Writing in the euphoric aftermath of the visits of Queen Elizabeth II and of President Barack Obama in May 2011, but in the context of the ongoing economic crisis, clinical psychologist, Maureen Gaffney, noted that people respond to big crises in two main ways – ‘by constructing redemption stories or contamination stories’, and said that ‘these stories significantly affect how people respond to the crisis’.1
Gerry O’Hanlon SJ
Gaffney went on to observe that the difference between ‘redemption’ and ‘contamination’ narratives is not a matter of different ‘facts’. It is, rather, about a different interpretation of the facts, involving imagination and a certain motivation and force of will, as well as rational analysis. In redemption narratives, people recount how they were forced to re-examine the fundamental assumptions they had about themselves and others, to modify them, to learn from the crisis and to emerge transformed and better people.
There is a deep sense of something torn in the fabric of Irish life in these times. Equally, there is awareness that, in our globalised world, this torn fabric is but a tiny part of a much larger tapestry which is itself greatly disfigured and in need of repair.
In this time of anxiety, bewilderment, and sometimes, still, denial, there is a call to believers and theologians to join with others in the construction of a redemption narrative or myth which does not ignore ‘the facts’ but which can offer vision and hope, galvanising our society towards effective action.
This call comes at a time when believers themselves are in a weak position – all Christians, all religious believers, are confronted in Europe with an operative secularism which is suspicious of their contribution in the public square, while Roman Catholics in particular suffer from the enormous loss of credibility of their Church due to the scandalous reality of clerical child sexual abuse.2
It is clear from the redemption narrative at the heart of Christianity that weakness of this kind cannot be used as an excuse for inaction or for turning a deaf ear to the call of the ‘signs of the times’. But we do well to make our contribution with humility, respectful of the complexity of the issues and the expertise of others, in dialogue and conversation. And if, true to our identity, we need also at times to be prophetic, to challenge, can we learn to do so without pontificating on the one hand or remaining at the level of pious platitude on the other?
The Irish Situation
We are all aware of at least the broad parameters of our situation in Ireland. The banking crisis of 2008, due in part to the global credit crunch and in part to our own property bubble, led first to a government guarantee of the major banks and then several recapitalisations amounting to over 60 billion euro. The accompanying economic recession, and a sovereign debt crisis due to the prohibitive rates of government borrowing on bond markets, led to the IMF/EU/ECB Programme of Financial Support or ‘bail-out’ in November 2010.
The impact of the economic recession and the austerity measures taken in response has been enormous. Over the past five years, GDP has declined by 14.5 per cent from its peak at the end of 2007. Between 2008 and 2011, disposable income per individual declined by 12 per cent.3 The overall rate of unemployment has risen from around 4 per cent during the years of the boom to over 14 per cent.4 Particularly worrying is the rise in unemployment that is long-term (this stood at just over 1 per cent in 2007 but is now over 8 per cent) and the rise in joblessness among those under twenty-five, for whom the unemployment rate is now over 30 per cent.
Alongside increased unemployment, there has been a significant rise in emigration: the Central Statistics Office has estimated that in the year ending April 2012, a total of 87,100 people emigrated, of whom 46,500 (53 per cent) were Irish nationals. During the previous twelve months, 80,600 people emigrated.5
A series of austerity budgets has resulted in incomes being hit by additional levies and charges and the imposition of severe cuts in spending in areas such as health, education and social services – with both short-term and foreseeable long-term negative consequences. Poverty has increased: by 2011, the ‘at risk of poverty’ rate was 16 per cent (up from 14.4 per cent in 2008); in the same period, ‘consistent poverty’ rose from 4.2 per cent to 6.9 per cent.6 The Society of St Vincent de Paul has had a huge increase in the number of people seeking its assistance (for example, calls to its main regional offices have risen by more 80 per cent since 20097); in some instances, these new requests for help are from people who were previously donors.
With the increase in unemployment, and the decline in take-home pay for many still in jobs, it became evident that there was an enormous amount of private debt that could not be sustained. The most striking indicator of this is the number of mortgages in arrears: in September 2009, there were 26,271 mortgages in respect of principal residences which were in arrears for 90 days or more; by December 2012, the number had increased by 259.5 per cent, reaching a total of 94,488 (representing 11.9 per cent of all such mortgages).8
Behind the statistics reflecting how the recession, and the policy response to it, has impacted on employment and living standards is the reality of the hardship and suffering being experienced by so many individuals and families – the anxiety and even despair when income cannot match basic needs or debt repayments, the awful demoralisation which accompanies unemployment, in particular if it is long-term, and the heartbreak for families whose loved ones are forced into emigration since there is no prospect of making a decent living at home.
