Last week, I wrote a
controversial post that asked a blunt and provocative question—whether Islam is
ultimately compatible with the West, and
led with evidence that Islam has often been hostile to free speech, even
violently hostile. Free speech is an underpinning
to Western democracy and enshrined and protected in the U.S. in the 1st
Amendment. Islam’s compatibility with
the West should not be assumed and is an issue that should be discussed and
debated on this and other grounds.
Then the Vatican and the Jesuits immediately
came along and said, “Hold my chalice of wine.”
Catholicism, as it is put forward
by the Vatican, and in particular, the Jesuits are also showing themselves to be
antithetical to Western democratic capitalism.
Just as I post questions about Islam, the Vatican last week released a 14
page document challenging capitalism and free markets. Nearly a decade after the Great Recession
roiled Europe and America, Pope Francis released a document that condemned
“unfettered capitalism” (as if that really existed anywhere on the planet), a
“culture of waste,” and fingered income inequality as a prime enemy. He condemned the pursuit of profit is
“amoral” and asserted that “The markets
know neither how to make the assumptions that allow their smooth running—social
coexistence, honesty, trust, safety and security, laws, and so on—nor how to
correct those effects and forces that are harmful to human society—inequality,
asymmetries, environmental damage, social insecurity, and fraud.”
If I didn’t know better, I would
have thought that this position paper was a collaborative effort with Bernie
Sanders and Elizabeth Warren. The posture
of Pope Francis is nothing new. Francis
has been attacking free markets throughout his papacy, often using the language
of a populist Latin American dictator, decrying money as “the dung of the devil,”
sometimes making statements that are virtually indistinguishable from Hugo
Chavez or Daniel Ortega. But this statement goes much further into the
weeds than before. It goes into
particulars on financial instruments such as derivatives, credit default swaps,
and the like, calling them “ticking time bombs” and calling for more financial
regulation. He decries the “predatory
and speculative tendencies” of the market, and that one of the major reasons
for the financial crisis was the “immoral behavior of agents in the financial
world.”
How far we have come from a
Vatican that was instrumental in the collapse of the Soviet Union.
The detailed position paper is
flawed on a number of fronts. First, its
complaints are about eight or nine years too late. It is written as if it we were in the throes of the downturn and Dodd-Frank
had never been passed. Dodd-Frank has
already addressed many of the issues raised by the Vatican. Sensible moderates
such as former Fed member Randy Kroszner
argued that it went too far,
imposing a regulatory burden on smaller financial institutions that lend
to small business, and thereby choking off entrepreneurism and job creation. As I write this, Congress has passed a bill
trimming the excess of Dodd Frank, which in turn addressed the excesses of the
banking system. While the meltdown in
2008 was harmful, it had a confluence of causes—flawed government policy,
sustained low interest rates, consumers that borrowed too much, a herd
psychology. The proximate causes to the
crisis are still being debated and dozens of books have been written about
it. While there were some immoral actors,
most worthy economists, including Raghuram Rajan (author of Fault Lines) fingered
systemic problems rather than immoral behavior as the primary cause of the
crash. And many of those have been dealt
with.
This leads me to my second issue
with the Vatican’s pronouncement. The
Vatican should stay in its lane. I would
expect the Vatican to talk about the obligation of INDIVIDUALS to share their
wealth, to use it for good, to act in a moral way. But this document steps into an area in which
the authors of it have little or no expertise.
The authors show little or no understanding of how markets actually work
-the importance of rewarding risk taking, the innovation, job creation and
betterments to everyone by a dynamic, flexible economy. The Vatican complains about a “culture of
waste” but the U.S. actually has a
system that uses assets very efficiently and has a robust bankruptcy code that
permits the recycling of underemployed assets very quickly. While not perfect, capitalism most often
puts assets in the hands of managers most equipped to use them efficiently and
not waste them. The Vatican shows no
understanding of any of this.
It is ironic that this moral
critique of capitalism and capital markets would be released just a few days
before Nicolas Maduro won re-election in Venezuela in their faux democratic
elections. The Vatican has had precious
little to say about the morality of Venezuelan socialism and the fruits of its
state controlled economy. People are
eating their pets. Children are dying in
hospitals because they don’t have basic medical supplies. Gangs recruit with food baskets. Refugees are streaming into neighboring
countries. Inflation is running at
13,000%. Parents are dumping their
children off at orphanages because they cannot feed them. Venezuela is the biggest and most preventable
humanitarian crisis in the Western hemisphere in our lifetime. Yet the Vatican singles out Western
capitalism as amoral. The Vatican is virtually
silent about the sentence of poverty imposed by other authoritarian governments
around the world. Just a few days
following the release of its statement, the World Bank announced that the
number of people living in abject poverty across the globe is around 10%, down
from 30% just a few decades ago. Free
markets are doing there thing, even in places like Africa. Instead of shooting spitballs at free
markets, the Holy See should be celebrating them.
The sex abuse crisis of the
Catholic Church has been well documented and just last week, the bishops of
Chile tendered their resignation over the whole ordeal. In addition to the abuse scandal, the Vatican
had its own Vatican bank, money laundering and embezzlement scandal. The Vatican would do well to remember
Matthew 7:3, “Why do you look at the speck in your brother’s eye, but fail to
notice the beam in your own eye?”
It’s a very sad thing. Last weekend, I saw the film A Man of his
Word, a documentary about Pope Francis.
He has taken the Church in the right direction on several fronts, most
notably he has eschewed the trappings of the Vatican, and led by example,
living in a modest apartment, giving up the regal clothing and the
Lamborghini. He has recently made
comments to be more inclusive of gay Christians. And he is right to be concerned about the
poor. But his attacks on the economic
system that has lifted more people out of poverty than any other and this
latest statement shows a lack of understanding and a willingness to take
positions that he is ill equipped to prescribe.
Perhaps both Islam and
Catholicism have points of friction with democracy and capitalism. I have faith in Jesus but I have faith in
free markets, too. Francis should not
force us to choose.
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