Sins of the Wallet – Faith and the Financial Crisis
Reprinted from The Common Good, No 47, Advent 2008
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 market’.
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 neighbour was forgotten. The common good was simply ignored.
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.
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.
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 conquered.’
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.
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.
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. The Kiwi version, Rogernomics, is a lie for the same reasons.
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?
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.
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? 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 neighbour 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.
Is it such a radical idea that voluntary poverty should be promoted by Christians as one answer to the financial crisis?
Voluntary (or evangelical) poverty 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, 4th century). It involves acting justly and with generosity with our money and resources ‘because our neighbour 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 practising 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 usurious 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?
Dorothy Day wrote ‘The present vast possessions of the robber barons need to be overthrown, cast down, appropriated, decentralized, distributed etc. A vast reform is needed. The power of the great corporations…the great banks, will all be overthrown. And that is something to look forward to.’ (Diaries, Duty of Delight, 1948)
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 every street.
It seems financial institutions built on sand are as attractive to Catholics as to everyone else. It doesn’t ease the pain to know that we all need to be a bit more responsible about the ethics of our investments. Some are very good at it. Most of us don’t notice. Ideology rather than faith remains the predominant force in so many lives. Some seek to play financial games in what Dorothy Day called ‘that filthy rotten system’. Recent events have once again reminded us, we do so at our peril.