For God and Profit E-Book

Samuel Gregg

• Herausgeber: WS
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2016

Seitenzahl: 362

Beschreibung

From Christianity's very beginning, it has had a difficult relationship with the world of money. Through developing sophisticated understandings of the nature and wealth-creating capacity of capital, Christian theologians, philosophers, and financiers exerted considerable influence upon the emergence and development of the international financial systems that helped unleash a revolution in the way the world thinks about and uses capital. In For God and Profit, Samuel Gregg underscores the different ways in which Christians have helped to develop the financial and banking systems that have helped millions escape poverty for hundreds of years. But he also provides a critical lens through which to assess the workings—and failures—of modern finance and banking. Far from being doomed to producing economic instability and periodic financial crises, Gregg illustrates that how Christian faith and reason can shape financial practices and banking institutions in ways that restore integrity to our troubled financial systems.

Leseprobe

Advance Praise for For God and Profit

“For God and Profit is a formidable book, packed with interesting and regularly unacknowledged and unknown historical information, especially about the contribution of Christian thinking to the development of banking, the rise of the markets and Western prosperity. It is also closely argued with Christian and natural law categories of right and wrong being used to evaluate the economies and financial systems of today and yesterday.”

Cardinal George Pell, Prefect of the Secretariat for the Economy, Vatican City

“Christians have long been suspicious of the worlds of finance and capital. But Samuel Gregg has produced just the book we need. It is ecumenical, patient in explaining concepts and practices that Christians of all confessions should know, characterized by logic and clear moral analysis, and attentive to the contributions made by Christians throughout history to the development of modern finance systems. At a time when finance not only seems bereft of a moral compass but also to be lurching from crisis to crisis, this is a book sorely needed by Christians today.”

Michael Novak, author ofThe Spirit of Democratic Capitalism

“Many relationships between people today are based on finance and the exchange of financial value. Often the potential of these relationships and institutions are lost and damaged through harmful action and misguided thought. Both are challenged by Samuel Gregg in this timely, thoughtful, and accessible book. He seeks not only to analyze and critique but to exhort, and his appeal is to reason and the Judeo-Christian tradition. His breadth of scholarship and understanding of contemporary finance make this book a relevant and insightful resource for thinkers and practitioners alike.”

Peter S. Heslam, Transforming Business, University of Cambridge

“In his typically erudite fashion, Samuel Gregg has successfully synthesized an understanding of two topics which are, regretfully, too often seen as being in opposition to one another: God and finance. Grounding his analysis in a narrative which is equal parts modern economics and morality, he leaves the reader thankful for new and at times surprising insights.”

Frank J. Hanna III, entrepreneur, merchant banker and author ofWhat Your Money Means

FOR GODAND PROFIT

“The love of money is the root of all evils,” and there are some who, pursuing it, have wandered away from the faith, and so given their souls any number of fatal wounds.

1 Timothy 6:10

But his master answered him, “You wicked and lazy servant! So you knew that I reap where I have not sown and gather where I have not scattered? Well then, you should have deposited my money with the bankers, and on my return I would have recovered my capital with interest.”

Matthew 25:26–17

FOR GOD AND PROFIT

HOW BANKING AND FINANCE CAN SERVE THE COMMON GOOD

SAMUEL GREGG

—WITH A FOREWORD BY—

GEORGE CARDINAL PELL

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Title by Samuel GreggCover design by Ray LundgrenBook design by The HK Scriptorium

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ISBN 9780824521882

ISBN EPUB: 9780824522230

ISBN MOBI: 9780824522247

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Contents

Foreword

1.Introduction

Knowing before Judging

Faith, Morality, and Money

Renewing a Tradition

The Way Ahead

Some Caveats

Going Backward to Go Forward

2.Detestable to God and Man

Scandal Time

Hellenes, Latins, and Money

Israelites and the Poor

Premedieval Christianity, Money, and Interest

Zero-Sum Economies, Zero-Sum Economics

A New Economic World

Further Reading

3.Financial Revolution

From Stagnation to Growth

Finance and the New Economy

Institutionalizing Capital

The Not-So-Dark Ages

Back to Aristotle—and Rome

God’s Time, My Time

Work, Creativity, and Money

Partnership and Investment in a Growth Economy

Just Titles to Interest

Spreading the Risk

Money Markets, and Speculation

Toward the Full Justification of Interest

Tradition and Innovation

Further Reading

4.Caesar’s Coin

Measurement and Stability

The State and Debasement

Debasement as Economic Injustice

Money, Power, and Tyranny

Debt, Bonds, and Public Finances

Bankers and Princes

Against Monopolies

An Uncultivated Part of the Vineyard

Further Reading

5.Freedom, Flourishing, and Justice

Doing Good, Avoiding Evil, and Human Flourishing

Sociability and the Common Good

Material Goods: Common Use and Private Ownership

Surplus and Essential Wealth

Finance’s Ultimate Legitimacy

Getting Justice Right

From Theory to Practice

Further Reading

6.Understanding Capital, Civilizing Capital

Speculators and Speculation

Speculators and the “Real Economy”

