed in
Christ. Good Friday and the Empty Tomb have a lot to say about future
social relations of a redeemed humanity and speak directly to this
crisis. But ‘market forces' takes no notice of these things and relies
on ‘the principalities and powers' or prevailing systems to work things
out for the common good. All the evidence is these systems can't and
don't work. Little ever ‘trickles down'. They are social systems driven
by avarice. They pander to people's greed. They reward only the rich.
The signs are everywhere. Look at the
gap between rich and poor nations. Hear the cries of the 30 000 children
who, in a world full of resources, die from hunger every day. Look at
the lack of human rights denied through prejudice to billions in the
world. Look at ethnic wars which flow from racism. Look at the ongoing
wars for resources with thousands of fresh victims every year. These
wars are fuelled by the ever increasing arms race and permanent war
economies like the US. As long as we continue to act as if we are not
redeemed, these catastrophes will continue.
Such issues, huge as they are, are all
solvable. But only a humanity which recognizes its need of redemption
and changes the way it operates can do it. Here the role of the teaching
Church is critical. She supplies the heartbeat and the vision. But only
if she engages, believes and practices what she preaches herself. And
therein lies the crunch. In the past 20 years we have generally reverted
to being a devotional Church and social justice issues have been largely
ignored. When was the last time you heard a sermon on social justice?
So much of our western affluence is
built on exploitation of the poor, particularly in so-called developing
economies. In so many of these countries, factory labour equates to
slave labour. Too often in Asia, Africa and Latin America, wages are
used as a weapon to keep prices down and profits up. For example, Wal
Mart, one of the world's largest corporations, pays its workers in
Bangladesh between 13-17 cents per hour for working seven days a week,
16 hour days. No union. No overtime. The cheap imports made come to
western countries. There are thousands of western companies following
similar practices. We all need to take ownership of this type of
exploitation. Could we not refuse to buy these imports? Dorothy Day
noted such practices ‘constituted a sack from which blood is oozing'. Is
it any wonder such a system is condemned?
Jesus addressed some of these issues in
his teachings. He unequivocally condemned exploitative systems and
provoked the wrath of the political and religious power brokers of his
day. Referring to systems he said, ‘no healthy tree bears bad fruit, no
poor tree bears good fruit. Each tree is known by the fruit it bears.'
(Luke 6) He warned against avarice and greed. ‘Where your treasure is,
there will your heart be also.' (Matt 6). The ‘heart' of capitalism lies
in making money. It worships wealth. The Church has long recognized the
dangers of building a system of unbridled capitalism based on ‘market
forces' and warned against it constantly. John Paul II gave a severe
warning in his encyclical On Social Concerns (March 1988),
calling such a system ‘structurally sinful.' In effect, the Pope was
saying the capitalist emperor had no clothes and that so called market
forces were a fraud.
But who took that warning seriously?
Much of the evidence is that Catholics are just as unlikely to live an
alternative lifestyle based on the Gospels and the Church's social
teachings as anyone else. They are as dominated by capitalist ideology
as the next person.
We need to think through options based
on our beliefs. There are many notions which have appealed to thinking
Christians for centuries, including financial co-operatives, microcredit
banking and a range of mutual benefit societies. The Jubilee year goal
of pardoning debts still outstanding after 50 years is another.
There is a further one. Is it such a
radical idea that voluntary poverty should be promoted by Christians as
one answer to the financial crisis? Is it not closer to the teachings
Jesus gave on money and wealth? Peter Maurin, co-founder of the Catholic
Worker in the midst of the Great Depression, certainly felt so. He
sought to feed, house and clothe the millions of victims of the
depression by challenging Christians to accept personal responsibility
for their needy neighbor and take a radical option for change by sharing
their resources and advocating on behalf of the poor. This was nearer
the Gospel ideal of the early Church. And thousands who follow his
philosophy give testimony that such a way is a real option for many in
our time as we face another financial meltdown.
Voluntary (or evangelical) poverty
stands in direct contrast to the ideology of unbridled acquisition, so
central to global capitalism. It is praised in the Gospels as a virtue
(Matt 5, Luke 6). However, we must be careful never to romanticize it.
Material poverty, which often leads to malnutrition, violence and
premature death, has too many in its iniquitous grasp to ever be
romanticized. Voluntary poverty doesn't mean destitution, which is
sinful and an enslavement rather than a free state. Jesus came to free
us. No one should be destitute.
In simple terms, voluntary poverty
recognizes we are all part of one another and ‘what we own over and
above what we need does not belong to us but to the poor who have
nothing.' (St Basil, 4 th century). It involves acting justly and with
generosity with our money and resources ‘because our neighbor is in
need.' As the Second Vatican Council pointed out, ‘It was the ancient
custom of the Church to give generously not merely out of what was
superfluous, but even out of what was necessary.' ( LG, No 89 )
Voluntary poverty includes practicing
the earlier teaching of the Church that usury is sinful and shouldn't be
tolerated because it steals from the neighbour. The primary reason why
poverty exists at such momentous levels in so many countries today is
that international banks charge usurous interest rates on loans that the
countries can never repay. They can't repay even the interest, much less
the capital. Most of their annual GDP incomes go on servicing their
interest. Is that not widespread institutional theft and a huge scandal?
Jesus does offer ways forward on these
issues. And in successive social encyclicals from Populorum
Progressio (March 1967) onwards, the Church has challenged its
membership to act. But most find the asking too much and fail to
respond. Just imagine if the one billion Catholics all took a stand for
economic justice in their lives and in society. It's a pipe dream – but
the world would change overnight, and economic justice would be seen in
Catholic Worker, Vol. XXIX, No. 1, January-February 2009.