It would be different, more hopeful, if we could be reassured that the burden we shoulder now is fairly distributed and will lead to future stability. But, as we keep hearing, we are one of the world’s most ‘open’ economies and, as things are set up, our future depends greatly on growth in the global economy. However, this is far from guaranteed – in its World Economic Outlook of October 2012, for example, the IMF acknowledged ‘new setbacks’ to economic recovery and pointed to the continuing high risk of financial instability. It predicted that growth in the global economy was likely to remain weak and that unemployment would remain high in many parts of the world. And it drew particular attention to the deepening of the crisis in the euro area, describing it as ‘the most obvious threat to the global outlook’, and pointing to its impact not just in peripheral countries but its spill-over effects in other countries in the EU.9
All kinds of uneasy questions lie behind the bleak description above. If we all turn to austerity, thrift and saving, how can we create growth in our economies? And how can so many countries rely on growth from exports if domestic demand in many countries is so weak?10 But, anyway, given that our growth in the recent past was consumption-led and debt-fuelled, is growth really any kind of sustainable answer, particularly when we consider global environmental limits?
Furthermore, is it not the case that most of the developed world faces an enormous overhang of accumulated government and private-sector debt, much of which is un-repayable, so that the real question is how much gets written off and who picks up the tab?11 Are we not, particularly in the developed world, living beyond our means? And, given that our economies are so inter-linked, is there not a need for more effective global governance in order to ensure a coordinated response to the crisis?
It is easy to see that there is an underlying moral dimension to many of these questions which also, of course, involve extremely complex and important technical issues. For example, it would be reckless and irresponsible to return to an old model of growth if that were to result in the destruction of our planet; it would be grossly unfair if the burden of repaying debts was laid on the shoulders of those who did least to incur them.
A redemption narrative will have to draw on values and principles such as fairness and the common good, while respecting the difficult technical issues involved. A Christian narrative will, in addition, draw on that basic notion of loving one’s neighbour as oneself in a way which respects, while engaging critically with, conversation partners coming from a secular background or from that of another faith. It will seek to understand where God is in all this, what God is saying.
In the remainder of this article, I will look at some questions arising in relation to the economic model adopted over recent decades, and in later articles I will consider the social, cultural, political and theological resources we can draw on as we attempt to find solutions to our difficulties.
The Economic Model
It is perhaps an endemic temptation for theologians who dabble in economic matters to bring a moralistic lens to bear that favours equality and the vulnerable and is somewhat jaundiced towards business, profit and entrepreneurship. I don’t believe that there need be a conflict between these aspects: there is just profit, entrepreneurship is part of a good, natural, human proclivity and, together with sustainable growth, they are necessary for the protection of the vulnerable and compatible with the eradication of egregious inequalities. But I do believe that there are at least three key questions which a theologian may and ought to put to the current dominant economic model as part of that re-examination of fundamental assumptions which Maureen Gaffney alludes to in her observations about ‘redemption narratives’. These questions relate to the role of the market; the importance of equality and fairness; and the assumption that economic growth is ‘good’.
The Role of Markets
The first question concerns the role of markets and in particular financial markets. In a very interesting piece in the journal, Studies, Bernadette Andreosso-O’Callaghan distinguishes between the ‘real sphere’ of the economy and the ‘financial sphere’.12 Corresponding to this distinction, an economy is, she suggests, characterised by two types of markets: the markets for goods and services (the real sphere) and the financial markets. In the former, the interaction between buyers and sellers establishes the price of the good or service. The latter consists of a nexus of interactions between institutions such as banks, insurance companies, hedge and mutual funds and may be involved in financial intermediation or in the exchange of financial instruments (such as stocks, foreign exchange, bonds, futures, swaps, and so on).
In the past, the prime function of the financial market, and in particular of banks, was to create a bridge between savers (households) and investors (firms) and so to assist business corporations (and more marginally households) to fulfil their investment plans and to create jobs – in other words, to act in service of the ‘real economy’.
In more recent decades and years, with the flowering of deregulated ‘neo-liberal’ or ‘financial’ capitalism from the late 1970s on, and the progressive dismantling of regulatory structures, banks were allowed to become involved in widening range of activities of an increasingly speculative nature.
