The financial crisis can only be overcome if banks rediscover their duty to serve society, Archbishop Vincent Nichols of Westminster has said.
He said the banking sector had to learn that its purpose was not merely to make money but to contribute to the common good.
His comments came two days before an emergency Budget attempted to re-balance Britain’s battered economy and start to pay off the debt that has been accrued over the past decade.
The archbishop said the root cause of the banking crisis was a “gradual erosion of the duty of service to society”.
The crisis could only be addressed, he said, by changing the culture of the City, and not merely by tinkering with regulation.
His remarks also came after the Government announced it would scrap the Financial Services Authority (FSA), the City’s regulatory body, and transfer its powers to the Bank of England.
In an article for the Sunday Telegraph, the archbishop said: “New regulatory structures of themselves will not solve the underlying problem, which is about the purpose of banks and financial institutions: in the end, are they there just to make money, or to serve society?
“A key part of the change needed is to forge a cultural consensus in the financial sector that its licence to operate depends on a clear and demonstrable commitment to service.”
The archbishop said the crisis had been caused in part by “a market mentality which focused relentlessly on the search for ever greater and quicker profits”.
He added: “Of course, profits have to be made if an efficient and thriving financial sector is in fact to serve society.
“But the ethical judgment, which has to be transmitted right through the organisations concerned, is that profit must only be a means to this end, and not an end in itself. We have a long way to go to achieve this.”
The archbishop said that ethical leadership was needed not only to reform the financial sector but also to rebuild the nation’s economy.
He cited Pope Benedict’s first social encyclical, Caritas in Veritate, issued last year, which said: “Development is impossible without upright men and women, without financiers and politicians whose consciences are finely attuned to the common good.”
The archbishop added: “If the long-term recovery of the financial sector depends on ethical leadership, so too more generally does the health of the economy.”
The key moral consideration of this week’s Budget, he said, was justice. “We live in a society of continuing and wide inequality,” he said. “The outcome needs to be fair and seen to be fair.”
He said support for the Government would depend on the “extent to which it is seen to act impartially and prudently, with a demonstrable care for basic human needs and a continuing sense of our responsibility in the wider world”.
“A powerfully positive message will be sent if in Tuesday’s Budget the overseas aid programme to assist the development of the world’s poorest people is not cut,” he said. The Conservatives agreed to ring-fence Britain’s overseas aid budget, which is currently £6billion, before the general election. It is expected to grow to £9billion by 2013.
Archbishop Nichols also expressed worry about rising unemployment following cuts to the public sector.
He said: “The times we are entering are difficult and will be painful. Joblessness is a grave social ill, and every effort must be made to try bring about a sustainable recovery.” But the Archbishop said the last 15 years had shown that prosperity did not necessarily correlate with a nation’s well-being.
He said: “We have seen an extraordinary period of economic growth and prosperity. Paradoxically, it has been accompanied by serious human costs in increasing rates of relationship breakdown, loneliness and reduced levels of happiness and contentment.”
The archbishop criticised a “relentless focus” on GDP and other economic indicators that “fails to take any account of many core human activities, especially within families, which in fact lie at the heart of human well-being”.
He said: “We should, as a society, explore profoundly what it is that truly makes for a humane and fulfilled life. This is an opportunity to change our lifestyle for the better, giving more value to the intangible: qualities and virtues such as love and compassion that never appear on records of GDP, but are at the heart of all that makes life worthwhile.”
The archbishop’s comments were welcomed by the Observatoire de la Finance, a Geneva-based think-tank whose manifesto is entitled Finance that Serves the Common Good. Its director, Prof Paul Dembinski, a Catholic, said he agreed that the financial sector had neglected its duty to serve society.
“In finance the level of remuneration skies above the average in industry or other services,” he said.
“The sector has been doing extremely well. But it’s been doing extremely well also because it has not been serving society, it’s forgetting the other side [of the coin].”
Prof Dembinski also agreed that the “relentless focus” on GDP as a way to measure society was extremely damaging.
He said: “If politicians look only at this indicator then they get it wrong. The problem is we don’t have – for the moment – any other single alternative indicator to present to politicians.”
He said one of the most urgent tasks needed “to put the house in order” was to replace GDP by a scoreboard of more than one indicator.
But Prof Philip Booth, editorial and programme director of the Institute of Economic Affairs, said Archbishop Nichols had a rosy view of the benefits of government spending.
He said: “There is precious little evidence that an expansion of government-to-government financial aid brings about development.
“And the hopelessness and despair which he describes amongst the poor is so prominent after a period during which the government has very rapidly increased financial expenditures, so that total government spending is now over half of national income.
“We need the principle of subsidiarity to apply in welfare to a greater degree. In turn we need the Church and other institutions to rise up and meet real human needs in a way that government never can. This was one of the messages of Deus caritas est.”
Prof Booth, also a Catholic, said that despite criticising an obsession with economic indicators, the archbishop “perhaps stresses the financial issues too much himself”.