♠ Posted by Emmanuel in
Casino Capitalism,
CSR,
Latin America,
Religion
at 5/18/2018 03:18:00 PM
 |
| You tell 'em, Pope Francis! Here are more of his thoughts on haute finance. |
Okay, so the question posed above is not definitively answered in a new papal bull on modern finance. Let's just say that certain kinds of speculative activity most likely raise your chances of eternal damnation. As a pope coming from Argentina--ground zero for IMF borrowings
past and
immediate future--the way financial markets impact the well-being of persons has long been on his mind. Earlier this year, an apostolic exhortation encouraged people to think about the true meaning of "
security" which does not equate to "wealth":
67. The Gospel invites us to peer into the depths of our heart, to
see where we find our security in life. Usually the rich feel secure in
their wealth, and think that, if that wealth is threatened, the whole
meaning of their earthly life can collapse. Jesus himself tells us this
in the parable of the rich fool: he speaks of a man who was sure of
himself, yet foolish, for it did not dawn on him that he might die that
very day (cf. Lk 12:16-21).
68. Wealth ensures nothing. Indeed, once we think we are rich, we can
become so self-satisfied that we leave no room for God’s word, for the
love of our brothers and sisters, or for the enjoyment of the most
important things in life. In this way, we miss out on the greatest
treasure of all. That is why Jesus calls blessed those who are poor in
spirit, those who have a poor heart, for there the Lord can enter with
his perennial newness.
Just yesterday, Pope Francis continued with this theme of countering what the world values by identifying immiserizing forms of finance that *might* make you wealthy but leave others worse off (and endanger your soul's well-being in the process). Given a reasonable premise that financial crises leave many worse off in market-based societies, derivatives attract scrutiny insofar as they may hasten such crises as witnessed during 2007-08. From the
just-released Economic and Pecuniary Questions:
[26.] However, in some types of derivatives (in the particular the
so-called securitizations) it is noted that, starting with the original
structures, and linked to identifiable financial investments, more and
more complex structures were built (securitizations of securitizations)
in which it is increasingly difficult, and after many of these
transactions almost impossible, to stabilize in a reasonable and fair
manner their fundamental value. This means that every passage in the
trade of these shares, beyond the will of the parties, effects in fact a
distortion of the actual value of the risk from that which the
instrument must defend. All these have encouraged the rising of
speculative bubbles, which have been the important contributive cause of
the recent financial crisis.
It is obvious that the uncertainty surrounding these products, such
as the steady decline of the transparency of that which is assured,
still not appearing in the original operation, makes them continuously
less acceptable from the perspective of ethics respectful of the truth
and the common good, because it transforms them into a ticking time bomb
ready sooner or later to explode, poisoning the health of the markets.
It is noted that there is an ethical void which becomes more serious as
these products are negotiated on the so-called markets with less
regulation (over the counter) and are exposed more to the markets
regulated by chance, if not by fraud, and thus take away vital
life-lines and investments to the real economy.
In a similar vein, other targets of the pope's ire include credit default swaps when used for the purpose of "gambling" on the eventual insolvency of firms instead of "insurance" for corporate debt holdings as originally intended:
A similar ethical assessment can be also applied for those uses of
credit default swap (CDS: they are particular insurance contracts for
the risk of bankruptcy) that permit gambling at the risk of the
bankruptcy of a third party, even to those who haven’t taken any such
risk of credit earlier, and really to repeat such operations on the same
event, which is absolutely not consented to by the normal pact or
insurance[...]
In fact, the process of acquiring these instruments, by those who do
not have any risk of credit already in existence [i.e., those who don't hold debt securities], creates a unique case
in which persons start to nurture interests for the ruin of other
economic entities, and can even resolve themselves to do so.
It is evident that such a possibility, if, on the one hand, shapes an
event particularly deplorable from the moral perspective, because the
one who acts does so in view of a kind of economic cannibalism, and, on
the other hand, ends up undermining that necessary basic trust without
which the economic system would end up blocking itself. In this case,
also, we can notice how a negative event, from the ethical point of
view, also harms the healthy functioning of the economic system.
Therefore, it must be noted, that when from such gambling can derive
enormous damage for entire nations and millions of families, we are
faced with extremely immoral actions, it seems necessary to extend
deterrents, already present in some nations, for such types of
operations, sanctioning the infractions with maximum severity.
You may of course question my impartiality on this matter, but I do think the pope lays out a straightforward response to a highly topical issue. Risks of financial distress tend to
rise in developing countries like Argentina as interest rates increase Stateside, and the current rate-hike cycle is no exception. Detached from the "real" economy, financial activity without underlying economic purpose aside from speculation is ethically questionable insofar as the lives of other persons can be subject to grave harm--especially in the developing world:
17. What is morally unacceptable is not simply to profit, but rather
to avail oneself of an inequality for one’s own advantage, in order to
create enormous profits that are damaging to others; or to exploit one’s
dominant position in order to profit by unjustly disadvantaging others,
or to make oneself rich through harming and disrupting the collective
common good.
Such a practice is particularly deplorable from the moral point of
view when the intention of profit by a few through the risk of
speculation even in important funds of investment, provokes artificial reduction of the prices of public debt securities,
without regard to the negative impact or to the worsening of the
economic situation of entire nations. This practice endangers not only
the public efforts for rebalancing, but also the very economic stability
of millions of families, and at the same time compels government
authorities to intervene with substantial amounts of public money, even
to the extent of artificially interfering in the proper functioning of
political systems.
The pope is able to relate finance's potential dangers in a manner we can easily understand.
