Passion for Justice

A Social Concerns Blog from Members of the Passionist Community

Passionist Reflection on the Economic Crisis

Nov 19, 2008

Passion for Justice

Economic Crisis – Autumn 2008

By John Gonzalez

Our Catholic tradition calls for a “society of work, enterprise and participation” which “is not directed against the market, but demands that the market be appropriately controlled by the forces of society and by the state to assure that the basic needs of the whole society are satisfied” (Centesimus Annus). These words of John Paul II should be adopted as a standard for all those who carry this responsibility for our nation, the world and the common good of all.

-Bishop William Murphy’s statement to Congress

Our global world is in the midst of a transition. An uncertain future lies ahead of us. The American public began to respond to this transition by voting for a new vision that we hope will change the direction of our nation. This recent election is indeed historic and many people including our own Bishops have publicly recognized the positive message we sent in electing our first African-American President who demonstrated great leadership and vision during this arduously long campaign. We at the JPIC office also recognize this historical achievement.

Nevertheless, even with a new administration coming into power, the current financial crisis continues to shake the social foundations of our global world. Some solutions have been offered to contain the crisis that began to undermine our banks and financial institutions. Yet the markets remain volatile, financial institutions continue to suffer, and the auto-industry is now at a critical point.

This reflection will offer an analysis of the economic crisis and the causes that led it to happen. Then it will consider the current solutions and proposals from the vantage point of our Passionist spirituality.

 

Causes of the Crisis:

Several analyses exist which identify a number of causes that have created this crisis. By now many of us are familiar with some of these causes such as:

  • Market deregulation of the financial institutions.
  • Predatory lending and other loose lending practices.
  • Bank sales of “mortgage backed securities” and other risk ventures.
  • Mortgage defaults and foreclosures.
  • Further growth of massive consumer debt.

However these causes are merely a series of conditions that flow from a systemic problem within our national and global economy. The root cause, in this case, was the housing bubble, which just popped.

What is a bubble? How is it that our global economy generates these financial bubbles? Let me see if I can explain. Our global economy is based primarily on speculation rather than actual production. In the global economy the massive and unregulated flows of money are being invested in areas or industries based not on actual production but on high-risk projections (speculation) of what investors feel will be an economic boom. Thus these investments which are high risk tend to also yield high returns. Some call this economic system a “casino economy.” In this light, basically our global economic system is one giant gambling structure where major investors get to play by moving large sums of money from one area to another in hopes that their money can generate a bigger bang for each buck. However in the wake of this financial flow the global economy creates financial bubbles where a certain industry or region receives unbelievable amounts of money all at once and when speculation begins to turn sour then all this money is rapidly pulled back. This is what happens when a bubble pops.

In the mid 1990’s financial speculators flooded the dot-com industry. Towards the end of the 1990’s those speculations started to sour and the dot-com bubble popped. Recall how the dot com industry grew into a ludicrous business where anyone with an idea and internet access entered this business. Then, by the end of the 90’s, investors began to pull out and many of these companies went under. I remember watching a Simpsons episode around this time where Bart Simpson got into the dot-com business of drawing angry depictions of Homer and placing them in the internet. The internet manager paid him with stocks in the company that were worth a fortune. Within a week Bart walked into the company to see that everything was gone because the stocks had become worthless. His compensation was to have a massive quantity of worthless stocks while the dot-com manager scavenged the building for copper wires that still had value.

We survived the dot-com bubble because at the time it was isolated and it did not bring down the engine of the global economy. However the 2008 housing bubble was not that benign. It came about during a perfect economic storm:

  • Oil prices were rising.
  • Food prices had gone up by the spring of 2008.
  • Savings were at an all time low.
  • Unemployment skyrocketed

These conditions brought down one of the mightiest engines of the global economy. That is, the purchase power of the United States. This leads to another systemic problem that should also be addressed: the consuming habits of the average American. It is an unfair and unsustainable part of our global economic system. Once American demand for products, resources and services begin to drop, the global industries that supply these demands begin to get unstable. This leads us to the global economic crisis we face today.

 

Passionist Reflection

On the issue of the global economy the social teachings of our Catholic Church have supported economies that are both free and fair. For this to happen the market forces must strike a balance with Government and civil society so that it can retain its entrepreneurial freedom while being regulated just enough so that the economic forces of the market serve the common good. In the Encyclical, Populorum Progressio, Pope Paul VI expressed it in this way:

But it is unfortunate that on these new conditions of society a system has been constructed which considers profit as the key motive for economic progress, competition as the supreme law of economics, and private ownership of the means of production as an absolute right that has no limits and carries no corresponding social obligation. This unchecked liberalism leads to dictatorship rightly denounced by Pius XI as producing “the international imperialism of money.” Such improper manipulations of economic forces can never be condemned enough; let it be said once again that economics is supposed to be in the service of man.