Speculation, Currencies, and Financial Crises

Short Term versus Long Term:

A Detached Financial Sector?

The Knowledge Issue

Just and Unjust Compensation

Rewards, Justice, and Equality

Finance, Regulation, and the State

Further Reading

7.The Common Good, the State, and Public Finance

Hazardous Lending, Evading Responsibility

To Bail or Not to Bail

Regulation and Its Limits

Regulation and Virtue

Central Banks and Monetary Stability

Monetary Policy, the Poor, and the Wealthy

A World Central Bank?

Humility and a Higher Calling

Further Reading

8.Finance as Vocatio, Finance as Magnificentia

Understanding vocatio

Making Money Good

Building Trust, Pricing Risk, Enabling Opportunity

Growing Capital

Credit, the Poor, and Loving Our Neighbor

Debt and the Developing World

Greed, Virtue, and Life in Christ

Endnotes

Index

Acknowledgments

About the Author

Foreword

For God and Profit is a formidable book, packed with interesting and regularly unacknowledged and unknown historical information, especially about the contribution of Christian thinking to the development of banking, the rise of the markets, and Western prosperity. It is also closely argued with Christian and natural law categories of right and wrong being used to evaluate the economies and financial systems of today and yesterday.

For many, the very title. For God and Profit, will be provocative. It smacks of political incorrectness. Yet, as Samuel Gregg reminds us, capitalism first developed in the eleventh century, especially in northern Italy and Flanders, and many merchants had that exact phrase written in Latin—Deus enim et proficuum—in the upper corner of their accounting ledgers. This simply reflected the Christian intellectual framework that shaped thinking and activity in the Middle Ages and was not a cynical expression of materialism. Pursuing profit, taking risks, and creating capital were seen not only as economically useful but also as a way of giving glory to God as people fulfilled the injunction in Genesis to “be fruitful and multiply, fill the earth and subdue it” (1:28).

Western-style capitalism, or what is often called the market economy, is far from perfect. Many remain in poverty. Too many countries have mountains of debts (to the detriment of future generations). Youth unemployment is at catastrophic levels in Spain, Greece, and Italy. The market encourages neither stable marriages nor child bearing. Such a list of ills can be continued.

But today’s prosperity remains a stunning achievement that has enabled a better, longer, healthier, and richer life for billions. It is true that no gains are permanent or universal as nothing can be taken for granted and we cannot guarantee that the grandchildren of today’s youth, especially if they are from middle-class backgrounds, will be as prosperous as their families are today.

All this is true. But we also have to acknowledge the benefits of the market system, not only in the remarkable economic progress of China, India, and East Asia but also in the United States and the Anglosphere more widely over the past two centuries, and in much of Europe, especially Central and Eastern Europe in more recent decades.

None of this is possible without profit and capital. Moreover, these are more likely when people are God-fearing, know right from wrong, are hard working, honest, and prudent. Widespread corruption damages the economy as it also hardens individual hearts and destroys souls.

Every economy needs a moral framework shared by most of its practitioners. The author of For God and Profit is convinced that Christian teaching can contribute much to illuminating the ambiguities and moral challenges in today’s economies, provided that Christian commentators, and especially the clergy, have an adequate understanding of the economic activities that they are commending or condemning.

Jesus understood money, as the parable of the talents demonstrates. Matthew recounts (25:26-27) that the man with one talent, condemned by Jesus, did not lose his money. He simply did nothing with it, burying it. Jesus wanted more.

This accurate understanding means that Jesus was speaking from strength when he explains that we cannot choose both God and money (Matt. 6:24; 13:22; 19:22) and makes the notorious warning that it is easier for a camel to pass through the eye of a needle than for a rich man to enter heaven. Greed can be overmastering in every way of life so that it is necessary not to overestimate human goodness and to insist on adequate systems of control and vigilance in capital markets and the financial world more generally.

