A new Vatican document which calls for the creation of a new global authority to regulate financial markets and a tax on financial transactions has been praised by some for reminding world leaders to uphold the dignity of the poor.
But others have roundly criticized it for being out of touch with political and economic reality.
The 41 page document, drawn up by the Pontifical Council for Justice and Peace and published Oct. 24, was aimed at contributing to the upcoming G-20 summit Nov. 3-4 which will be devoted to the ongoing global economic crisis.
Titled "Toward Reforming the International Financial and Monetary Systems in the Context of Global Public Authority," the Vatican said the current global financial crisis has revealed "selfishness, collective greed, and the hoarding of goods on a great scale."
It advocated a supranational authority as a possible remedy, one that places the common good at the center of international economic activity.
Although the document drew partly on the teachings of a number of popes, it is not considered official Catholic Church dogma. Vatican spokesman Father Federico Lombardi stressed that it was not from Pope Benedict and so it was not “an expression of papal magisterium.” But he did say it was an "authoritative note of a Vatican agency.”
The document said a global authority would include “a kind of central world bank” and a “set of public institutions” that will “guarantee the unity and consistency” of common decisions.
The U.N. should help establish such an authority, it said, and do so gradually without force. It should operate on the principle of subsidiarity, it added, intervening "only when individual, social, or financial actors are intrinsically deficient in capacity.” It should also transcend special interests, and not be beholden to the interests of developed nations or lobby groups.
“In this process, the primacy of the spiritual and of ethics needs to be restored and, with them, the primacy of politics — which is responsible for the common good — over the economy and finance,” it said.
Among other measures, the paper proposed a transaction tax to help promote “social justice and solidarity.” It advocated the creation “of a world reserve fund” to support countries suffering from economic crises, and called for recapitalization of banks with public funds but conditional on “virtuous” behaviors aimed at developing the “real economy.”
The document warned of an “idolatry of the market” — a term Blessed John Paul II used in 1991 after the fall of Soviet communism — and said his warning "needs to be heeded without delay.” And it claimed the primary cause of the current global crisis was "an economic liberalism that spurns rules and controls" and that relies solely on the laws of the market.
Italy's main leftist party, Partito Democratico, said the transaction tax had its “full support.”
“We hope the proposal [that has been proposed] elsewhere but with little success, can be immediately applied,” said Giuseppe Fioroni, the party's head of welfare. “The document underlines the necessity to confront the crisis and change the economy with a perspective not only on personal enrichment but on the growth and welfare of the community.”
Others have praised the Vatican for reminding world leaders to uphold and protect the poor and disenfranchised, and to place the human person rather than utilitarian considerations at the center of the economy.
Kishore Jayabalan, Rome director of the Acton Institute for the Study of Religion and Liberty, a free-market think tank, welcomed the Vatican's attempt to deal with the economic crisis, but he said their conclusions were based on “political and economic ignorance rather than experience.”
Jayabalan argued that “the supranational authority” to promote the common good is God, and yet the paper “doesn't speak of God or the natural law and so neglects this substantial notion of the common good,” he said.
The idea of a global authority was a “sentimental hope,” he added, one that has always proved unworkable. It cannot command universal support because of human diversity, and any attempt to empower such an authority to enforce its commands “would most likely be considered tyrannical and therefore unjust by a large part of the world,” he said.
Dr. Thomas Woods, a Catholic senior fellow at the Von Mises Institute, a libertarian think tank, said he didn't think the document was “entirely without its merits” and welcomed its warning against “excess credit creation” by central banks and the banking industry. But he said there were “some troubling aspects,” namely that a supranational body would add another layer to a system that instead needs more radical reform.
He argued that the mistakes of the Federal Reserve (such as setting artificially low interest rates that many believe led to the housing bubble which precipitated the current crisis) show these institutions are harmful and cannot be trusted. And he added that this economic crisis came about despite a threefold increase in spending on regulation of the economy over the past 30 years.
Rather than an idolatry of the market, he said, “we have had an idolatry of the public authorities” — institutions that are “taken for granted and whose indispensability is a myth.”
The U.S. banking sector, he added, is a highly regulated cartel dominated by a central bank. “There is a grave misconception about what's really going on,” he said.
Jayabalan, a former official at the Pontifical Council, said greed and idolatry are permanently recurring temptations that require “constructive ways” to combat them. And yet “quite surprisingly for an office of the Roman Curia and from a Catholic perspective, the note does not tell us much about the spiritual battle that must take place.”
Rather than draft this note, Jayabalan said the Vatican should have drawn on the “economic wisdom of the division of labor” which would have told them “to stick to what it knows and does best.”
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