As a result, there has taken place a financialisation of the economy in ways which are arguably beyond any real usefulness in supplying added liquidity and which serve few real economic or social needs beyond profiting financial institutions and individual traders. So, for example, far from investing in order to create economic and social capital in accord with some notion of the common good which would imply a ‘win–win’ situation, markets often engage in a predatory kind of profit opportunism, targeting areas of weakness at any particular time (including primary commodities and food products13).
Will Hutton writes: ‘Bankers … created a gambling culture in which the moral borders between legitimate trading activity, recklessness and criminal activity became ever more fuzzy – and the disproportionate personal rewards disconnected from any economic and social reality’.14 This, he argues, is a new business model whose aim is ‘to make money from money – recalibrating high risk as low risk, riddled with conflicts of interest, and playing cat and mouse with regulators and governments to avoid their close scrutiny’.15
The scale of the financialisation of the global economy is breathtaking. Hutton estimates that ‘by the summer of 2008, $800 trillion of financial derivatives were being traded globally – more than 12 times the world’s GDP. Financial assets had risen from 80% of the world’s GDP in 1980 to 300% in 2008’.16
All this was occurring in a context where ‘less and less capital was being deployed to support the staggering size of the banks’ balance sheets’.17 Hutton suggests that the bankers seemed to think that they ‘… had created a new alchemy – the lead of poorly rated bonds and assets was turned into the gold of ‘Triple A’ ratings’.18 His summary judgement is succinct: ‘The financial sector grew ever larger in relation to GDP without serving any useful economic or social purpose whatsoever. And it was a one-way bet: the bankers knew that they would never be allowed to go bust’.19
Another commentator, Catherine Cowley, judges that by the 1990s only about 5 per cent of derivatives (of which securities are but one example) were being used for productive purposes, whereas ‘the rest were used for speculation or for other purposes within financial markets’.20 Arguing that ‘derivatives frequently do not create wealth’, Cowley says: ‘Wealth is certainly re-distributed, but to go … to the comparison with horse racing: if I bet Arthur’s Ransom is going to win the 2.30 and you bet that it won’t, one of us is going to be wrong. Whoever is right will be wealthier, but the other will be poorer. Wealth has not been created, merely moved around’.21
One recalls the legendary investor Warren Buffett’s famous remark in 2003 that derivatives were ‘financial weapons of mass destruction’ and the argument of George Soros that the Credit Default Swap (CDS) in particular should not be allowed at all: ‘The more I’ve heard about them, the more I’ve realized they’re truly toxic. People buy a CDS not because they expect an eventual default but because they expect them to appreciate in response to adverse developments … It’s like buying life insurance on someone else’s life and owning a license to kill’.22
Distinguished Financial Times journalist, Wolfgang Munchau, speaks in a similar vein: ‘A naked CDS purchase means that you take out insurance on bonds without actually owning them. It is a purely speculative gamble. There is not any social or economic benefit. Even hardened speculators agree on this point … the case for banning them is about as strong as that for banning bank robberies’.23
Andreosso-O’Callagahan, then, is arguing that because financial markets tend to be of this speculative nature ‘they have become increasingly disconnected from the real sphere’24 and so only very loosely serve the needs of firms. In particular, operating according to the ‘efficient market’ hypothesis and rigorous mathematical models – which assume that markets operate best when they are most free from regulation and that agents act with full understanding and rationality – they have ended up with enormously complex financial instruments which remain opaque even to ‘insiders’.25
Irrationality of the market
Andreosso-O’Callaghan also draws attention to the lack of transparent information in financial markets and the lack of any assurance that assessment of risk and of a financial price is solidly founded. Furthermore, she suggests, trading decisions are made as much according to emotional and hormonal reactions as rational choice.26
Will Hutton makes a similar point, noting that ‘financial market participants display enthusiasm and panic and they move in herds’.27 Likewise, Catherine Cowley speaks of the ‘illusions of power and the anxiety, competitiveness and insecurity’ which typically characterise market activity. These features are reinforced by the way that jobs and remuneration packages are organised – particularly where the basis for calculating bonuses is ‘you eat what you kill’; that is to say, remuneration is calculated according to fees generated or profits made. In this context, emotions can easily affect judgement as traders show willingness to make ‘perhaps unjustifiably risky investments, to cut corners, to do what has become known as ‘gambling for resurrection’.28 ‘Market sentiment’, it follows, does not by any means always coincide with the ‘fundamentals’ of an economy.