But to return to the book. The author has a gift of simple explanation for complex concepts and procedures and of unveiling truths long hidden. I did not know, for instance, of the contribution of Franciscan thinkers (men vowed to material poverty), such as St. Bernadine of Siena, in the thirteen to fifteen centuries to developing an adequate understanding of the changing role of “fertile” money and of the legitimization of charging interest that was not usury and did not exploit the poor. “Triple contracts” are explained. We learn that Christian financial operations dwarfed those of Jews and that in the fourteenth century every bank in Western Europe was either in Italy or a branch of an Italian bank.

Moving closer to our own times, the author underscores the importance of private ownership and monetary stability. He also develops a moral framework, based on the crucial distinction between the fundamental goods, which lie at the heart of human flourishing, and instrumental goods, such as money and capital, which must always be directed to the service of basic goods such as life, knowledge, friendship, work, and the very exercise of reason itself.

The disproportionate ownership of wealth by the top one percent is acknowledged, together with the enormous salaries and bonuses enjoyed by senior financial executives even as they have presided over huge losses during many financial crises, including the Great Recession of 2008. Gregg notes that this raises significant dilemmas. Which firms, he asks, should be bailed out by governments ? Do banks have any right to be capitalists in good times and socialists in bad times ? Ultimately, the decisions made in the financial world are personal. This means that its practitioners are accountable, even if the speed of transactions has created the “economic herd” and many of the practitioners of finance do not themselves understand clearly what is in their “bundles” or packages of derivatives.

The structures of sin can be real in the world of finance. Hence, the book addresses in detail genuine problems such as odious debt, short-termism, and moral hazard, while urging readers to think more carefully about the nature of practices such as speculation. Yet while Gregg believes that money and finance can be dangerous, liable to spark sinful and even ruthless greed, he also demonstrates that finance is essential to human flourishing, that the poor must never be ignored or forgotten, and that financiers should see their roles as vocations and choose and act accordingly.

Gregg does not believe in the “prosperity gospel”—the heresy that holds that faith automatically brings an increase in wealth. Rather, he follows Pope Francis, at least on this point, who has described business “as a noble vocation provided that those engaged in it see themselves challenged by a greater meaning in life,” so that they can serve the common good by striving to increase the goods of this world and make them more accessible to all. That is the mission of finance today.

Feast of Sts. Peter and PaulJune 29, 2015

George Cardinal PellPrefectSecretariat for the EconomyVatican City

1

Introduction

People have to struggle to live and, frequently, to live in an undignified way. One cause of this situation, in my opinion, is in our relationship with money, and our acceptance of its power over ourselves and our society.... We have created new idols. The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking any truly humane goal.

Pope Francis, 2013.1

With these words spoken to four new ambassadors to the Holy See—two from countries often labeled as tax havens—a newly elected Pope Francis expressed the conviction of many Christians that something is fundamentally awry in the world of finance. On another occasion, Francis stated that Christians who work in financial markets faced particular temptations that aren’t so easily resisted. Then, almost one year after making the remarks cited above, the pope departed from a text of remarks about the Sacrament of Confirmation to denounce what he described as the “dramatic social wound” of usury. “When a family doesn’t have enough to eat because it has to pay off loans to usurers,” the pope insisted, his voice rising, “this isn’t Christian! It’s not human!”2

Rather less well known was that the same pope’s views of money were more nuanced than often supposed. In an October 2013 homily, for instance, Francis insisted that neither he nor Christianity was in the business of demonizing money or those who work in finance. “Money contributes,” he stated, “greatly to many good works for the development of the human race. The real problem is a distorted use of money, attachment and greed. Hence the Lord’s warning: ‘Take heed and beware of all covetousness.’”3 In a speech in 2015, the pope quoted one of the Church Fathers, Basil the Great, to the effect that money is “the devil’s dung.” Prior to saying these much-reported words, however. Pope Francis carefully noted, in words that went virtually unreported, that money is in fact indispensable if you want to have investment, pay wages, and organize resources.4

Christianity has always stressed the potential pitfalls associated with disordered attitudes toward wealth. It has been equally clear that greed, rather than money per se, is the primary stumbling block. Nevertheless, many Christians have been extremely critical—often with good reason—of particular uses of money and capital by individuals, companies, and the state. In the midst of the Great Depression, Pope Pius XI referred to an “accursed internationalism of finance.” He even claimed that a “dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money.”5

Today one does not have to look far to find similar remarks in the statements of prominent Christians about specific financial practices. In a speech in September 2008 in London to the Institute of Worshipful Company of International Bankers, the Anglican Archbishop of York, John Sentamu, had strong words for those who engaged in short-selling shares. Referring to a spate of short-selling surrounding the British-based banking and insurance company HBOS, the archbishop exclaimed, “To a bystander like me, those who made £190 million deliberately underselling the shares of HBOS, in spite of its very strong capital base, and drove it into the bosom of Lloyds TSB Bank, are clearly bank robbers and asset strippers.”6

Bank robbers—that’s a serious accusation. But one difficulty with the archbishop’s statement was that, judging from his speech, it is not clear he understood what short-selling is.