Article #26

This moral opinion on the global economy is not derived from an economic policy held by the Church. This opinion is based on an assessment of the global economy on key principles of Catholic social teaching. How does the global economy support:

  • The basic dignity and rights of the human person
  • The participation of the local community
  • The promotion and welfare of the family
  • The dignity of work and the rights of workers
  • Global Solidarity
  • The integrity of creation

It is the moral opinion of the Church and the general theological community that an unregulated and unaccountable market system, like the system known as Market Fundamentalism, does not serve these principles. What concerns the Church even further is that this economic system actually undermines these basic social principles. This is especially true of the negative effect that the global economy is having on the majority of the world population that are either poor or in the low income bracket. Indicators on the global economy from the United Nations, the World Bank, and several accredited think tanks have highlighted this reality.

Adam Smith, the famous father of modern capitalism, said the following in his epic work, The Wealth of Nations:

What improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can be flourishing and happy if the greater part of the members are poor and miserable.

Chapter 8

One of the principles of Catholic Social Teaching that is near and dear to the Passionist spirituality is the Preferential Option for the Poor. The spirituality of St. Paul of the Cross was attentive to compassionate love of God for all of humanity through the mystery of the Passion. What is equally important with the Paulacrucian spirituality, as it was developed by the founder, was that the poor and the marginalized members of the human community were given special attention with regards to acts of charity and justice. In one of his letters St. Paul of the Cross states:

We ought to be grateful and correspond to his divine benefits by loving justice, truth, and exercising charity and the works of mercy towards our neighbor, especially to the poor.

The option for the poor informs us that when members of our human community suffer we all suffer. Anytime somebody profits from the pain of others, not only is that profit unjust, it is also unsustainable. Adam Smith came from an economical position and St. Paul of the Cross came from a mystical position. Yet they both realized that an economic system, based on the misfortunes of the many, is unsustainable.

 

Passionists International and the Passionist JPIC Office have maintained the opinion that this global economic system is unsustainable. While we based our concern on the values expressed by Catholic Social Teaching and highlighted by our own concern for those who “are crucified by injustice,” we have also believed that this short sighted economic boom generated by the “casino economy” is not a healthy economic system and in the long run it could generate a global economic disaster.

The current economic bust demonstrates just how volatile the market can be if it remains unchecked. The Passionist JPIC Community along with our Catholic Church believes that the international system ought to have a global economy where the institutions of corporations, governments, and civil society can hold each other accountable and regulate each other in order to preserve both the freedom of market enterprise and the common good.

Our Passionist spirituality keeps us informed on the wisdom of the cross. We position ourselves with those who suffer. We minister to those who are afflicted and burdened with their own cross. However we believe that cross is not merely an instrument of violence. For us the cross is also an instrument of redemption. With the cross comes a resurrection. With death comes new life. For those who suffer from the present economic crisis, now is the opportunity to gain wisdom for a new economic system. We Passionists believe that it is in the midst of our suffering that we are afforded an opportunity to change for the better. Robert Kennedy quoted this famous Greek Philosopher during his campaign as he tried to make sense of the assassination of Martin Luther King Jr.

He who learns must suffer. And even in our sleep pain that cannot forget falls drop by drop upon the heart, and in our own despair, against our will, comes wisdom to us by the awful Grace of God.

-Aeschylus

Now, our government and the international financial community have the massive obligation of addressing these present financial conditions. A bailout of the financial institutions has been proposed and passed. Now congress is debating a bailout for the auto industry. We will not add our voice to this because the details of these packages need to be discerned by economic, financial and social experts that can assess the details of these financial packages.

However we again offer our moral voice in favor of a future economic system that can learn from this calamity. A priority of the Passionist community and the Catholic Church is that the governments look towards the poor and the people who will suffer the worst from this crisis. Many have expressed a policy to bail out Main Street. We hope that our Government can address both the financial sector as well as the basic fallout from those who cannot afford this crunch. We also hope that world governments work in solidarity with each other to address and alleviate the more critical members of the human community.

The Institute for Policy Study (IPS) offers a Sensible Plan for Recovery. This plan is made up of five points that address many of the current failings and place us in a position to develop a global economic system that may be able to support the values of our social teaching. This is by no means an exhaustive list. It is merely an initial consideration that may help us to conceptualize some basic tenets for a legislative program that could move us into a better direction. The five point programs that IPS offers would be the following:

  • Fund a green stimulus for the real economy
  • Restructure mortgages for families put at risk by predatory lenders
  • Make Wall Street speculators pay for the bailout: no more debt
  • Shut down the global casino: rein in the unregulated financial sector
  • Limit CEO pay and prohibit profiteering from the bailout.

If you’re interested to read more about this plan visit the following website to download a copy. (http://www.ips-dc.org/reports/#752.)

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