The president of the Vatican Bank has said that emerging economies may be the only countries experiencing economic growth over the coming decades, while Western nations are crippled by lack of productivity, uncompetitive labor markets, and aging populations.
Writing in the Vatican newspaper L'Osservatore Romano, Ettore Gotti Tedeschi said the “next decades risk seeing exclusively the growth of emerging countries, and not just because of their low cost of production but also due to their advanced technological level and capacity to create capital, which is far superior to that of the old West.”
Populations in these emerging countries will also become heavy consumers, he added, “attracting production investment which until now has been the privilege of western economies.”
In developed rich countries, on the other hand, “the process risks becoming the reverse,” Gotti Tedeschi warned. “The law of economic gravity will progressively transfer investments to emerging countries,” while the West's economy, with a GDP in continual decline and an aging population, “will become unsustainable.” In the so-called developed countries, he said, “progress towards the opulence envisioned by Adam Smith has been interrupted, if not exhausted.”
The Vatican Bank president observed that the West has become a major consumer while its manufacturing productivity has declined, and that GDP has largely grown in terms of debt. “When all of this became too much, they [Western nations] threw in the towel,” he wrote. “Emergency measures from the State became necessary in order to raise public spending, but to be sustainable, it needs GDP growth, otherwise taxes become unbearable. In fact, this is what has happened.”
But the Italian financier believes it's possible to stem the West's economic decline, and he proposes some possible solutions. Most importantly, he argues for a “growth in productivity,” generated in part through making maximum use of “technology and the digital economy,” as well as “channelling savings into small and medium-sized businesses through the banking system.” Finally, he advises “studying appropriate currency measures.” All of this, however, “implies a change in the mentality of manual work, which needs to be rethought,” he said.
He also advised making exports of Western goods easier which would balance the loss of competitiveness. “One could then re-import production activity, favoring employment,” he said.
He ended by criticizing state intervention, saying it had exacerbated the economic crisis. Gotti Tedeschi wrote: “Many think that individual States need to intervene in order to resolve economic problems. But that happens with an increase in public debt. Countries that have chosen this path now regret it; others have not taken that road thanks to their politics, which are more attentive to the budget. But it is also necessary to be able to count on savings, on entrepreneurs, and on good banks — important elements, if not the only ones, to re-invent labor.”
Gotti Tedeschi was writing in support of warnings made by Fiat's CEO, Sergio Marchionne, who has been battling with labor unions to make his workforce more competitive.
A devout Catholic and father of five who used to be a director of Santander bank, Gotti Tedeschi has consistently said the underlying causes of the current economic crisis, particularly in Europe, is a decline in the birth rate.
The Western world's population growth rate (zero percent, or two children per couple) has led to a profound change in the structure of society, with less productivity and an aging population, leading to the inability of governments to reduce taxes, he said.
The Catholic Church believes these challenges derive from a still deeper cause, namely a lack of faith brought about by secularism and a disregard for the West's Christian roots. During a homily in San Marino at the weekend, Pope Benedict XVI warned that “Christian values are beginning to be substituted with a supposed wealth which, in the final analysis, shows itself to be inconsistent and incapable of bearing the weight of that great promise of truth, goodness, and beauty” of the Christian gospel.
He implied that this has resulted in a crisis in the family, "aggravated by the widespread psychological and spiritual frailty of spouses, and the fatigue experienced by many educators as they seek continuity for young people who are conditioned by many forms insecurity — first and foremost as regards their social role and employment possibilities."
© 2013 Newsmax. All rights reserved.