Not alone, then, do financial markets as constituted at present serve little useful purpose, they may also lead to great harm.29 Their irrational and short-term, speculative, ethos leads to the kind of market volatility that we are so well aware of, often resulting in gains and losses of a disproportionate scale on scant rational evidence. Given that too little of the profits made in these markets are invested in the real economy, that the losses may be socialised, and that the expectation of high and short-term returns then puts pressure on the real economy in terms of higher profits, cost cutting, and lower wages, it is clear that an overly-financialised economy is a risk to the real economy.
Angus Sibley is scathing in his assessment: ‘… most of the world has become, to varying degrees, infected with the virus of market short-termism. Part-ownership of our major business concerns is now shuttled at lightening speed between investment funds, which may well be unregulated organisations hidden in remote islands. It makes Frankenstein’s monster look very tame’.30
Andreosso-O’Callaghan points out that in 2009 Ireland represented 5.3 per cent of all EU wholesale financial activity in the EU-27, a disproportionately large share, and a ‘sign of a profound disconnection between domestic financial intermediation and the needs of a (shrinking) real economy’.31 She argues that much of the wealth in Ireland during the years preceding the crash was ‘extracted through trading activities on the property and financial markets … it looked as if the Irish economy had become increasingly an economy of rent seekers as opposed to an economy of generators of wealth through work, intellectual talent and physical effort’.32
We in Ireland therefore need not only to ask questions about the operations of our financial services sector, but become more active participants in the debate about the global economy and the sustainability of a financial market model that is excessively speculative in nature, often aggressively so.
This is not so say that financial markets are always wrong or do not also at times point to real problems in national and regional economies. But, too often, serious attempts in Ireland, and elsewhere, to make the real economy sustainable are undermined by the, at best, amoral logic and whims of financial markets lacking solid foundation in a sense of values and vision of the good life.
In this context, I note some of Andreosso-O’Callaghan’s recommendations for reform, including more robust EU regulation; legislation at EU and international level to provide for the separation of commercial and investment banks ‘so as to protect depositors and to guarantee a regular flow of investment to firms’; the setting of limits to speculation on certain commodities (including food and energy); and the regulation and supervision of the financial rating agencies.33 Like many other commentators,34Andreosso-O’Callaghan advocates a tax on short-term financial transactions.
It is clear that proposals for reform will encounter stout resistance from the financial sector – a sector that seems incapable of breaking out from its commonsense culture of entitlement, which most outsiders see as a nonsense. The financial industry’s vigorous opposition to the proposed European Financial Transaction Tax (EU FTT) is but one indication of the resistance to change. Only eleven of the twenty-seven EU Member States have stated their willingness to implement the proposed new tax. Ireland is not among them, taking the position that this country will not sign up unless the UK (which is strongly opposed) does so.35
It is worrying that so much of the current debate takes place within conventional assumptions about the normativity of markets as constituted at present. Are we building on sand? Does this kind of ‘financial engineering’ have any secure foundations? In Ireland, do we look forward to returning to the international financial markets – to ‘business as usual’?
Andreosso-O’Callaghan’s analysis – shared by many others36– is sobering. Her argument, in summary, is that the first global crisis of the third millennium finds its roots in the ‘financialisation’ of the Western economies, characterised by the rise of institutional investors on financial markets, by the worldwide liberalisation of capital markets, by an increasing disconnection between the financial economy and the real economy and, in the case of Ireland, by an over-sized financial sector. Governments all over the world have increasingly become subordinate to the vagaries of the financial markets. Will Hutton succinctly expresses the difficulty of finding ways to reverse this dominance: ‘The doctrine of ‘there is no alternative to the market’ lives on …’37 Who in Ireland is challenging this state of affairs at European and global level?
Equality and Fairness
The economic crisis has led to increased attention being focused on the growth in inequality in incomes and wealth which occurred in many developed, and developing, countries over recent decades – and the role which this inequality, and in particular the increasing share being captured by the wealthiest, played in bringing about the crisis.
