A REFORMED MARKET ECONOMY:
ENTREPRENEURSHIP FOR HUMAN DEVELOPMENT
- FINANCE WITH THE PURPOSE OF THE COMMON GOOD
In the last few years, financial global development as a fact has been accompanied by amplified economic volatility. On the background of the resilience shown by some banks and the heavy public cost of the bail-out processes of others, the financial sector is undergoing profound change, both through added regulation and through internally promoted reform. The call to give this reform a human and ethical perspective can be translated into practical ways which, in addition to the acknowledged ethical approach to finance, also involve the idea of “inclusive finance”, i.e. “finance that helps fight exclusion”. The Foundation’s special group on finance has formultated this in “The Dublin Proposals on Finance and the Common Good” which principally include the following ideas:
- Change in managerial culture and behaviour: there is a human being at the beginning and end of each and every transaction. This may go against the demands of technology and regulation.
- Helping job creation through decentralized lending: the greatest possibilities of job creation lie at the level of small enterprise and in a more flexible redistribution of employment among adaptable and creative companies, and this requires decentralized lending from banks and from non-regulated credit intermediation.
- Fighting fraud, corruption and abuses: effectively implement zero tolerance of unethical practice, including “regulatory arbitrage” practices; make unethical behaviour punitively expensive.
- Promote stability and clarity of legislation to mitigate the cost of bureaucracy and the difficulties of interpreting regulation, which is one of the roots of corruption.
- Make consumer protection more effective through transparency and simplification. Explore fair and equitable deleveraging for over-indebted households through risk sharing by creditors and debtors. Promote family financial education.
- Promote and support long term investment especially through institutions capable of “patient” financing which involve public and private funds and require adequate legal and tax arrangements.
- Mobilize financial technology for inclusive finance through the use of mobile devices and the digitization of government disbursements, of health services and of supply chains.
- Enrich financial education to avoid transmitting future finance managers a “value-free” framework, by cultivating ethical reflexion, the ability to understand history and the capacity to exercize critical analysis.
- Redefine the financial business model with moderate profit objectives and long term incentives and bonus policies.
To start these processes and give them enough strength, it will be necessary to reformulate the mission statement of finance in terms of service to the entire economy and society, without which no young people will feel motivated to work in financial institutions.
- POVERTY AND THE “RESPONSIBILITY TO PROTECT”
Whatever the past merits of the market economy in overcoming poverty in parts of the world, a Christian inspired approach necessarily has to envisage the present state and the permanence in many places of the wicked problems of poverty and under-development. While a mounting euphoria of the Western world trivialized the wisdom enshrined in traditional precautionary principles and let hubris proliferate – with the ensuing crisis and depression -, others remained trapped in the negative circles of poverty. The drama of insufficient emergency response to catastrophe – natural or man-made – and immigration are two aspects by which the disquieting truths of inequality are brought again and again to the fore.
In cases of natural disasters, the duty is not only to act quickly, but also intelligently. Contacts between groups within the Church in donor countries and in the receiving countries can be essential to increase the donors’ generosity and also to direct external help towards longer term development needs, of which the immediate emergency may be just an indicator. Man-made humanitarian crises tend to disappear from the priorities in front of natural disasters (as was evident for example in the coincident tsunami in Southeast Asia and the Darfur genocide in 2004). There is reluctance to intervene in man-made crises, even when the latter are responsible of unlimited numbers of human victims. The drama of child soldiers in many conflicts tests international policies of non-intervention, as does the suffering of Christians and other ethnic groups in the Middle East. The Church’s teaching clearly affirms that the “responsibility to protect” – or the obligation to intervene – has shifted away from individual countries and has been entrusted to the international community.
In the issues of development there are positive trends that make significant contributions to the impact of policies and alleviation of poverty, mainly through better quantitative analysis, better scientific data on “behavioural economics” and through private-public collaboration in financing and monitoring development projects. But institutional structures will never be enough: the human person is integral and human beings are beyond measure. As many examples suggest, the key to development requires the mobilization of people, from the bottom up, and with a fully human dimension, including freedom, moral agency, goodness, virtue and vocation.
Migration is an example of the need for greater focus on the vocation of the human person. To begin with one should see not only the abuses, the tragedies of refugees and the lack of co-ordinated policies – all of which need to be addressed – but also the positive aspects of migration, the gifts it brings. Economic migration does not proceed from extreme poverty. It involves an investment, an economic calculation and, very often, a family-oriented plan. The question of unaccompanied minors is especially acute and requires a priority treatment based on the human person, as does the whole issue of migration.
Promote a world-wide solidarity effort
Both when discussing the new dimensions of inequality and the role of finance, the idea of an international tax based on financial turnover or on capital is often mentioned. These proposals would require international unanimity, unlikely to be forthcoming at the global level, and their effect could be confiscatory. Instead of a tax, the Catholic Church could support and promote the idea of voluntary contributions, not part of public finance, to endow new independent solidarity national funds aimed at supporting meritorious causes at the service of the poor. These funds should come together in a supranational network under guarantees of transparency and good governance.
Joseph FX Zahra