To say that Pope Francis has a somewhat negative view of the financial sector is an understatement. In his recent speech after receiving the Charlemagne Prize, for instance, he urged Europe to move away from what he called “an economy directed at revenue, profiting from speculation and lending at interest”.
These comments were mild compared to some of the Pope’s other statements about modern finance. “When a family doesn’t have enough to eat because it has to pay off loans to usurers,” he insisted in 2014, his voice rising, “this isn’t Christian! It’s not human!”
That an Argentine would be distrustful of banks and wary of the financial world more generally should surprise no one. The debt and currency crisis that engulfed that unhappy nation between 1998 and 2001 inflicted lasting damage. It’s also true that the 2008 worldwide recession owed much to banks leveraging their assets at 50-1 ratios or hawking financial products so complicated that even their sellers didn’t understand them. Imprudent and, in some instances, deceptive choices by private financial actors contributed mightily to businesses closing, people losing their homes and high unemployment.
That said, some Catholics seem reluctant to acknowledge the role of governments and central banks in facilitating many of the financial markets’ problems.
One example is the way that central banks misjudged the state of the world’s economies and kept interest rates too low for too long in the lead-up to 2008. Likewise, we shouldn’t forget the part played by those American politicians who passed legislation forcing banks to devote significant percentages of their loan portfolios to making subprime mortgage loans to people unlikely to meet their payments.
With some notable exceptions – such as Cardinal Reinhard Marx of Munich, and Cardinal George Pell, the prefect of the Secretariat for the Economy – it’s hard to argue that deep understanding of financial institutions prevails among Catholic clergy. That’s not to say that such knowledge is a requirement for a Catholic bishop or priest. It’s not. But any Christian commenting on these issues should have some grasp of the finer points of the subject.
Take speculation. In 2004 a document issued by the World Council of Churches actually placed money laundering and speculation in the same category. Certainly, any speculation that relies upon telling falsehoods is wrong because choosing to lie is, for a Christian, always wrong. Yet while speculation occasionally has some negative (albeit usually transitory) effects, it plays a major role in stabilising, for instance, commodity prices and exchange rates over the medium and long term. Most Christian contributions to contemporary discussions of this subject, however, seem oblivious to such details.
All this is somewhat ironic, given the role played by medieval and early modern Catholic thinkers such as Peter Olivi (1248-1298), St Antoninus of Florence (1389-1459), St Raymond of Penyafort (1175-1275), Giles of Lessines (1230-1304), and Luther’s greatest theological opponent, Johannes Eck (1486-1543), in developing many of the financial tools taken for granted today.
Among other things, they identified just titles to interest, illustrated how time preference helped to explain price variations, and showed how currency speculation helped to ensure that capital was available where it was needed. In doing so, they helped banking’s emergence as a major engine which, beginning in the Middle Ages, started transforming subsistence economies into ones characterised by economic growth.
Other Catholic minds such as Bishop Nicole Oresme of Lisieux (1320-1382) and Juan de Mariana SJ (1536-1624) wrote at length, and critically, about the wrongness of governments – for instance – manipulating currencies to try to inflate away public debt instead of reducing real expenditures.
The sophistication of these analyses was such that the noted economist Joseph Schumpeter (who coined the phrase “creative destruction”) affirmed that “we behold an embryonic Wealth of Nations” in Scholastic thought. But what’s especially noteworthy is that these Catholic thinkers tried to understand that upon which they sought to offer moral guidance.
Another Spanish Jesuit, Luis de Molina (1535-1600), wrote on financial subjects ranging from bank deposits to money exchanges. But Molina also made a point of extensively consulting people engaged in these activities. Why? Because, he said, they would have insights likely to escape a theologian’s attention.
And this is surely the approach that Catholics today should be adopting. Rather than simply engaging in blanket condemnations that occasionally verge on moralism and which reflect little actual knowledge of the financial sector, we should follow our forebears’ example by first seeking to understand modern financial practices. That would place the Church in a far better position to help those in finance do good and avoid evil in an arena in which, as we have seen, strong temptations prevail.
Samuel Gregg is research director at the Acton Institute. This piece draws on his new book For God and Profit: How Banking and Finance can serve the Common Good (Crossroads, 2016)