Knowing before Judging

In simple terms, short-selling involves selling a stock that you have borrowed.7 You may look, for instance, at the stock price of MAG Enterprises and see that it’s currently trading at $ 1,000 a share. Based on your research and experience, you conclude that the stock is overpriced and likely to decline in price. You consequently decide to borrow 100 shares of that stock through your stockbroker, who purchases the shares and then lends them to you. You are now “short” 100 shares of MAG Enterprises. The short sale is possible only because you borrowed the shares in the first place and you promised to purchase the stock in the future as a way of extinguishing your debt.

One month later, as you anticipated, MAG Enterprises releases poor results for the previous quarter. Stock in MAG Enterprises subsequently plummets to $500 a share. You then choose to close your short position and buy 100 shares of MAG Enterprises on the open market at $500 a share and return them to your stockbroker. In effect, you are buying back the stock at a lower price. Put crudely, this means you only have to pay back half of what you originally owed. The difference (after you’ve paid your stockbroker a service fee and any dividends earned on the stock during the time of the loan) is your profit.

If, on the other hand, your judgment proves to be wrong and MAG Enterprise’s stock rises after one month to $2,000 a share after you borrowed the initial 100 shares (at $1,000 a share) you make a considerable loss. Why? Because you face the prospect of having to pay back twice as much as you initially borrowed.

Short-selling is not for the faint of heart. Nor are the transactions always simple. But looking at the series of exchanges detailed above, the choice to steal or engage in fraud does not manifest itself at any point. Instead, short-selling is about taking risks, and the Christian understanding of justice has always regarded willingness to assume risk as a potential basis for receiving more than those who choose not to take a risk.

There are also several external benefits from short-selling that escape many people’s attention. Short-selling has, for example, the broader effect of driving down the price of otherwise overpriced securities. As the English economist and commentator on Christian social ethics Philip Booth notes, short-selling causes “a share price to reflect information quicker than it otherwise would.”8 The pace of price adjustments is thus accelerated, thereby improving the efficiency of financial markets in correctly pricing assets. This is good for everyone.

In other instances, short-selling serves as an early-warning system for fraud—often turning up malfeasance long before regulatory authorities become aware of the problem. It was a hedge fund, for example, whose research first identified problems with Enron’s accounting practices, which led the fund to short that stock. That was the first tip-off to the wider world of Enron’s inflated revenue reporting.9 In testimony to the Securities and Exchange Commission, the short-seller concerned pointed out, “Many of the major corporate frauds and bankruptcies of the past quarter century were first exposed by short sellers doing fundamental research: Enron, Tyco, Sunbeam, Boston Chicken, Baldwin United, MicroStrategies, Conseco, ZZZZBest and Crazy Eddie are but a few examples... ”10 Of course, if those involved in short-selling a stock in our fictional MAG Enterprises engaged in spreading rumors and untruths about the company’s health in order to drive down the price, that would be wrong. The moral error in such cases, however, isn’t short-selling but lying.

My point here is not to belabor the specifics of short-selling. Instead it is to illustrate that a clear understanding of the nature of a given financial practice is necessary before morally assessing it. For many Christians, the work of those involved in finance has always been immersed in a fog of moral ambiguity. One reason for their confusion is their lack of concrete knowledge of what bankers really do and why.

The need to gain such knowledge before rendering moral judgment has been underscored by some of modern Christianity’s finest minds. In a response to a question about the 2008 financial crisis during a 2009 meeting with priests, Pope Benedict XVI said,

I see now how difficult it is to speak with competence on this subject. If we do not deal competently with the matter, it will not be credible. On the other hand, it is also necessary to speak with great ethical awareness, created and awakened, so to speak, by a conscience formed by the Gospel. Hence it is necessary to expose the fundamental errors, the basic mistakes, now being shown up by the collapse of important American banks… We must do so courageously and concretely, for lofty moralizing does not help if it is not substantiated by knowledge of the facts, which also helps one understand what it is possible to do in practice to gradually change the situation}11 [emphasis added]

