This article was published by Eureka Street on 29 May 2018
The Vatican has launched a stringent critique of widespread abuses in global economies, abuses that are driving astonishing inequality, threatening ecological sustainability and unleashing powerful reactionary political forces.
The title of the Vatican document Oeconomicae et pecuniariae questiones can be translated as 'On Economic and Financial Matters'. It was written by the newly formed Dicastery for Promoting Integral Human Development together with the Congregation of the Doctrine of the Faith. Approved by Pope Francis on 6 January, it was not released till 17 May with a clumsy last-minute English translation.
It reiterates the call by Francis in Laudato Si' for an urgent dialogue between politics and economics to advance human life and wellbeing. 'Money must serve, not rule!' (#6).
The 10,000-word document encapsulates the strong critiques of forms of economics most responsible for current social and economic crises, drawing strongly from the documents of Francis and his predecessors. Informed by the thinking of many leading scientists and economists advising the Vatican agencies, it warns urgently to reduce extreme inequalities and address climate issues before they become truly catastrophic.
The critique in Oeconomicae centres on the growing influence of economic thinking that exaggerated the role of free markets, believing that markets of themselves, without adequate regulation, produce the best results, while ignoring concerns about liberty, social equity and human wellbeing.
'At stake is the authentic wellbeing of a majority of men and women of our planet who are at risk of being excluded and marginalised' while a rich minority, 'indifferent to the condition of the majority, exploits and reserves for itself substantial resources and wealth'.
The document does not attempt to adjudicate between rival economic theories, and does not use the term neoliberalism, though that is implied, but insists that economics must not abandon the profoundly moral task of promoting the human wellbeing of everyone, especially those in need.
"Never has this call to protect the common good been so dramatic and immediate."
The Vatican document recognises the value of markets in coordinating production of abundant goods to serve human needs, but argues that public authorities need to regulate financial markets to curtail malpractice. Experience has shown 'how naïve is the belief in a presumed self-sufficiency of the markets, independent of any ethics', and how necessary is 'appropriate regulation' to protect all involved, especially the vulnerable. (#21).
It warns that 'massive deregulation' has opened the way for moral risk and embezzlement, as well as 'the rise of the irrational exuberance of the markets, followed first by speculative bubbles, and then by sudden, destructive collapse, and systemic crises'. (#21).
Without mentioning the 1933 Glass-Steagall Act that the US used to separate savings banks from investment banks, the document calls for a clear separation of investment banking from that of 'mere business', in order to increase financial stability.
Following the royal commission into banking, Australians will with the document deplore 'the questionable activities of financial advisers' who mislead investors with hidden commissions, failing to act in the interests of their clients and even with 'malicious negligence'. (#22).
In Australia seeking profit at any cost has become commonplace, not just in finance but across whole sectors of business including fast food and petrol franchises, fashion and retail. As the Vatican document comments, 'the objective of mere profit' creates perverse incentives for the 'greedy and unscrupulous'. (#23).
Oeconomicae highlights the manipulation of markets, as in the subprime mortgages that helped precipitate the recent financial crises, along with problems with the rating agencies and inter-bank lending arrangements that can create a 'dangerous oligopoly' over credit markets. (#25). Fanciful products, including the 'economic cannibalism' in credit default swaps, became 'a ticking time bomb ready sooner or later to explode'.
The document laments 'how fragile and exposed to fraud is a financial system not sufficiently controlled by regulations, and lacking proportionate sanctions for the violations'. (#27).
The authors of Oeconomicae deplore the growth of the so-called shadow banking system, resulting in a loss of control by national authorities. Despite its legitimate roles, offshore finance thrives through mechanisms of tax avoidance and money laundering from international crime networks. There has also been an 'enormous outflow of capital' from many low-income countries. The document attacks the 'hypocrisy' of states that profit from such operations.
Oeconomicae supports calls for 'a minimum tax' on offshore transactions, as well as transparency and public accountability on multinational companies so they pay appropriate taxes in the countries in which they operate (#31).
The document notes that 'the accumulated private wealth of some elites in the fiscal havens is almost equal to the public debt of the respective countries.' This debt then falls on millions of very poor people. (#32).
Buy ethically: 'vote with your wallet'
The authors urge consumers to 'vote with your wallet', choosing goods that are ethically responsible, without exploitation in supply chains or damaging the environment. 'Today, as never before we are all called, as sentinels, to watch over genuine life and to make ourselves catalysts of a new social behavior' for the good of all and for the planet (#34).
Oeconomicae reiterates the focus of Francis on issues of global poverty and inequality, now exacerbated by global warming and environmental issues. He considers these of overriding moral urgency in the face of looming catastrophic threats to whole populations and indeed the entire planetary life support systems. Never has this call to protect the common good been so dramatic and immediate.
Bruce Duncan is a lecturer in history and social ethics at Yarra Theological Union, a College of the University of Divinity.