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Benedict on global crises

Republished with permission from Eureka Street magazine which is committed to tell stories from humane perspectives often lacking in other media.

Benedict’s new encyclical likely to reflect Pius XI’s response to the Great Depression

By Bruce Duncan, C.Ss.R.

Pope Benedict’s new social encyclical is finished and will be released in early May. It will commemorate Paul VI’s 1967 document, the Development of Peoples, and address the great global problems of hunger and gross poverty, climate change, human rights, nuclear weapons and disarmament, violence, fundamentalism and peace.

The new encyclical has been delayed two years because of the need for Benedict to respond also to the collapse Pope Benedictof global financial markets and the ‘Great Recession’. He will likely reiterate key themes from Pope Pius XI’s 1931 encyclical, Quadragesimo Anno, in response to the Great Depression. Many aspects of Pius’s encyclical are strikingly relevant to the current crisis.

The Wall Street collapse of 1929 triggered the Great Depression which left a third of workers unemployed in many countries, and resulted in the rise of dictatorships in Europe, notably the Nazis in Germany.

The current economic crisis has different origins, beginning with the collapse of often fraudulent financial markets, with the collusion or blindness of business leaders and bankers, regulators, sections of the media and some politicians. In addition, perpetrators of the neo-liberal economic ideology, with its inflated belief in free markets and minimal regulation, proclaimed that the rules of economics had changed. This belief helped undermine moral judgment in business circles and among investors, who were drawn into this giant bubble economy.

Various commentators warned against this corrosion of ethical standards, and forecast the inevitable collapse of this financial bubble (see Peter Hartcher’s 2005 Bubble Man: Alan Greenspan & the Missing 7 Trillion Dollars), but regulators did not listen.

What will Benedict say about the current ‘Great Recession’ which is causing such growing distress?

First, he does not have to ‘reinvent the wheel’. Modern Catholic social writings have long insisted that economics must be directed to serve the good of everyone, not just the rich. Pius XI was particularly strong on this, though Benedict will also draw from later reflection, especially by Popes Paul VI and John-Paul II.

Second, Benedict will insist that the principles of equity, participation and social justice are essential for a just economic system, as well as freedom and enterprise. He will attack the collapse of ethical standards, but is also likely to criticise the concentration of economic power in the hands of a relatively small number of people, institutions and companies.

Third, he will strongly critique the contemporary free-market ideology of neo-liberalism which encouraged a ‘greed is good’ mentality in sections of the business culture, resulting in the corrosion of due diligence in financial markets and by regulators.

As recent events have shown, the values of social justice and good governance need to be strongly reaffirmed throughout the international economy. The lessons from the Great Depression need to be learned all over again. The whole economic edifice relies on moral foundations - of honesty, transparency and social responsibility. The very word ‘credit’ derives from the Latin word meaning to believe or trust.

Critiquing ‘Liberalism’

Pius XI attacked the vast inequalities of wealth and the ‘greed of unchecked competition’, for which Pius blamed ‘liberalism’ (QA #10). The term did not mean, as it might in Australia today, a philosophy of individual economic responsibility based on principles of fairness and social justice. Far from it. In Italy Pius understood ‘economic liberalism’ to mean domination of the economy by rich and powerful elites who claimed that the vast inequality of wealth was ‘the consequence of inevitable economic laws’ (QA # 4).

Pius rejected this ‘liberal’ ideology which considered the economic order ‘as absolutely free and independent’, and which claimed free markets would of themselves produce the best outcomes. Pius also opposed the minimalist role for the State as the ‘mere guardian of law and order’ that liberalism proclaimed.

Instead, Pope Pius insisted the State must preserve the ‘public well being and private prosperity’, especially by protecting the poorer classes and wage-earners (#25). He called for a more equitable distribution of wealth to meet ‘the needs of all’ (#57). He also advised that wage contracts be ‘modified somewhat by a contract of partnership’ so employees could ‘participate in the ownership or management, or in some way share in the profits’ (#65).

Benedict will not of course oppose free market economies, but he will urge they be better regulated and ensure an equitable distribution of wealth and opportunities. The problem, unsurprisingly, is in the details of how to regulate the economy, and especially special interest groups, to ensure fair and just social outcomes. Finding the right balance is the demanding task facing all democracies, but Benedict will warn they will not succeed unless they are committed to the values of social justice and participation.

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• 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.