Benedict was hardly the first Christian to make this point. Similar thoughts were articulated by sixteenth-century theologians engaged in the study of usury. The Spanish Jesuit Luis de Molina (1535-1600) wrote on financial subjects ranging from coinage to taxation, bank deposits, and money exchanges more generally. He went out of his way to consult people actually engaged in these practices, whom he believed would have insights likely to escape a theologian’s attention. “The practice of the merchants,” he wrote, “makes a better estimation of goods than the scholastic doctors, and the merchants’ judgment is rather to be abided by about the value of the goods, especially when they are used in the business they do with one another.”12

Faith, Morality, and Money

Not only did the bankers of Molina’s time understand the workings of money. For the most part, they strove to be faithful Christians. From the beginning of the first forms of capitalism in northern Italy, Flanders, and other parts of medieval Europe from the eleventh century onward, many of the merchants involved in increasingly sophisticated forms of finance wrote inscriptions such as Deus enim et proficuum (“For God and Profit”) in the upper corners of their accounting ledgers. Others opened their partnership contracts with a formula such as A nome di Dio e guadangnio (“In the Name of God and Profit”).13

One of the most accomplished scholars of this period, the Belgian economic historian Raymond de Roover, insisted that such mottos were neither “an expression of cynicism” nor “a sign of materialism.”14 Instead, these words reflected their authors’ conviction that banking and finance were economically useful endeavors, and that in pursuing profit they were in some way giving glory to God by helping to unfold the full potential of the universe he had created.

Molina and the many other Christians who explored these areas throughout history were not searching for greater marketplace efficiencies. Their concern was moral. They analyzed the decisions that people made in finance to see which actions were morally upright and which fell short of the demands of Christian truth.

As important side effects, such studies helped to identify key features of money, clarified how interest worked as a means of calibrating risk, and increased knowledge of the true nature of capital, exploring how it could be used to generate wealth. Nonetheless, Christians were—and must continue to be—primarily concerned with the morality of different choices in finance.

Such an approach differs from that of most people studying finance today. Their focus is on seeking to understand and critique contemporary financial practices in order to improve the ability of financial systems to generate wealth and realize particular policy goals. In doing so these scholars have discovered a great deal about how modern finance functions—knowledge that should be just as helpful for Christians exploring these areas as the findings of scientific research have assisted Christians engaged in medical ethics.

Where the approach of faithful Christians differs from most secular approaches to finance is that Christians cannot accept appeals to expediency or utility maximization as the decisive criterion for making moral decisions. The author of one of the few modern studies of finance from a Christian standpoint, the late Thomas Divine, S.J., stressed this point. The potential for exploitation of borrowers by lenders, Father Divine argued, was dramatically reduced in the conditions of a competitive market for capital precisely because borrowers were no longer at the mercy of one or two lenders.15 Yet Divine didn’t hesitate to affirm, “If the springs of interest are tainted in their source, then no amount of social welfare that interest may promote can avail to purify that source.”16 Divine understood—just as figures such as St. Paul, St. Basil, St. Augustine, St. Thomas Aquinas, and more recently, C.S. Lewis did—that the very stability of orthodox Christian ethics lies in its unambiguous affirmation that there are exceptionless moral absolutes: that is, there are things that may never be done, no matter how much social welfare they may promote.17

This doesn’t mean that Christians cannot reflect on the foreseeable consequences of a given action. It is entirely legitimate for a Christian to note how short-selling can improve the process of pricing, or to be attentive to inflation’s discernible effects on different social groups. There are also many instances in which we may reasonably measure the foreseeable consequences and efficiency of alternative choices. As the moral philosopher John Finnis notes, one such context is a market for those things that may legitimately be exchanged and in which a common denominator (i.e., money) allows appraisals of costs and benefits.18

Christians studying finance can’t, however, fall into the trap of thinking that it is acceptable to intentionally choose evil in order to realize good. That way of moral choosing and acting was specifically condemned by St. Paul (Rom. 3:8) and the entire orthodox Christian tradition. Moreover, Finnis cautions, making the assessment of calculations the primary points of moral reference is deeply irrational because it assumes the impossible: that humans can know and weigh all the known and unknown consequences of particular actions or rules.19

Renewing a Tradition

Though many of us live in religiously pluralist societies in which it can’t be assumed that everyone understands Christianity’s core beliefs, many people nonetheless want to know what Christians think. It was revealing that, in as secularized a country as Great Britain, the primate of the Anglican Communion, Archbishop Justin Welby, was asked in 2012 to serve on a Parliamentary Commission into Banking Standards. This could be understood as reflecting a dawning recognition that the heavily utilitarian ethics that presently dominates Western societies has failed to produce convincing answers to many of the moral dilemmas facing modern financial systems.