Comparative data show that in terms of income distribution Ireland is among the more unequal Member States of the European Union38 and of the OECD39 and that prior to the economic downturn Ireland was among the OECD countries which had experienced a rise in the share of total gross income going to the top income-earners.40
In this context, the remarks of Dr Joachim Fischer (a German university lecturer who has lived over half his life in Ireland) are interesting: ‘…the privileges of a relatively small elite are all too obvious: medical consultants, the legal profession, top civil servants, the top echelons of Irish universities, politicians and others have helped themselves to extraordinary salaries, often twice what they would be in Germany and hardly justified by the only slightly higher cost of living here’.41
Given the role of the financial sector in creating the crisis, the continuation of a ‘culture of entitlement’ within which those working in the sector expect enormous rewards, and resist all efforts to rein them in, is breathtaking. One might imagine, given the colossal failures in this sector and the consequent suffering for the rest of society, that there might be more modest expectations from people whose jobs now depend on massive tax-payer subvention. The blunt words of Niall Fitzgerald, former CEO of Unilever, are apt: ‘There’s too much of ‘we can’t do this because our competitors will grab our best people away’. Fine, let them grab them away. You mean those terribly valuable people who either didn’t understand the risks they were running, or understood them and continued anyway without thought for the consequences? You know what? I could so without those valuable people.’42
To change this culture of entitlement would involve challenging market assumptions and an objective analysis of the difficulty, value and usefulness of particular jobs (is there anything intrinsically more difficult or valuable about running a bank in comparison with designing and building a bridge, engaging in medical research, risking one’s life as a fire-fighter?) – as well as taking account of the ‘achievements’ of senior bank executives in the recent past.
The market is too easily impressed by what Lonergan would call a ‘naïve realism’ – an empirical positivism that equates proximity to the management of money with entitlement to enormous reward. How much intelligence does one need to take money ‘from government (and others) and lend it out at vast profit, almost risk free’?43 Will Hutton notes the incongruities and moral vacuity in all this, observing that ‘bankers themselves cannot explain why they should be so generously rewarded’, yet have put forward the argument that no individual bank can break the cycle ‘because they all had to pay the going rate to retain their ‘talent’’.44
Of course, as indicated above, it is not only bankers whose earnings and wealth deserve scrutiny. Apart from the professional elites already mentioned, at the height of the boom, in 2007, the average remuneration packages granted to the top twenty chief executives of Irish public companies were thirty-five times higher than the annual income of the average employee.45 The situation in the UK and USA is, if anything, worse.46 It is not surprising that in a survey carried out in 2010 for TASC, 87 per cent of people said that wealth is distributed ‘not very’ or ‘not at all’ fairly in Ireland, while 91 per cent agreed that the Government should take active steps to reduce the gap between high and low earners.47
It is in this context that the rhetoric of solidarity (‘we are all in this together’; ‘we must all make sacrifices’) rings hollow and that concerns about bonuses and pay packages assume particular symbolic significance, way beyond the economic trade-off from lower remuneration.
It is not at all a ‘given’ that the introduction of a maximum wage, or of a rule that the highest-paid workers in any public or private enterprise would be paid at a fixed multiple of, say, five times the earnings of the lowest paid, at least for an emergency period of three years or so, would solve our economic woes.48 But in a situation where the austerity and cut-backs introduced to address our problems are disproportionately affecting those who are poor or otherwise vulnerable in our society, then there is a particularly sharp need to tackle inequality, so as to cultivate a solidarity that is more than rhetorical and is required by the gravity of our situation.49
|Occupy slogan: ‘We are the 99%’ © iStock
Without this solidarity, there is the ever-present danger of significant social unrest, not to mention the lack of the kind of social cohesion that can generate the vision, policy and energy needed for a sustainable recovery. In this context, it is not surprising to note resistance on the streets in Greece, the wider ‘indignant’ movement in other parts of Europe, and the Occupy Movement, with its slogan ‘We are the 99%’, reflecting its opposition to the world-wide trend towards increased concentration of income and wealth among the top 1 per cent.
A sense of solidarity would also be enhanced by stronger evidence of a new culture of accountability within Irish business and public life, in particular with respect to the speedy prosecution of white-collar crime, and an end to that culture of impunity which is so ingrained.50
This latter suggestion is a particularly sharp illustration of the tension that runs through any analysis of the Irish or global crisis: how does one combine a sense of fairness and values with what ‘works’? How, in Ireland, do we avoid slipping back into ‘business as usual’ mode and instead plan for an economy with greater equality and access to quality public goods such as education, health, housing, social services, a humane penal system?
