Moral Purpose & the Economy
Moral purpose and the International Economy
The current financial crisis spreading from the United States threatens to cause a major economic recession or worse. But the unfolding economic drama has so captured world attention that even the looming spectre of global warming has dropped into the background.
Australian Prime Minister, Kevin Rudd, in New York on 26 September addressed the UN General Assembly on the Millennium Development Goals, though he had also intended to focus on climate change. In the event, his speech centred more on the financial crisis and security matters, including initiatives to contain the proliferation of nuclear weapons.
The MDGs gained only a few sentences. Mr Rudd reiterated Australia’s commitment to the Goals, but admitted progress had been ‘mixed’. ‘We need to redouble our efforts to reduce poverty, provide education for children and ensure’ adequate health care. Australia was committed to increasing its overseas aid ‘to 0.5 per cent of gross national income by 2015’.
Noble sentiments, but consider the circumstances. By a cruel turn of events, this great opportunity at the United Nations to refocus global efforts to eradicate hunger and the grossest poverty was totally upstaged by the collapse in Wall Street.
The irony is indeed bitter. The free-market principles behind the so-called ‘Washington Consensus’ that the International Monetary Fund and other international institutions had forced on many developing countries had turned savagely on their creators. The citadel of free-market capitalism was collapsing under its own weight of neoliberal economic ideology, unimaginable levels of greed and self-delusion, startling hypocrisy, corruption of the processes of rating agencies and financial structures, and incompetence in governance.
As the Nobel Prize-winner, Joseph Stiglitz, wrote in Project Syndicate recently, neoliberalism with its economic ‘fundamentalist’ notions had failed: ‘free-market rhetoric has been used selectively – embraced when it serves special interests and discarded when it does not.’ Behold, the prophets of free markets were now appealing for massive subsidies and bail-outs from taxpayers.
There is no joy in any of this. No wonder the American public are furious at these colossal failures of the banking and credit markets. Yet the whole mess should not have happened. Many leading economists warned that this crisis was inevitable given the unprecedented debt binge, the irresponsible and profligate lending, the excessive overseas borrowing, and the abdication of due diligence in regulation.
The consequences of the Iraq war also played a part in this great unravelling. As Stiglitz wrote The Nation on 26 September, the war was ‘financed entirely on credit’. The US national debt increased from $5.7 trillion to over $9 trillion in eight years. The US was spending $12 billion a month on the war. Almost $1 trillion of the national debt was due to the war, and was likely to double within ten years. Instead of raising taxes to pay for the war and share the burden more equitably, ‘Bush asked for, and got, a reckless tax cut for the rich.’
Many of the architects of this disaster have walked away with their millions, leaving credit markets in chaos and a growing toll in human suffering. So much for all the neoliberal preaching to developing countries about transparency, good governance and the virtues of the unfettered free market. Stiglitz again: ‘Neo-liberal market fundamentalism was always a political doctrine servicing certain interests. It was never supported by economic theory.’
This market fundamentalism directed affected food production in many developing countries. As the Director of the Earth Institute at Columbia University, Jeffrey Sachs wrote, the neoliberal economic prescriptions of the World Bank and International Monetary Fund ‘forced dozens of poor food-importing countries to dismantle’ their state systems. ‘Poor farmers were told to fend for themselves, to let ‘market forces’ provide for inputs. ‘This was a profound mistake… Poor farmers lost access to fertilizers and improved seed varieties. They could not obtain bank financing. To its credit, the World Bank recognized this mistake in a scathing internal evaluation of its long-standing agricultural policies’ in 2007.
The shock of the financial collapse has been so traumatic one hopes that it will lead to a profound rethinking not just about better financial regulation and risk-management, but a recovery of our sense of moral purpose in the economy.
Here is a moment for common sense to reassert itself and insist that the economy is not about individuals amassing huge fortunes, but ensuring that everyone has enough resources and opportunities to live a fruitful life. The churches have much to offer this process as they can draw from their own long involvement in service delivery and improving living conditions. It is not just a matter of articulating convincingly the values needed to secure future human wellbeing, but of contributing to the search for better practical ways to ensure sustainable and more just societies.
The churches can also help motivate us in the conversation about what meaning we wish to give our lives at this time. There is no escaping the difference in perspectives if one takes seriously the Gospel message that God identifies intensely with those in distress: ‘…when did we see you hungry, thirsty…?’
Despite Milton Friedman and his fan club, ‘social justice’ is not a term of abuse or a swearword, but a badge of honour. ‘Freedom’ is not the only worthy catchcry, but can be a cloak for cruel injustices unless it finds comrades in distributive justice and equity, compassion and solidarity.
• Fr Bruce Duncan CSsR is one of the founders of the advocacy group, Social Policy Connections, and Director of the new Yarra Institute for Religion and Social Policy, based at Yarra Theological Union in Melbourne.