There are, however, four significant impediments to the ability of Christians to shape today’s financial sectors in positive ways. The first is one to which I have already alluded: the widespread unawareness—and, at times, outright ignorance—of finance among Christian clergy of all confessions. In an article in America magazine, the Jesuit priest and writer James Martin used some poignant examples to underline just how “at sea” are so many pastors with regard to economics in general and finance in particular:

Not long after the financial crisis in 2008, one priest confidently told me, “Capitalism is dead.” I asked him if he could still go to the corner and buy a hotdog. Yes, he said. “That’s capitalism,” I said. “It’s not dead.” A few days later another priest with a Ph.D. asked me, as he read about the financial crisis, “What’s a bond?”20

From the other end of the finance/Christianity spectrum, it should be said that misunderstandings of Christianity aren’t hard to find among those who work in or write about finance. In a Fortune article in 2014 about Pope Francis’s reforms of the Holy See’s finances, one financial commentator asserted, “The paramount duty of the church and its faithful is to aid those in need.”21 Such comments reflect, at best, an inaccurate grasp of what Christianity is about. The Christian church isn’t just another NGO, a gaggle of well-meaning do-gooders, or a collection of political activists. Its primary responsibility is to communicate the truth revealed in the person of Jesus Christ to everyone, and to bring all people who accept Christ’s message of salvation into the fullness of the Kingdom of God. Everything else in the Christian message—including the promotion of justice in this world (which, by definition, can never be fully realized by sinful human beings)—flows from this.

A second obstacle to Christian reflection on finance is that much of the history of Christians’ long involvement in the study of the ethics of money, banking, and finance is relatively unknown not just to the average churchgoer but also to many clergy and theologians. In recent decades, more has been written on this history by deceased and living scholars such as Marjorie Grice-Hutchison, Joseph Schumpeter, Raymond de Roover, John T. Noonan, Odd Langholm, Andre Azevedo Alves, Jose Manuel Moreira, Rodney Stark, Diana Wood, and Alejandro Chafuen. Their work, however, remains relatively unknown, even within some Christian circles.

A third hindrance is that relatively few have engaged in the analysis of financial markets or public finance from specifically Christian standpoints. Despite the high volume of discussions of money and finance in the public square, such subjects have received relatively peripheral treatment in modern Christian social ethics. In the twentieth century, most studies of this area were undertaken by a small number of American and German theologians, including the aforementioned Father Divine, but also figures such as Father Bernard Dempsey, S.J., Father Oswald von Nell-Breuning, S.J., and Father Johannes Messner—all long deceased and working in relative isolation from one another. Writing at the end of the 1970s, the Lutheran theologian Wilhelm Kasch lamented the deep gap that had emerged between theology and the study of money.22 More recent Christian contributions to the study of different aspects of finance have been made by scholars such as Pierre de Lauzun, Jorg Guido Hülsmann, and Paul Dembinski. Yet the number of Christians reflecting on these issues in a sustained manner remains pitifully small.

This leads us to a fourth problem: the fact that much Christian reflection on these matters has not kept pace with finance s increasingly prominent role in modern economic life. This becomes evident when we analyze, for instance, the documents associated with the modern tradition of Catholic social teaching that began with Pope Leo XIII’s 1891 social encyclical Rerum novarum.

As observed, Pius XI had hard words for the international finance system in his 1931 encyclical Quadragesimo anno. Yet his critique hardly went beyond the generalities cited above. This was odd in light of the part played by banking collapses in America and Europe in generating the Great Depression.

Thirty years later, St. John XXIII’s encyclical Mater et magistra (1961) described “the stability of the purchasing power of money” as “a major consideration in the orderly development of the entire economic system.”23 This, however, is only one aspect of what is encompassed by monetary stability. Monetary stability—understood as the stability of the value of money—also encompasses the relative value of a currency vis-a-vis other currencies (the exchange rate), and the opportunity-cost with respect to amounts of money available in the future (the interest rate). Even the Catholic social encyclical widely regarded as being most positive about market economies, St. John Paul II’s Centesimus annus, limited itself to observing that a “stable currency” is essential for “steady and healthy economic growth” and constitutes a presupposition for market economic activity.24

Since the early 1990s, the financial sectors of developed economies have grown tremendously, as has the role of central banks and monetary policy more generally in influencing the well-being of billions of people. And yet despite acknowledging the fundamental mediating role played by the financial sector in modern economies and noting the benefits and risks associated with what it accurately called “the global capital market,” a document on Christian social ethics as comprehensive as the Compendium of the Social Doctrine of the Church, published in 2004 by the Pontifical Council for Justice and Peace, devotes just three paragraphs to finance in a text that numbers 583 paragraphs.25 And while the Compendium mentions that it is historically the case that little if any economic growth can take place without financial markets, most of its focus is on the potential for financial markets to do harm.

