During an interview just over a year ago the Archbishop of Canterbury very briefly revealed that he had met the now former chief executive of payday lending company Wonga, Errol Damelin, where he told him frankly: “we [the church] are trying to compete you out of existence”. A brief joke about the Wonga chief taking it well, because after all “he’s a businessman”, and a minor detail about credit unions, and that was it.
What came next was unexpected, even to the Archbishop himself. Slow to travel, about a week later the news that the church planned to out-compete Wonga, a company that had been fighting off controversy for its expensive payday loan product, with interest rates north of 5,000 per cent (or in pounds and pence terms, it will cost you around £37.15 per every £100 borrowed in interest and fees for a 30 day loan), had gone viral.
Off the back of a single paragraph in a relatively small publication’s interview, Welby was news the world over. In the week that followed I happened to be interviewing the chief executive of the main trade association for Australian payday lenders, and before I could ask my first question he spluttered: “good God, does the Archbishop of Canterbury know what he’s up against?”
Still, whether by accident or by design, from that day the Archbishop was the self-appointed hero against the payday lenders and the champion of community finance.
As one recent report by Joseph Henson at the Centre for Social Justice points out, the provision of finance from the likes of credit unions is still too small, serving just under one million Britons; but change will not happen overnight. That’s why the Archbishop has set up the Task Group on Responsible Lending, plays a focal part in the Church Credit Champions Network, and has teamed up with former city regulator Hector Sants to profess the good word about community finance.
During his remarks at a reception for the Credit Union Foundation in June, 2014, the Archbishop spoke about the injustices of debt, particularly debts of the poor, and the clear need for more responsible forms of finance. He also suggested a target to train 300 people within the Church and to oversee a further 3,000 members of the church join credit unions.
While all to the good, what’s needed of the Archbishop now is a future vision of what credit unions and, for want of a better phrase, Christian finance can do, not only to challenge a system that allows low income households to land up in hock to such unscrupulous lenders in the first place, but of the wider impact of community-led finance.
Looking back through the archives of GK Chesterton, in his role as leading exponent of Distributism, it was felt in some of his more conceptual works that such a vision of finance could come from within Catholicism, in particular Catholic social teaching.
Distributism stems from the idea that for there to be a just society, property should be more widely distributed; in short, a good society is one where there are a greater number of owners. Opposed in equal measure to the centralisation of Communism, and the inherent concentration of wealth and property in capitalism, distributists like Chesterton felt that property should belong to the many, rather than the few.
The idea is related to the Roman Catholic concept of subsidiarity, a prominent principle within Catholic social teaching which proposes that some things are too important to be left to over-centralised authorities. In this, it’s easy to see why the distributists might prefer a nation of shop-owners, than a nation run by a monopoly.
However for Hilaire Belloc, another well-known advocate of Distributism, and a contemporary of Chesterton’s, he understood very well what stood in the way of the distributist model, namely that monopoly capitalism could present its strengths in an extremely compelling way. For example when it comes to credit Belloc wrote that the “larger unit [such as a big business] can borrow more easily than the smaller one.” In response he urged the state to counter the strengths of monopoly capitalism with more positive tendencies including the restoration of the small cultivator, wholesaler, shopkeeper, and artisan.
Specifically with credit, Belloc called for the decentralisation of distribution, which would entail “applying a turnover tax to large wholesalers, with the money raised put into a “Guild Credit Union” to finance new small suppliers”. For individuals Belloc also called for “the state [to] create and subsidise “chartered cooperative banks” or credit unions under local control.”
For anyone who may accuse Belloc of being a statist he was quite the opposite. For him the need for state subsidy in response to monopoly was simply a means to a greater end. In fact he felt that when the demands of the distributists had been reached, and property was more evenly owned, the state could afford to run simply by setting a flat tax of 2 per cent. To be sure this is not libertarianism, but it is a rather bold statement about what place the state has in a future society.
Clearly what is of interest here is the status of a credit union. It was felt by Chesterton, Belloc and the many other distributists that the credit union, which unlike banks or payday lenders are member-owned, would take the place of the usurers in the big banks who didn’t care a bit for the communities in which they were supposed to supply finance. Presumably if Chesterton and Belloc were around today they would join the Archbishop in wanting to see these institutions out-compete the likes of Wonga, but they would do so with a broader vision of what society should look like.
Chesterton famously said in The Superstition of Divorce, “Too much capitalism does not mean too many capitalists, but too few capitalists.” Equally he felt in finance itself that there were not too many financial institutions, but too few. While we should support the intervention of the archbishop, there is something within Distributism that cannot be ignored speaking more broadly about relational finance and what it can do to make society more equitable.
Carl Packman is a writer and researcher based in London. He is the author of two books on the payday lending industry and is @CarlPackman on Twitter
This article first appeared in the print edition of The Catholic Herald (15/8/14)
The Catholic Herald comment guidelines
•Do not make personal attacks on writers or fellow commenters – respond only to their arguments.