The current financial crisis represents a stellar opportunity for the renewed growth of the Holy Spirit in our hearts and in our minds. But first, a few hard truths.
The current downturn is probably not just another recession, but may well represent a new phase in economic history, the beginning of the end for the “savage capitalism” which John Paul II contrasted with Catholic social teachings in passages such as this, “… there are collective and qualitative needs which cannot be satisfied by market mechanisms. There are important human needs which escape its logic. There are goods which by their very nature cannot and must not be bought or sold… these mechanisms carry the risk 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.” – Centesimus Annus, 40
Before we consider the nature of the economic healing that must take place, we should pause and consider the origin of the breakdown. The basic factors behind the current crisis are stagnant wages for workers accompanied by large increases in productivity enabled by those same workers. The resulting increased profits were not shared with the workers, but directed entirely to the owners and shareholders of the profitable enterprises. In response, in order to maintain the lifestyle promoted by marketing campaigns, workers borrowed against their houses. Wall Street, in turn, bought up these mortgages and packaged them as securities to be sold to big investors. The scheme imploded when housing prices stopped climbing. At that point, many workers could no longer pay off their mortgages and the value of the mortgage-based securities declined drastically. This set off a chain reaction among the major banks that were gradually forced to expose the extent of their reliance on bad mortgage debt. Unable to meet their financial obligations, the bankers had no alternative but to run to the federal government for relief.
The Christian principle which this arrangement has violated is well stated by the Pope Paul VI, “… private property does not constitute for anyone an absolute and unconditioned right. No one is justified in keeping for his exclusive use what he does not need, when others lack necessities. In a word, according to the traditional doctrine as found in the Fathers of the Church and the great theologians, the right to property must never be exercised to the detriment of the common good.” – “On the Development of Peoples”, 13. q.66. The financial system of which we are a part has consistently and blindly violated the common good for the past thirty years. The judgement that is currently being rendered on it by events will hopefully be permanent.
The immediate cause of the crisis is the unbridled growth of speculation that produces no real economic value, but profits by sophisticated forms of gambling on price movements. Michael Hudson describes it as follows, "A hedge fund does not make money by producing goods and services. It does not advance funds to buy real assets or even lend money. It borrows huge sums to leverage its bet with nearly free credit. Its managers are not industrial engineers but mathematicians who program computers to make cross-bets or ‘straddles’ on which way interest rates, currency exchange rates, stock or bond prices may move – or the prices for packaged bank mortgages. The packaged loans may be sound or they may be junk. It doesn’t matter. All that matters is making money in a marketplace where most trades last only a few seconds. What creates the gains is the price fibrillation – volatility." – Michael Hudson, “America’s Own Kleptocracy”, CounterPunch, Sept. 20, 2008. In other words, this “wealth” was based not on real economic value, but is a kind of mathematical illusion based on price fibrillations. Clearly, it was a blatant instance of the “idolatry” John Paul so presciently condemned. Like all idolatries, it was doomed by its own arrogance.
Perhaps now it is time to turn back to the great Fathers of the Church and use their wisdom to re-imagine a completely different type of economics. St. John Chrysostom, patriarch of Constantinople, (born at Antioch in 347, died in exile in Armenia in 407), preached a vision of Christian economics which can still inspire us today. Here is a section from his 11th Homily on the "Acts of the Apostles":
"And there was a great charity among them (the Apostles): none was poor among them. None considered as being as being his what belonged to him, all their riches were in common…a great charity was in all of them. This charity consisted in that there were no poor among them, so much did those who had possessions hasten to strip themselves of them. They not divide their fortunes into two parts, giving one and keeping the other back: they gave what they had. So there was no inequality between them; they all lived in great abundance. Everything was done with the greatest reverence. What they gave was not passed from the hand of the giver to that of the recipient; their gifts were without ostentation; they brought their goods to the feet of the apostles who became the controllers and masters of them and who used them from then on as the goods of the community and no longer as the property of individuals. By that means they cut short any attempt to get vain glory.
Ah! Why have these traditions been lost? Rich and poor, we should all profit from these pious usages and we should both feel the same pleasure from conforming to them. The rich would not impoverish themselves when laying down their possessions and the poor would be enriched…But let us try to give an exact idea of what should be done.
Now, let us suppose - and neither rich nor poor need be alarmed, for I am just supposing - let us suppose that we sell all that belongs to us to put the proceeds into a common pool. What sums of gold would be piled up! I cannot say exactly how much that would make: but if all among us, without distinction between the sexes were to bring here their treasures, if they were to sell their fields, their properties, their houses - I do not speak of slaves for there were none in the Christian community, and those who were there became free - perhaps, I say if everyone did the same, we would reach hundreds of thousands of pounds of gold, millions, enormous values.
Well! How many people do you think there are living in this city? How many Christians? Would you agree that there are a hundred thousand? The rest being made up of Jews and Gentiles. How many should we not unite together? Now, if you count up the poor, what do you find? Fifty thousand needy people at the most. What would be needed to feed them each day? I estimate that the expense would not be excessive, if the supply and the eating of the food were organized in common.
"You will say, perhaps, 'But what will become of us when these goods are used up?' So what! Would that ever happen? Would not the grace of God be a thousand times abundant? Would we not be making a heaven on earth?”
Thus speaks the “golden voice” of the economics of compassion, which acts as a channel for true wealth to flow into communities. It is long past the time for priests, bishops, and theologians to start promoting an economic vision based on satisfying real human needs, rather than silently accepting savage capitalism based on orgiastic and unsustainable consumption by the many and obscene profits hoarded by the few. These golden voices from Catholic tradition offer hope as the thunder deepens while idols crash.
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