A Question of ‘Growth’
A third question of a fundamental nature concerns the inherent assumption by most economists – shared then by politicians and a majority of ordinary citizens – that constant growth is ‘good’ and its lack is ‘bad’.51 Given the probable status of our knowledge about the effects of climate change and peak oil, not to mention our awareness of the great injustice of national, regional and global inequalities, it is surely wise to look again at this simplistic notion of ‘growth is good’.52
Capitalism in its most primitive form always comes up against an inherent contradiction of a philosophical–anthropological nature: it promises happiness to the person who goes out and buys and ‘consumes’ particular goods and services, but then depends for its flourishing on persuading the same person that what they really need is something else, something more. There is kind of a diabolical ‘magis’ (‘more’) at work here, in contrast to the Ignatian and Christian magis focussed on the question: ‘What more can I do for God?’.
We need, at the very least, to create more rounded measurements of what might constitute ‘good’ economic growth, a measurement that in Ireland and other developed countries would pay less attention to material affluence (still a major issue in developing countries) and more to social and cultural matters such as health, education, housing, arts and leisure.
In this context, I note the practical proposal of Eddie Molloy that each year on budget day the Minister of Finance would adopt a ‘balanced scorecard’ approach by reporting not just on our public finances but – following the truism that ‘what gets measured gets done’ – also on our wealth-creation capacity, the quality of our infrastructure (including education, health, environmental factors and so on), social justice and quality of life, and ethical, competent, accountable government and public service.53
We may even need to think instead of something like ‘the richness of sufficiency’ in terms of our vision and goals, to aim for the satisfaction of basic needs and modest wants, and come up with appropriate economic policies to attain these goals. So, for example, the New Economics Foundation in the UK advocates consideration of a shorter working week and the sharing of jobs in order to achieve a more integrated working life, in a context where growth (as measured by simple GDP) will fall, but where one might hope for a more humane life in which work, care and leisure are better balanced and more in tune with care for our environment).54
We are engaged in the search for elements of a redemptive narrative for our crisis. We have indicated some of the fundamental assumptions that need to be re-examined as part of this new narrative, including the excessive financialisation of economies, the fixation with growth, and the lack of fairness and other values endemic in the current model, both nationally and globally.
Again and again we came up against the need to marry technical, economic approaches and solutions with some wider grasp of values and what constitutes the good life. Left to itself – as it largely has been in the recent decades – economics is indeed a ‘dismal science’, and we need to learn from the ongoing implosion of the neo-liberal model of capitalism, with its harsh outcomes for so many.
We have an opportunity, arising out of this crisis, to imagine and move towards a more sustainable economic model and world. This will not be easy – the temptation will be to try to return to ‘business as usual’, and resistance to change is strong, in particular among elites which stand to lose most from a re-balancing of the status quo. What resources do we have to bring about the required change? Reflections on this question will form the next article in this series.
- Maureen Gaffney, ‘Queen and Obama visits can be benchmark for a new beginning’, The Irish Times, Saturday, 28 May 2011.
- See Gerry O’Hanlon SJ, Theology in the Irish Public Square, Dublin: Columba Press, 2010.
- Central Statistics Office, Survey on Income and Living Conditions (SILC) 2011 and revised 2010 results, Dublin: CSO, 13 February 2013.
- Central Statistics Office, Quarterly National Household Survey, Quarter 4 2012, Dublin: CSO, 27 February 2013.
- Central Statistics Office, Population and Migration Estimates April 2012, Dublin: CSO, 27 September 2012.
- Central Statistics Office, Survey on Income and Living Conditions (SILC) 2011, op. cit.
- Society of St. Vincent de Paul, The Human Face of Austerity, as witnessed by the Society of St. Vincent de Paul, Dublin, October 2012, p. 3.
- Central Bank of Ireland, Residential Mortgage Arrears and Repossessions Statistics: Q4 2012, Information Release, 7 March 2013.
- International Monetary Fund, World Economic Outlook, October 2012: Coping with High Debt and Sluggish Growth, Washington DC: IMF, 2012.
- Paul Krugman, speaking from a United States perspective, puts it succinctly: ‘It’s true that we’d have more jobs if we exported more and imported less. But the same is true of Europe and Japan, which also have depressed economies. And we can’t all export more while importing less, unless we find another planet to sell to.’ See Paul Krugman, ‘The competition myth’, The New York Times, Monday, 24 January 2011.
- Laurence Knight, ‘Europe’s four big dilemmas’, BBC News website, 18 September 2011; Charlie Fell, ‘Debt mountain casts long shadow over growth’, The Irish Times, Friday, 30 September 2011.
