Vatican issues call for world financial authority [News/Analysis]

October 24, 2011

The Pontifical Council for Justice and Peace has called for the creation of a worldwide financial authority to help create “a free, stable world economic and financial system at the service of the real economy.”

The new Vatican document, released October 24, immediately generated headlines suggesting that the Holy See had advocated the creation of a world government. Some commentators saw the document as a signal that the Vatican was aligning itself with demonstrators occupying Wall Street and other world financial centers, while American news services quoted the Jesuit, Father Thomas Reese, as claiming that the Vatican document was “to the left of Nancy Pelosi.”

Actually the document—entitled “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority”—is much more modest in its suggestions and in its status. Released by a pontifical council rather than by the Pope himself, the statement has no formal teaching authority. Although it draws on papal encyclicals—notably including Caritas in Veritate, in which Pope Benedict XVI raised the question of a worldwide financial oversight agency—the specific proposal advanced in this document is based primarily on an economic analysis of the current financial crisis.

As he introduced the document to the media at a press conference in Rome, Cardinal Peter Turkson, the president of the Pontifical Academy for Justice and Peace (PCJP), explained that it was intended as a contribution from the Vatican to the discussions that will take place at the G-20 summit meeting in Cannes, France, early in November. The Vatican, he said, wants to encourage world economic and political leaders in an “examination of every facet of the problem: social, economic, cultural, and spiritual.”

The new document argues that the economic downturn of recent months “has revealed behaviors like selfishness, collective greed, and hoarding of goods on a grand scale.” The PCJP says that the world’s economic system has produced an unjust distribution of wealth, as well as instability in global finance. The free-market system alone cannot correct these problems, the document says:

The inequalities and distortions of capitalist development are often an expression not only of economic liberalism but also of utilitarian thinking: that is, theoretical and practical approaches according to which what is useful for the individual leads to the good of the community. This saying has a core of truth, but it cannot be ignored that individual utility – even where it is legitimate – does not always favor the common good.

In pointing to the need for moral guidance to supplement the workings of the marketplace, the PCJP statement follows themes that have appeared frequently in social encyclicals and in other statements of Catholic social teaching. But the October 24 Vatican document goes far beyond those authoritative statements in its specific call for the creation of a worldwide financial authority that could tax financial transactions, create a “reserve fund” to sustain growth in developing nations, and supply public funding for troubled banks.

The PCJP document acknowledges briefly that a global authority would necessarily impinge on national sovereignty, and argues that it must be planned carefully to avoid conflicts. Nevertheless the document says that a global power is needed to address global problems:

Of course, this transformation will be made at the cost of a gradual, balanced transfer of a part of each nation's powers to a world authority and to regional authorities, but this is necessary at a time when the dynamism of human society and the economy and the progress of technology are transcending borders, which are in fact already very eroded in a globalized world.

The new Vatican document recognizes the importance of subsidiarity: the traditional principle of Catholic social teaching that most public problems are best handled at the local level. The document explains that broader authority should be invoked “only when individual, social or financial actors are intrinsically deficient in capacity, or cannot manage by themselves to do what is required of them.” Noting that Pope Benedict mentioned that principle in his own reference to a global authority in Caritas in Veritate, the PCJP argues that in the current financial crisis, local and even national authorities are inadequate to the task of restoring a just economic order.

The PCJP document does not address the most obvious practical objections against such an economic scheme: the likelihood that a global authority would repeat the errors of national regulatory agencies; the “moral hazard” created by pouring public funding into banks that have made unsustainable investment decisions; the prospect that powerful economic forces would manipulate the actions of the worldwide authority to suit their own ends; the hostility that existing international organizations have shown to the principles of Christian morality. In fact—tossing aside the track record of the UN and other international agencies—the PCJP suggests that the creation of a global authority would serve to restore “the primacy of the spiritual and of ethics” in the guidance of the world’s economy.

 

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Further information:

• Holy See Calls for Reform of Global Finance (VIS)
• Pontifical Council for Justice and Peace urges major economic reform (Vatican Radio)
• FULL TEXT: Note on financial reform from the Pontifical Council for Justice and Peace
• Vatican Calls for Global Oversight of the Economy (New York Times)
• Vatican urges major economic reform (AP)
• Catholics, Finance, and the Perils of Conventional Wisdom (National Review Online)
• Vatican meets OWS: 'The economy needs ethics' (USA Today)
• Vatican releases ‘strange remedy’ to global financial crisis (National Post)
• Vatican sides with 'Occupy Wall Street' protesters (Reuters)
• Holy See v. Laissez Faire (National Catholic Reporter)