To its credit, that Pontifical Council is one of the few church organizations that have sought to engage the subject of finance in a relatively comprehensive manner. Following the financial crisis of 2008, for instance, it produced a document that sought to identify some of the causes of the meltdown and possible regulatory measures to be taken as a consequence.26 Three years later, the Pontifical Council produced a “Note” on the international financial system, entitled Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority.27 This repeated many of the observations of the 2008 document but also called for greater top-down regulation on a global level, even mentioning the creation of a global central bank as a serious option worthy of consideration. The Note was subject to widespread and sustained criticisms, many of which came from Christians. It was described, for instance, as insufficiently appreciative of how modern finance actually works at the national and global levels, and as inattentive to the problems associated with excessive regulation and centralization.28

In retrospect, however, the Council should be commended for trying to address a subject neglected by most Christians and against a background in which relatively little had recently been written by Christians about money, finance, and banking. Moreover, Christian analysis and criticism of the financial sector and the conduct of central banks were surely merited following the Great Recession of 2008. It was, after all, a crisis partly generated by the financial sector, albeit enabled in many respects by government policies and central bank decisions. Likewise, the debt crisis that brought Argentina to its knees between 1999 and 2001 had a major financial component—a fact that would hardly have been lost on the then-Cardinal-Archbishop of Buenos Aires, Jorge Bergoglio.

So while it’s possible to take issue with some of the specific criticisms offered by particular Christians of certain banking and financial practices, there is much about modern finance that does merit scrutiny from Christians. Consider the following questions:

Is it just that taxpayers bail out banks and other financial institutions that have manifestly failed?Is it ever prudent for a bank to leverage itself at ratios approaching 50 to 1 ?Is it right for central banks to allow mild inflation in an effort to stimulate employment levels, even if it damages the economic well-being of those on fixed incomes ?How much do those working in the world’s stock markets actually know about the companies whose shares they electronically trade by the thousands on any given working day? Is it simply a more sophisticated form of gambling? Or does the process facilitate genuinely wealth-creating efficiencies in the wider economy?How much should bankers and other financial sector workers earn by way of salaries and bonuses ?Should governments be permitted to reduce their debts by devaluing their currencies?What should a Christian say about societies in which there is significant recourse by individuals, businesses, and governments to debt, both public and private ? When does borrowing become not just economically irresponsible but morally problematic ?

These are all reasonable questions. They also indicate just how much modern finance now affects the lives of millions of people. The same questions underscore the complexity of many of the ethical issues associated with finance. Nothing in Christian ethics suggests, for instance, that public or private debt is intrinsically wrong. But how do we determine when a particular burden of debt accumulated by an individual, business, or government has become morally problematic ?

In many instances, the rhetoric of some Christians concerning money and contemporary finance is long on indignation but short on knowledge of how, for instance, particular financial instruments work. Are blanket and often uninformed condemnations all that Christianity can offer?

The Way Ahead

This book suggests not. Central to its argument is the claim that Christians have played a long and honorable role in the development of modern finance and banking. It also maintains that finance is an entirely legitimate area in which Christians can participate in good conscience—avoiding actions that destabilize economic life but instead build up the common good. By that we mean conditions that help all to flourish under their own volition. Put simply, a Christian can indeed be for God and for profit—provided that God comes first and that the profit realized through finance is (1) understood as a means to an end, (2) never seen an end in itself, and (3) used to serve, rather than diminish, what Christians understand as human flourishing.

Finance is unquestionably a sphere of life in which people are subject to particular temptations—just as politics and ordained ministry are callings with their own potential pitfalls that lure people toward choosing sin. But while the Christian moral life is certainly concerned with not doing evil, finance is far from being an intrinsically problematic activity. As the French economist and Catholic thinker Jacques Bichot observes, financial markets are not in themselves structures of sin: that is, they are not processes and institutions that are in themselves evil.29 Indeed, the potential to flourish and contribute to the flourishing of others through finance is real.