- Bernadette Andreosso-O’Callaghan, ‘Markets, Bondholders and other Economic Agents’, Studies, Vol. 100, No. 396, Summer 2011, pp. 223–242.
- A particularly shocking example of this kind of predatory behaviour is described by financial journalist Aditya Chakrabortty who draws attention to an UNCTAD report (published in June 2011) estimating how much commodity index investors had artificially pushed up food prices. In a world blighted by starvation in parts of Africa, Asia and elsewhere, it is nothing short of obscene that the buying and selling of contracts for food has gone way beyond the useful function of balancing supply and demand and instead has degenerated into speculative betting in pursuit of quick profits. Chakrabortty quotes Joerg Mayer of UNCTAD: ‘Food markets have been turned into a casino. And for no other reason than to make Wall Street money’. (Aditya Chakrabortty, ‘Bankers and politicians have turned food into a betting game’, The Guardian, Tuesday, 7 June 2011.)
- Will Hutton, Them and Us: Changing Britain – Why We Need a Fair Society, London: Little, Brown, 2010, p. 7.
- op. cit., p. 137.
- op. cit., p. 150.
- op. cit., p. 151.
- op. cit., p. 151.
- op. cit., p. 180.
- Catherine Cowley, ‘How Financial Institutions Dug the Hole We’re In’, in Philip Booth (ed.), Christian Perspectives on the Financial Crash, London: St Pauls Publishing, 2010, p. 35. Cowley defines a derivative as a ‘financial contract the value of which is based on (derives from) something else, for example a stock or a barrel of oil or … loans’ (p. 32).
- Ibid., pp. 42–43.
- Andrew Ross Sorkin, The New York Times, Saturday, 13 June, 2009.
- The Financial Times, Tuesday, 28 February 2010.
- Bernadette Andreosso-O’Callaghan, ‘Markets, Bondholders and other Economic Agents’, op. cit., p. 225.
- Philip Booth, ‘Differing Views on the Causes of the Crash’, in Philip Booth (ed.), Christian Perspectives on the Financial Crash, op. cit., pp. 22–23.
- Bernadette Andreosso-O’Callaghan, op. cit., p. 230.
- Will Hutton, op. cit., p. 193.
- Catherine Cowley, op. cit., p. 35.
- For a particularly trenchant statement of the baleful effects of markets, see Angus Sibley, ‘Frankenstein’s Market’, Doctrine and Life, Vol. 60, No 7, September 2010, pp. 31–38.
- Ibid., pp. 34–35.
- Bernadette Andreosso-O’Callaghan, op. cit., p. 226.
- Ibid., p. 235. For some pertinent comments on the effects of Credit Default Swap (CDS) dealing and short-selling on Irish government bond price volatility, and the wider need for more transparency in financial markets, see Sheila Killian, John Garvey and Frances Shaw, An Audit of Irish Debt, Limerick: University of Limerick, September 2011, especially Chapters 7 and 8.
- Bernadette Andreosso-O’Callaghan, op. cit., p. 236.
- Will Hutton, for example, in arguing that the growth of the financial system ‘needs to be arrested’ says: ‘a solution would be a tax on financial transactions, which is justified because so many of them serve no useful economic purpose’ (Will Hutton, op. cit., p. 209).
- In a joint letter to The Irish Times, on 30 January 2013, the Directors of Trócaire, the Jesuit Centre for Faith and Justice, and Social Justice Ireland expressed disappointment at the decision of the Irish Government to opt out of the proposed European Financial Transaction Tax.
- See, for example, Ian Linden, A New Map of the World, London: Darton, Longman and Todd, 2003 (in particular, Chapter 5 and 8). Linden refers to ‘stock markets increasingly determining economic stability and growth’ (p. 56) and to the ‘casino quality of most financial flows’ (p. 57) in the context of the ‘growing fragility of the international economic architecture’ (p. 60), so that we have a story of the ‘Prometheus unbound of finance capital and flows’ (p. 76). He advocates in response a political economy of the common good, faithful to the ‘refusal of Aquinas to locate self-interest in opposition to the common good’ (p. 151).
- Will Hutton, op. cit., p. 391.
- Kaja Bonesmo Fredriksen, Income Inequality in the European Union, Paris: OECD Publishing, 2012 (OECD Economics Department Working Papers, No. 952, ECO/WKP(2012)29).
