How to rebuilt trust?

The market, including the financial market, has a need for presuppositions that it is unable to produce itself, such as trust. The current financial crisis is a demonstration of what the social doctrine of the Church has long been saying: when an economic or financial system is thrown into crisis, it’s never for economic or financial reasons, but because an injury to the global moral system has occurred further upstream. It’s never the economy that ultimately explains the economy. Behind it all is man and the ethical or unethical relations that he establishes with his fellowmen and with capital. The bishops of France have underlined this concept in a very recent document on the financial crisis. The exclusive desire for profit and irresponsible speculative practices are not in themselves exclusively economic, but primarily human attitudes. And in fact, if we try to trace the main causes of the current crisis, we discover that they are primarily moral, not financial. The first factor was the granting of mortgages without proper guarantees. It involved a risk, especially due to the final motivation of these grants: constructing financial packages, with home loans as an ingredient inside them, to be sold on the market. This initial risk was then compounded with a chain of so-called “toxic” funds, in other words, bonds containing financial products derived from home loans and thus devoid of any real substance since they cannot be redeemed. These financial packets are so little transparent that not only the purchasers of funds could not know what was inside the box they were buying, but not even the banks to this day know how many of them they have in their system. This can be explained not only by their lack of transparency, but also by the chain of the sale of products that are not yet possessed, but that will be possessed in future. It’s an infinite chain that is driven by speculation and that increasingly becomes divorced from the real economy: it becomes a form of gambling. To all this the French bishops – and subsequently those of other European countries – have referred when they speak in their document of the “exclusive desire for profit” and “speculative practices”. Then there is the question of trust. By now the problem is not just that of the funds that have become toxic as a result of home loans that cannot be redeemed. It’s also a wider problem due to the fact that on stock exchanges everyone is eager to sell, and, especially, due to the fact that the banks are no longer making any loans to each other for fear of them going bust. Trust is not primarily an economic or financial element, but an ethical element. When the market erodes it, the market is unable to restore it by its own efforts alone. Maintaining the importance of ethics in finance does not mean underestimating possible measures to correct the sharp crisis from which financial markets are suffering at the present time, both those of an immediate character and those in the medium and long term. These measures, however, cannot dispense with the commitment to reconstruct a regulatory framework and good practices that respond also to moral needs. For even the negative consequences appeal to ethical imperatives, since – as the French and other bishops have pointed out – in the last analysis it will be the poorest that will have to pay the steepest price for this crisis. This will happen when – as has already happened – the financial crisis will become a wider economic and productive crisis and then a political crisis. The restriction of credit, for example, is already a reality. The experts maintain – but who’s really an “expert” in such cases is not easy to know – that we need to act in three ways: first, the (US) State ought to buy up the home loans, guaranteeing their solvency; second, the real economy would have to be helped with deep and courageous tax cuts; third, the whole system of rules affecting the way banks work would need to be redesigned. In this regard COMECE, the Commission of the Episcopates of the European Community, has insisted much in recent days on the need for the creation of a global system of governance. To achieve this, what’s needed is a moral effort among nations and collaboration between states that, once again, cannot be merely of economic or financial type. In past days the CCEE, the Council of the Bishops’ Conferences of Europe, has itself underlined, at its plenary assembly in Esztergom, the negative consequences of an economic and financial system that is out of control and called for a supplement of responsibility. The social thought of the European Catholic Church is once claiming its place as an essential point of reference to overcome the crisis and heal the wound.