The Values of Money: The Just Economy
by The Revd Andrew Studdert-Kennedy
Posted: 11 Oct 2011
Having spent several weeks exploring the financial world, I offer some thoughts about what I have learnt. For simplicity's sake, I suggest three points to consider. First, the direction or purpose of economic activity, secondly the need for perspective when looking at markets and money and thirdly the role of sin or greed.
- Again and again when talking with financiers about behaviour and ethics the emphasis has been on the attitudes and priorities with which people come to the market in the first place. 'It is a question of what is at your centre', says Stephen Green, former Chairman of HSBC. This suggests that morality and direction have to be brought to the market rather than established within it. Whereas it is possible to establish a particular culture of integrity within a business, it's much harder to do so within a market, thinks Andreas Whittam Smith. Conversations about purpose and direction need to be prior to conversations about regulation, capital ratios and transparency. There is a sense that by the time you get to these conversations it is too late. Why? Because the system has its own inexorable dynamic.
The Common Good, (as articulated by much Catholic social teaching) and solidarity with the world's poor are what the capitalist system should serve - not the maximization of assets or the level of returns. All financial activity should be pegged back to answering these prior questions - who benefits? Nowhere is this more urgent than in dealing with the indebtedness of developing countries and the way the system seems to do so much damage to those it is meant to serve. In Catholic social teaching the Common Good is not about making society more equal, nor even making everybody better off, but has been defined as 'The sum total of social conditions which allow people either as groups or individuals, to reach their fulfilment more fully and more easily' (Pontifical Council for Justice & Peace 2005).
At the heart of a Christian response are two essential principles. First, that the earth belongs to the Lord, so the goods of the world are originally meant for all. That doesn't mean that the right to private property isn't valid and necessary, but the principle remains prior so that private property is under a 'social mortgage' which means it has an intrinsically social function. Secondly, economic structures exist for people and not the other way round. The whole of the Bible witnesses to the paramount value of people, especially those in need.
- Allied with this, money needs to be de-throned. This is not an anti-capitalist comment - it is simply the need to see things in perspective and to offer a necessary corrective. When the market has only itself to refer to, this is a recipe for the kinds of excessive rewards that have been common in recent years. Who or what should determine something to be 'excessive'? Perhaps it is the notion of the Common Good, rather than the market alone, because it is precisely the lack of such perspective that seems to have been missing.
The 17th Century priest and poet, Thomas Traherne, offers a compelling corrective to the way markets value things. Remembering God's generosity in creation, and thereby emphasising abundance rather than scarcity, Traherne suggests that the use of goods rather than their exchange value helps us to see where lasting and solid value lies.
Economics is not a pure science and in being applied depends upon other disciplines, not least anthropology, studying how humans are likely to react in circumstances. Perhaps it is time for poetry and theology to be included ( or more accurately re-instated) - Traherne could be one of the poets, offering this different perspective. 'We have exchanged too much wisdom for exactness, too much humanity for mathematization', says Tomas Sedlacek in his wonderful book The Economics of Good and Evil (Oxford University Press USA £16.99), a book which explores these very ideas much further.
Markets value things according to their marginal value rather than total utility (hence diamonds being more expensive than water). A Christian approach will always wish to keep an eye on overall utility rather than just the marginal value of exchange.
- 'We spent borrowed money and called it growth', says Richard Harvey, former Chief Executive of Aviva, whilst commenting on Britain's financial state. Herein lies an observation made by many - namely the hazards that accompany excessive borrowing and the impatience that lies behind so much of it. Indeed, looking at the bigger picture a lot of commentators have advocated the merits of restraint rather than instant gratification and have suggested that the virtues of prudence, courage, justice and temperance.
Ours is an impatient age and whilst the financial system has played its part in the reckless offering of credit, so too has human fallibility. A study of three million loans originated between 1997 and 2006 in the US found that in 70% of the cases where there was early payment default there was some degree of 'borrower misrepresentation'. In other words people lied about their assets, income and liabilities in order to obtain loans and mortgages. And lest we think it is only individuals that act like this, we should remember that Governments do so as well. Greece lied about the state of its economy in order to join the Euro and other political leaders were aware of the lies too!
Sinfulness has thus played its part in the story we have been following and needs to be taken into account when reforms are being considered. The Chair of the Federal Reserve, Alan Greenspan, ruefully accepted this when he said that '...if you're going to model an economy, you have to do far better at understanding how the unit of the economy functions - i.e., the human being'. (The Age of Turbulence) The Christian understanding speaks of a fallen world - yet redeemable with grace.
These three points concern the large scale or macro issues. At a micro level, how might individual Christians or church communities respond? Within an imperfect system, can we find ways for money to work more mercifully than it usually does?
There is increasing scope in this field - from ethical investment funds, micro finance initiatives and participation in Credit Unions, there are numerous ways of helping to create and share wealth worth having.
Taken together, perhaps these (macro and micro) themes might constitute the starting points for what has been called The Just Economy, a way of establishing principles that enable economic activity to be scrutinised, acting as a sounding board in much the same way as the Just War Theory can. (Revd Dr. Alan Billings has begun to produce some writings exploring these ideas).
Hard work will be required for the idea of the Just Economy to become established, but the need for an over-mathematized economics to expand its horizons and re-discover its roots is a project to which Christians should contribute. Perhaps this might also constitute a future series for the Institute.
This piece is the final part of the series by Revd Andrew Studdert-Kennedy exploring the role of the financial sector and how we might come to understand it better.
Terence Stone - Posted: 17 Oct 2011
Carsick Phil - Posted: 7 Nov 2011
The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.