Spiritual Reflections on the Financial Crisis

Here's that article by my friend Andy Hamilton, SJ, on the financial crisis.

The wage of sin is the death of the market
ANDREW HAMILTON SEPTEMBER 25, 2008

It is interesting that the Churches have had little to say about the financial crisis and the behaviour that caused it. After all it has put at risk the lives of people throughout the world no less than do abortion, euthanasia or gambling. And Christian faith, with its insights into sin and salvation, offers some rich material for reflection.

Sin is popularly seen simply as the breaking of God's laws. But at a deeper level sin is the pursuit of values that sell your humanity short. That pursuit typically both corrodes your humanity and undermines the conditions that permit you to pursue cheap values. This process can be seen in the financial crisis.

The root of the financial crisis was greed — seeking individual financial gain in ways that did not respect the common good. The symbols of greed were spectacular. Monstrous salaries of CEOs, for example, and takeovers that transferred fees to the engineers and debt to the companies.

But greed was not confined to the top end. Funds demanded that companies produce short-term profits, led in turn by their members who wanted spectacular superannuation growth.

The way in which greed saps the humanity of the greedy and injures the welfare of ordinary human beings and of societies is evident enough. It is less recognised that unfettered greed destroys the conditions under which the market itself can function and under which the greedy can reward themselves.

If they are to function, financial markets require confidence. They are based on credit, and we give credit only to people whom we believe to be credible, and only if we believe creditable the processes by which we give credit. If we believe that people in the market are trying to rip us off and can rely on shonky processes to do so, we shall refuse credit. Without credit financial markets collapse.

Greed alone does not destroy trust and confidence. But it breeds a fatal lack of responsibility. We accept responsibility for our own gains but refuse responsibility for others' losses. The evasion of responsibility creates bad process. We make a legal and commercial framework that diffuses responsibility. When we need to reckon our debts and our credits, we shall be unable to do so. Confidence and credit will disappear from the market.

In this financial crisis evasion of responsibility has been refined into an art form. The slicing of debt into instruments that make it impossible to determine who has responsibility is a clear example. So is the propensity of banks to press money on those who cannot repay and the failure of board to resign after approving policies that gutted their companies and employees.

So the wage of sin is the death of the market and consequent real deaths in a world that relies on credit. That is where the parallels with Christian theology get interesting. There too the cycle of sin begets irresponsibility, and irresponsibility begets a doomed world. Salvation needs to come from outside by the intervention of a beneficent creator. He must take responsibility for debts owed in an altruistic and painful way. Thus is the working of greed and irresponsibility healed, doom averted, and credit restored. Sinners will be inspired to another and better way of life.

It all sounds familiar, doesn't it? The Reserve takes on all bad debts, and market players are freed from the consequences of their greed and irresponsibility. So salvation comes to the market whose devotees henceforth eschew greed, are responsible, and look to the common good. The market can be trusted to regulate itself.

Sound likely? Or in the market does salvation merely mean that the greed and irresponsibility are spectacularly rewarded?
In Christian faith, of course, there is the little business of original sin. People continue to sin, so that even after they come to faith life is a school for learning altruism. That experience suggests that financial markets will continue to encourage greed. So they need to be carefully structured in order that they don't foul their own nest of confidence as well as smearing those who depend on them.

Churches have a lot to say about markets. They ought to humour as children those who tell us to trust the markets to regulate themselves. Greed is part of the human condition. It does not offer salvation. That is something altogether different and better.