Our process of analysis, critique, and exhortation begins with Part I’s examination of the long history of Christian reflection about finance. Here we direct particular attention to how Christians addressed the issue of usury and, in the process of doing so, helped turn private finance into an engine that fuels economic growth and the reduction of poverty. We also consider how Christian minds contributed to the shaping of public finance.

Having established this background. Part II provides a short outline of some of the key principles of a framework for Christians to think through how finance can promote human freedom, justice, and the common good. Finally, Part III draws on these principles and the historical background to articulate Christian responses to some of the more significant challenges facing modern private finance and public financial institutions.

Some Caveats

Given the potential scope of any reflection on finance and its role in today s economies, it is appropriate to outline some caveats concerning our investigation.

The first point to note is that this book is not about money per se. Clearly, money is a crucial element in any discussion of finance. There are also important differences between commodity money, paper money, money certificates, bank money, and credit money.30 Money, however, is an enormous subject in its own right. Hence it is only discussed in these pages when it serves to illustrate wider points about private finance and financial systems.

A second caveat involves underscoring that this text seeks to be ecumenical in its sources and reflection. Christians from a range of churches and ecclesial communities have contributed to discussions ranging from usury to the nature and ends of capital. That said, readers will soon notice that many of the primary sources from which I draw are authored by Roman Catholics. The reason for this is simple. Any survey of the materials authored by Christians on subjects concerning finance soon indicates that the longest and most detailed treatments of these issues have been authored by Catholic scholars, both before and after the Reformation.

Third, this book does not try and provide a definitive answer to every moral dilemma facing Christians working in the financial industry. Certainly there are some questions concerning finance to which the Christian church has very clear answers. Though, as we will see, there are arguments about what constitutes usury, there is no question that usury itself is always wrong. So while Christianity does not have a definitive answer to every single moral question, it does provide sometimes very specific answers to many complex issues and solid principles by which to understand all the others.

Readers won’t, however, find in these pages the single definitive Christian answer to the ethical status of practices such as high-frequency trading, credit swaps, shadow banking, flash-trading, derivatives, or quantitative easing. This partly reflects the fact that while Christian ethics is very clear there are certain acts that may never be done because they are by their very nature evil (theft being an obvious example), Christian ethics has also always held that there is often immense room for prudential judgment regarding how Christians do good at the level of individuals and communities. On many such matters, governments, communities, and individuals cannot on grounds of reason or Christian revelation identify political or economic arrangements that are uniquely correct. In many instances, they can actually identify several options that meet the tests of revelation and right reason, even if some of the options may be incompatible with others.31 This is the kind of activity of the practical intellect that Aquinas called determination.32

Consider, for instance, the case of taxation. Christian ethics has never disputed that governments may engage in taxation. Yet it has also held, as Alejandro Chafuen summarizes, that any tax law must meet the following requirements:

Need: is there a legitimate necessity for new taxes ?Opportunity: is it the right moment to impose such taxes ?Form: are the proposed taxes proportionate and equitable?Level: are the proposed taxes moderate or excessive?33

Observe that, within these parameters, there is considerable room for Christians to argue among themselves about what constitutes the most optimal taxation arrangements. Likewise, one can say that, provided basic principles of justice are observed, there’s no one right Christian answer to, for instance, how those working in finance are compensated. Nor is a single correct answer concerning the optimal size of banks to be found in Christian ethics. To be sure, the sheer size of many large banks raises questions about the capacity of CEOs to know everything they should know about what is happening inside their businesses. It is also reasonable to suggest that the sheer size of some financial institutions makes it easy for bankers to fall into what the former chairman and chief executive of HSBC Group, the Anglican clergyman Lord Green, calls the sin of compartmentalization.34 Christian ethics in itself, however, does not tell us when a bank has become “too large”—or “too small” for that matter.

The fourth caveat concerns what this book means by “finance.” Many institutions and practices are collated together under this broad heading. They range from ratings agencies to day traders who operate out of their homes. Our focus, however, is on two dimensions of modern finance. One is those private investors and investment institutions that compete in financial markets. The other is the state’s role vis-a-vis these markets. The reason for this emphasis is simple. As Pierre de Lauzun notes, “these are at the center of the debate.”35

Finally, a word about audiences. This book is not primarily directed to economic historians, theologians, economists, or specialists in banking and monetary theory. Their work forms an indispensable backdrop to this text. To this end, some of the most helpful of such writings is listed at the end of each chapter. I have, however, written this book primarily for three groups.