- OECD, Growing Unequal?: Income Distribution and Poverty in OECD Countries, Paris: OECD, 2008 and OECD, Divided We Stand: Why Inequality Keeps Rising, Paris: OECD, 2011.
- OECD, Divided We Stand: Why Inequality Keeps Rising, op. cit., p. 38.
- Joachim Fischer, ‘The Irish Crisis through German Eyes’, Studies, Vol. 100, No. 398, Summer 2011, p. 210.
- In interview with Fintan O’Toole, The Irish Times, Saturday, 6 March, 2010.
- The Tablet, 16 January 2010, p. 2.
- Will Hutton, op. cit., p. 173.
- See Fintan O’Toole, Enough is Enough: How to Build a New Republic, London: Faber and Faber, 2010, p. 196; see also Part Two, Chapter 4, ‘Beyond the Ultimatum Game: The Decency of Equality’, pp. 192–213.
- ‘Thus base pay of CEOs in the FTSE has risen from 47 times an average worker’s salary in 2000 to 81 times now …’, while the ratio in the US rises to 300 times – Will Hutton, op. cit., p 3; p. 67.
- TASC, The Solidarity Factor: Public Responses to Economic Inequality in Ireland, Dublin, August 2010.
- Fintan O’Toole, op. cit., 2010, p. 205.
- As is well known, the debate concerning the social effects of income inequality was reignited by the evidence and arguments put forward by Richard Wilkinson and Kate Pickett in The Spirit Level: Why More Equal Societies Almost Always Do Better (London: Allen Lane, 2009). Karen Rowlingson has examined the points made in various critiques since the publication of this work, alongside the evidence and debate in the broader peer-reviewed literature, and concludes that: ‘This is a highly complex area both theoretically and methodologically and there is still some disagreement among academics on many related issued, but the main conclusion here is that there is some evidence that income inequality has negative effects. There is hardly any evidence that it has positive effects’. See Karen Rowlingson, Does Income Inequality Cause Health and Social Problems?, York: Joseph Rowntree Foundation, September 2011, p. 6.
- Fintan O’Toole, Enough is Enough: How to Build a New Republic, op.cit.,Part Two, Chapter 5: ‘Ethical Austerity: The Decency of Citizenship’, pp. 214–237. See also: Fintan O’Toole, The Irish Times, Saturday, 26 March 2011 (re findings of Moriarty Tribunal) and 6 August 2011; Eddie Molloy, The Irish Times, Saturday, 9 October 2010; Joe McGrath, The Irish Times, Tuesday, 21 December 2010 (on corporate crime).
- Gerry O’Hanlon SJ, ‘A New Economic Paradigm?’, Working Notes, Issue 63, 2010, pp. 3–10; Frank Turner SJ, ‘The Crisis and Poverty: Reflections on the Global Economic and Financial Crisis’, Sozialalmanach: ‘L’annuaire Caritas sure la situation sociale du Luxembourg’, Luxembourg: Caritas Luxembourg, 2010, pp. 275–285.
- Richard Douthwaite, ‘Introduction: Where We Went Wrong’, in Richard Douthwaite and Gillian Fallon (eds.), Fleeing Vesuvius, Overcoming the Risks of Economic and Environmental Collapse, Dublin: Feasta, 2010, pp. 1–10; ‘Healing a Broken World’, Report of Task Force on Jesuit Mission and Ecology, Promotio Justitiae, No. 106, 2011/2. One wonders, in this context, if environmental constraints will not inevitably lead to a certain ‘de-globalisation’ effect and to a reconsideration of the notion of global free trade and the mandate of an organisation such as the World Trade Organization?
- Eddie Molloy, The Irish Times, Saturday, 5 March 2011.
- Gerry O’Hanlon SJ, ‘A New Economic Paradigm? In the Concrete –Towards a New Model’, Working Notes, Issue 64, 2010, pp. 3–9. For a recent attempt by an economist (with links to the New Economics Foundation) to outline a more radical approach to our crisis, see David Boyle, ‘New Deal for a Better World’, The Tablet, 15 October 2011, pp. 4–5.
Gerry O’Hanlon SJ is a theologian and staff member of the Jesuit Centre for Faith and Justice.
This article is based on a presentation to a seminar, ‘Reshaping the Ethical Imagination’, organised by the Irish School of Ecumenics and held in Trinity College Dublin on 22 October 2011.