American economists weigh in on the Vatican’s new financial manifesto

On May 17, the Vatican published Pope Francis’s manifesto on global economics. Oeconomicae et Pecuniariae Quaestiones echoes his previous critiques of consumer capitalism but contains an impressively technical critique of the modern finance industry. Aside from his usual concern for Western income inequality and poverty in the developing world, he also takes aim at tools like credit default swaps, which he says are part of “a kind of economic cannibalism”.

Answering the Holy Father’s claim that individualism “denies the validity of the common good”, economists Antony Davies and James Harrigan charged that it is impossible for the Holy Father to conceive that “people might willingly choose to facilitate the common good without being forced to do so”. The Catholic Church itself, they argue, “is an entity that thrives precisely because it is a voluntary association of individuals who choose to belong.”

Others were more supportive. “The hard-hearted creditors are certainly in the right legally, and in accord with current European politics,” wrote financial adviser and former Reuters economics editor Edward Hadas. Yet “markets cannot exist without a great deal of mutual trust from everyone involved.” He continued: “the finance business is diverted from its virtuous vocation of helping investment into what economists call rent-seeking. In the Catholic vocabulary, greed is allowed to flourish.” Few, however, have commented on the Pope’s specific recommendations for reform.

Again, those wonkish critiques are unusual for a Church document, and carry little (if any) spiritual authority. But the moral arguments – that the markets must serve all members of society, and not only the wealthy – is perfectly in line with Catholic social teaching. At its best, Oeconomicae is an updated version of Rerum Novarum, exhorting all people to place the common good above their individual desires – business-owners, workers, and consumers alike.

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