A Solution to the World’s Financial Crisis: Caritas in Veritate
Article written by Lou Iacobelli (Family Matters / Book Report program host)

     Those who are looking for a fresh way to respond to the world’s financial crisis need go no further than Pope Benedict’s latest encyclical Caritas in Veritate (Charity in Truth). The document essentially challenges the modern way of doing business.  In short, the Holy Father makes a convincing moral and logical argument for finding better ways to redistribute global wealth and a more effective way to run world economies.

     Pope Benedict delayed the publication date in order to address the current world economic crisis. He makes it clear that he has no “technical solutions to offer,” but in reading the work one soon realizes that it does offer a new vision to do business, both at the local and international level. The unanswered question is: will the world’s top bankers, economists and government leaders heed his message?

     Caritas in Veritate states that both charity and justice ought to be the common denominator of economic life.  Real human development isn’t possible unless men and women are treated with full human dignity and have the opportunity to achieve financial stability. People are not things, not mere objects to be used to generate profits. Charity must also shape the way we produce, sell and buy goods and services.  If we only fulfill the letter of the law and not the spirit, we cannot achieve our full humanity.

     Pope Benedict writes:  “Without the perspective of eternal life, human progress in this world is denied breathing-space.  Enclosed within history, it runs the risk of being reduced to the mere accumulation of wealth.”(Chapter 1, 11)  Human beings must consider the ultimate truth of human existence.  True development, according to the Holy Father, “requires a transcendent vision of the person.  It needs God.”

     The current world’s financial crisis was the consequences of investment decisions based on greed and profits.  A genuine desire to promote a strong world economy must be based on behaviour that takes into consideration the welfare of others. Only by loving our neighbour can we build a society that is both morally and economically sound. “If people look only to their own interests, our world will certainly fall apart,” Pope Benedict XVI told the audience at St. Peter’s Square, Christmas, 2008.

     The latest encyclical states, “Development is impossible without upright men and women, without financiers and politicians whose consciences are finely attuned to the requirements of the common good.”  (Chapter 6, 71)  In other words, there’s a global need for a just and charitable redistribution of the world’s wealth.

     On the environment, Pope Benedict says affluent countries must reduce their energy consumption through greater efficiency and simpler lifestyles, while lower cost energy should be made more available to poor countries for their development needs.  All this will require substantial state intervention in the economy  and even “a true world political authority ... with real teeth,” though such a global body would have to respect the local rights of individuals, families and communities.

     Globalization has made peoples around the world “neighbours but not brothers,” and Pope Benedict argues for a new ethos, going beyond the market and the state.  The market, while an ethically neutral instrument, responds mainly to self-interest, to the profit on the bottom line. The state operates according to the rules of power. What is needed is a wholly different approach, an approach where economic and political policies must go beyond self-interest and embrace the act of serving and sharing with others.  For example, in America where 2% of its citizens have almost as much wealth as the remaining 98% of the population, the encyclical would urge policy makers to work on reducing poverty, improving education for those with lower incomes and providing better health care for its needy citizens. Pope Benedict’s message may be difficult to live but is easy to morally understand:  the more we have, the greater should be the onus to share and help others who are less fortunate.  It’s living capitalism in reverse.

     Pope Benedict proposes a “principle of gratuitousness” and the “logic of the gift” — concepts which would transform the potential for development in his view. “Gratuitousness” and “gift” encourage people to think not only in their self- interest, but also about how they can be of service to others. This would mean that labour unions should go beyond thinking only of their own members to include the well being of all workers, including those who are employed by other companies and even foreign workers who often compete with organized labour.  More far-reaching, Pope Benedict endorses the idea that corporations should answer to shareholders as well as to the “stakeholders” — all those who have an interest in a company’s activities. This would include customers, workers and even its competitors.

     The last papal encyclical dealing with economic matters, “Centesimus Annus” was written in 1991 by John Paul II. He made a significant break with his predecessors in emphasizing the positive role of business, free markets and the role of creativity in the economy. John Paul II went so as far as to say that economic liberty is an essential freedom alongside religious liberty, political liberty and legal liberty.

     But the world economy has changed since 1991, and Pope Benedict has taken a substantial step forward from that analysis by maintaining that true economic freedom must be infused with the virtues of justice and charity. Too much attention has been paid to the role of the entrepreneur and the potential for wealth creation. This aspect of business ought to come second. The primary focus should be on fair redistributive solutions to economic disparities. This essentially means that rich nations need to take seriously the idea of poorer nations having opportunities to develop their economies and thus be capable of promoting the common good.  How to properly reconcile the free market economy with the principle that we’re all responsible for our neighbours’ economic progress remains a task for theologians, economists, government leaders and all of us to work out. However the point is clear:

     “Economic activity cannot solve all social problems through the simple application of commercial logic.  This needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility.  Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution.”(Chapter 3, 36) Pope Benedict, also, deals with world issues relating to law, politics and culture, but he makes his main points regarding the world economy. The Church’s social doctrine has always focussed on the question of justice. This entails giving people what is ethically owed to them. Workers, for example ought to be paid a fair wage for their work. In addition, we’re obligated to examine the larger societal issue as to whether a nation’s gross domestic product, GDP (or gross domestic income, GDI) is being distributed among its citizens in a fair and just way.

     Pope Benedict puts it this way: “In a climate of mutual trust, the market is the economic institution that permits encounters between persons, inasmuch as they are economic subjects who make use of contracts to regulate their relations as they exchange goods and services of equivalent value between them, in order to satisfy their needs and desires.”(Chapter 3, 36) But to merely follow the letter of economic rules is not enough. The Pope adds, “In fact, if the market is governed solely by the principle of the equivalence in value of exchanged goods, it cannot produce the social cohesion that it requires in order to function well. Without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function.”(Chapter3, 35)

     Justice alone isn’t enough to organize society. We also need charity and this is what Pope Benedict urges the world to practice in Caritas in Veritate. “Old models are disappearing, but promising new ones are taking shape. Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value.”(Chapter 3, 40) When we consider the global crisis that has resulted because of subprime mortgages, and the selling of “structured products” which in many cases were packaged to mislead investors, we can see why the Holy Father is advancing a different and more equitable way of doing business and of governing. Leaders, in the private and public sectors, must think about the long term stability of a company, of a nation and the entire world.

     When companies are run in the interests of all citizens rather than just the shareholders, then what emerges is a new business model. It’s an opportunity to re-examine our way of doing business. “When we consider the issues involved in the relationship between business and ethics, as well as the evolution taking place in the methods of production, it would appear that the traditional valid distinction between profit based companies and non-profit organizations can no longer do full justice to reality.”(Chapter 4, 46) Essentially Pope Benedict is telling the world that business activity and charitable activity ought to be more closely aligned.  Profits must be seen as a way to return some profits to investors, but returns should also help to make for a better society and a market which does not forget the dignity of the human person.  A good economy is one in which there is justice for all  people, but a justice working hand in hand with love.  Caritas in Veritate tells us clearly that we cannot have a stable economy if we forget to love each other.

     My recommendation would be for the world’s business schools to make Caritas in Veritate part of their mandatory curricula. Government officials should also study it.  Then, one day, we would have new economists and leaders with a larger world view.....a new vision in which governments and economists would organize their work around issues of justice and charity. Only by living out these virtues can we hope to ever bring stability in the financial system and the betterment of the entire planet. By bringing ethics to the marketplace, we could create an economy to morally serve all citizens.

Lou Iacobelli,
HMWN Radio Maria
louiac@hotmail.com