‘Politics must not be subject to the economy, nor should the economy be subject to the dictates of an efficiency-driven paradigm of technocracy. Today, in view of the common good, there is urgent need for politics and economics to enter into a frank dialogue in the service of life, especially human life.
‘Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery.
‘The financial crisis of 2007-08 provided an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth. But the response to the crisis did not include rethinking the outdated criteria which continue to rule the world. Production is not always rational, and is usually tied to economic variables which assign to products a value that does not necessarily correspond to their real worth. This frequently leads to an overproduction of some commodities, with unnecessary impact on the environment and with negative results on regional economies. The financial bubble also tends to be a productive bubble. The problem of the real economy is not confronted with vigour, yet it is the real economy which makes diversification and improvement in production possible, helps companies to function well, and enables small and medium businesses to develop and create employment.’
–Laudato Si n.183 (Paragraph breaks mine)
“The financial crisis of 2007-08 provided an opportunity to develop a NEW ECONOMY”. That’s what he said!
What’s the problem? Our whole world is run on the grounds of something which doesn’t really exist: an absolute concept of ownership separated from reality. We have a global system that can cause widespread starvation and loss of other basic rights, without any real famine or lack of necessary resources at all. Even in richer countries, with all our wealth and modern technology, people are made to struggle for their livelihoods as if we were still living with the scarcity of past centuries. It used to be widely assumed that by the 21st Century, no one would have to work more than 4 hours each day, since production would be so incredibly high. And production is higher than ever before in history, however this primarily benefits an extremely privileged few.
Speculation
The means of production are not directed towards production, but private profit. Sometimes the capitalists suddenly become afraid they will lose money, and so they shut down production and stop lending (making others shut down and stop lending also, creating a recession). Workers would happily go on producing for no more than the fruit of their own labour, but this is illegal (it’s trespassing at the least). Instead, workers pay the price to recover from these imaginary future losses by their unemployment, lower wages, higher interest on consumer debts, reduced social security and degradation of their living conditions.
At other times, capitalists will buy up a productive resource, such as land, and keep it entirely unused, merely as a speculative investment–that is, they buy up land and do nothing with it, thereby raising the price of land and reducing the amount of available land (for people who actually need land for various projects), for the sole reason of making money off of it– or another way of looking at it: they purchase the land, just so that they can make money off of people who would actually use it, by keeping the land out of their reach until they are desperate enough to pay extortionate prices for it. This is a particular problem with land today, but it is also a problem with many other resources. This financial speculation distorts the working of the price mechanism for efficiently allocating resources.
Inequality
Allowing money to make money, with little to no real work involved, is an obvious recipe for increasing inequality. And inequality means that, for example, more money is invested into cures for baldness than malaria. The things produced, are produced for the rich. And as much as we might hope for some magical “trickle-down” from this, this labour is being exploited just as much. It is not just the incomes of the rich that increase, but their wealth, and therefore what they can charge usury on (making money merely by being wealthy, in the form of unjust rents, interest, and profits/wages). The rich become richer, and the poor become poorer. And with speculation distorting markets, and maddening inequality, we are all poorer as a society.
These problems are mitigated or exacerbated by government policies, but these are at best a patch for the more fundamental issue of our warped concept of private property. Property must not be considered absolute, but must be made subject to just principles, for the good of all affected. Ownership, production and consumption have become separate, if related, concepts, when in reality they should be three sides of a single coin (including the edge). This encourages disharmonies and imbalances in the economy, resulting in poorer product quality, worse allocation of resources, and more unstable production and markets across the entire economy.
A New Economy
We need to create an economy centred on humans, where resources are allocated and production decisions made for the sake of actual use and actual people, rather than speculative profit. To this end, I suggest we make sure that every business recognise the human capital its workers provide, either by granting them some degree of ownership, or by recognising (formally) that the company owes a very real debt to each of its workers, regardless of their market value. When workers are integrated into production decisions, they will not be considered disposable, and the whole economy will be more stable as well as more just.
To stop speculation, we need to banish the idea that my property is simply mine, to do with however I see fit. We need to recall the universal destination of goods: that all things exist to serve all people, and private property is only valid in this service. The first thing for this purpose is to cultivate a spirituality that views all things as gifts, blessings from Our Father for His children. The second thing is to create laws considering various goods as part of the commonwealth of all humanity. An example of such a law would be a land tax, considering land as being the inheritance of the whole nation, which each business venture merely borrows for a time; this would help prevent the speculative and unproductive buying up of land.
‘You are not making a gift of what is yours to the poor man, but you are giving him back what is his. You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich.’
St. Ambrose
‘Wherever there is great property there is great inequality.’
Adam Smith
God bless you!
As A Little Child 