Why the Bailout will Fail according to John Paul II

“We must emphasize and give prominence to the primacy of man in the production process, the primacy of man over things. Everything contained in the concept of capital in the strict sense is only a collection of things. Man, as the subject of work and independent of the work he does--man alone is a person. This principle is an evident truth that emerges from the whole of man's historical experience.” – John Paul II – Laborem Exercens, 12.

The fundamental principle of Catholic social teaching is the priority of the human person over the means of production, that persons, their labor and their solidarity must always be preferred over things. More philosophically, being takes precedence over having. The bailout of the banks on Wall Street signifies the triumph of the opposite principle, the victory of what is described by John Paul II as “This gigantic and powerful instrument-the whole collection of means of production that in a sense are considered synonymous with ‘capital’” – John Paul II – Laborem Exercens, 12. It is the triumph of capital and its financial machinery over the needs of people and respect for the common good. In fact, it is even worse because the means of production at least represent a concrete potential for bringing benefits to humanity. This triumph is the triumph of financial speculation over productive enterprise, in which those who make the bets get to keep all the winnings, while distributing their losses to the public.

Again, Pope Benedict XVI put his finger on the nub of the issue in his “Instruction on Christian Freedom and Liberation”, “The priority of work over capital places an obligation in justice upon employers to consider the welfare of the workers before the increase of profits. They have a moral obligation not to keep capital unproductive and in making investments to think first of the common good. The latter requires a prior effort to consolidate jobs or create new ones in the production of goods that are really useful. The right to private property is inconceivable without responsibilities to the common good. It is subordinated to the higher principle which states that goods are meant for all.” No. 131 The financial players require vast amounts of unproductive capital in order to lay their bets, and the concept of the common good is meaningless to them.

The priority of the Bush administration has always been capital over labor, and in its final days, we are seeing a final massive Treasury heist. “When the Bush administration announced it would be injecting $250 billion into America's banks in exchange for equity, the plan was widely referred to as ‘partial nationalization’--a radical measure required to get the banks lending again. In fact, there has been no nationalization, partial or otherwise. Taxpayers have gained no meaningful control, which is why the banks can spend their windfall as they wish (on bonuses, mergers, savings...) and the government is reduced to pleading that they use a portion of it for loans.” – The Bailout: Bush’s Final Pillage, Naomi Klein, Oct. 31, 2008.

Catholic social teachings once spoke loud with the voice of justice, “If certain landed estates impede the general prosperity because they are extensive, unused or poorly used, or because they bring hardship to peoples or are detrimental to the interests of the country, the common good sometimes demands their expropriation. Vatican II affirms this emphatically. At the same time it clearly teaches that income thus derived is not for man's capricious use, and that the exclusive pursuit of personal gain is prohibited. Consequently, it is not permissible for citizens who have garnered sizeable income from the resources and activities of their own nation to deposit a large portion of their income in foreign countries for the sake of their own private gain alone, taking no account of their country's interests; in doing this, they clearly wrong their country. “ – Pope Paul VI, “Populorum Progressio”, no. 24.

The same principle applies even more emphatically to those who have looted the Treasury to protect Wall Street bankers from suffering the results of their bad bets. The common good demands that the property of those who have stolen the fruits of the people’s labor should be confiscated and returned to the people whose labor created the value in the first place. “The exclusive pursuit of personal gain is prohibited.” This traditional teaching of the Church is openly mocked by the bailout. We have become numbed to the organized lovelessness upon which this economic system is based.

The thesis that the bailout was critically necessary to prevent a “financial meltdown” is conclusively disproven by the use to which a significant part of the money has been or will be put. About half the bailout money will be used for mergers and acquisitions of other banks, not making loans. As to another significant chunk, “According to the Guardian, salaries and bonuses for top executives and employees at major banks and investment firms will add up to $70 billion this year. So 10 percent of the $700 billion that Congress committed to ‘rescue’ Wall Street will end up ‘rescuing’ the bank accounts of some of Wall Street's richest players.” – Alan Maass, “What’s so Funny about Peace, Love and Spreading the Wealth”, CounterPunch, Oct. 31, 2008.

The fundamental lie of this economy is that those at the top have earned their position by the wealth they have produced. “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”, Sept. 20, 2008.

I end with a quote from the Catechism on the seventh commandment, “Even if it does not contradict the provisions of civil law, any form of unjustly taking and keeping the property of others is against the seventh commandment: thus, deliberate retention of goods lent or of objects lost; business fraud; paying unjust wages; forcing up prices by taking advantage of the ignorance or hardship of another. The following are also morally illicit: speculation in which one contrives to manipulate the price of goods artificially in order to gain an advantage to the detriment of others; corruption in which one influences the judgment of those who must make decisions according to law; appropriation and use for private purposes of the common goods of an enterprise; work poorly done; tax evasion; forgery of checks and invoices; excessive expenses and waste. Willfully damaging private or public property is contrary to the moral law and requires reparation.” – Catechism of the Catholic Church, p. 2409. Let the reparation begin.