Thursday, 6 November 2008

A View from the Pew - Greed and Fear

View from the Pew is a series of articles I am writing for Newslink, the Diocesan magazine for the Diocese of Limerick and Killaloe. This one appeared in the October 2008 issue.
Panic on the floor of the New York Stock Exchange

We seem to be living the ancient Chinese curse at the moment – “May you live in interesting times!” Humankind is buffeted by a myriad of crises, including global warming which I touched on last month. Now we are faced with a global financial collapse and a domestic recession.

The bad news in the financial markets comes faster each day. This time last year people of modest means in the USA found they could no longer pay their mortgages, their houses were foreclosed, house prices dropped, and construction screeched to a halt. Mortgage lenders, and banks they had sold their interests on to, began to worry about bad debts: the ‘sub-prime mortgage crisis’ entered our vocabulary. In March this year, investment bank Bear Sterns was sold for a pittance to prevent bankruptcy. In early September, the US government took over loan guarantors Fannie May and Freddie Mac to prevent their collapse. Two weeks later investment bank Lehman Bros went bust, another, Merrill Lynch, was taken over for a song, and insurance giant AIG was nationalised.

The contagion has spread around the world. Banks are writing off bad loans and will not lend to each other for fear they will not get the money back. The shares of the biggest UK mortgage lender HBOS have plummeted in recent days, and it may go under. Personal consumption has ceased to grow and investment has dried up. The world’s real economy is falling into recession. Oil and other commodity prices are falling, and unemployment is rising.

At home in Ireland, the building bubble has burst: house prices have been falling for a year, mortgages are hard to get, construction has crashed, and thousands of building workers are unemployed. Government finances have lurched into the red, and bank share prices have fallen to a third of what they were a year ago.

Where will all this end? I haven’t got the foggiest idea, but I would be pleasantly surprised if the coming recession is much easier than the Great Depression of the 1930s, about which I heard my parents talk. Alan Greenspan tells us this is a ‘once in a 100 years’ event. And it gave me no confidence to hear the CEO of the Irish Banking Federation on Primetime warn maverick economist David McWilliams that ‘loose comment is not helpful’. Confidence in the future is what sustains markets, and I don’t see much about. Should I start to fear for my pension and my savings?

How should we respond to all this as Christians?

First, we must pray for the very many people who will be feeling the pinch over the coming months and years. Our prayers will remind us of our Christian duty and God will guide us in our response. Second, it is our duty to protect the poor and the disadvantaged who are always hit hardest in a recession. This means both arguing for public policies to help them and supporting them with private charity if we can. Christ enjoins us to love our neighbours as ourselves. Our neighbours live not just in Ireland, but all over the world. It would be all too easy to say that ‘charity begins at home’ and ‘let the divil take the hindmost’, but that is not Christ’s way.

The cause of the problem, I think, is old-fashioned, sinful human greed. Banks borrow at low interest and lend at higher. Greedy depositors look for the highest deposit rates. Greedy banks make loans at the highest loan rates they can get. Greedy individuals borrow money to buy things they cannot afford. Greedy businesses leverage their own funds with borrowed money to improve their rate of return. All this works well enough so long as all parties accurately assess the risks of default. But when they don’t, the whole edifice starts to crumble – that is what we are seeing now. But risk taking has been built into the whole system as if it is a positive thing: the more risks, the higher the returns, and the higher the bonuses handed out to finance professionals.

If we want to avoid the periodic crashes to which the capitalist system seems prone, then, as Christians who understand the power of original sin, we must support those who call for stronger regulation to reduce greedy risk taking and allow the system to function.

But what if the problem is the capitalist system itself? Even if it were possible to regulate its excesses to avoid crashes, perhaps capitalism leads inevitably to the over-consumption which is degrading our God-given planet. The whole system depends on usury: lending money at interest. Paying interest requires economic growth, which drives consumption. But for Christians from the early Fathers up to the Reformation, and for Muslims to this day, usury was always forbidden. This is what St. John Chrysostom has to say on it:

"Nothing is baser, nothing is more cruel than the interest that comes from lending. For such a lender trades on other persons' calamities, draws profit from the distress of others, and demands wages for kindness, as though he were afraid to seem merciful. Under the mask of kindness he digs deeper their grave of poverty; when he stretches forth his hand to help, he pushes them down. . ."

Have the Fathers and the Muslims got it right? Perhaps we should also think again about how we organise our economy.


Glo.Ball.Beats said...

Your blog reminded me of a project I've been working on. Check out
It's done very well I think. Takes about 20 minutes.

Joc Sanders said...

Thanks for the link Amy, I hadn't come across it before. It is good stuff! Very clear, even if a little school-marmy. I frame the problem as ultimately being a spiritual one. We need to relearn the spiritual value of living simply, as Jesus did, though it is not just a Christian value - all societies and faiths seem to have recognised it. And I'd be interested to hear about your project.


Anonymous said...

Yes - for you - anti-consumerism make sense as a christian value and for me it makes sense simply as an ethical value - but ultimately they are both values born from the same idea. I appreciate the spiritual messages in your writing even though we don't share the same religion.

The project is one we do in schools about social enterprise education and we use a simplified version of the story of stuff to introduce the basic ideas of how business and economy effect the environment and every person in the chain. The ultimate aim of the day is to enable the young people to understand that business doesn't have to have a negative impact on the world and that businesses can contribute positively.

Joc Sanders said...

Sounds like an interesting project, Amy. How do the kids respond to the message that we really need to get away from grasping more and more stuff?