The Vatican called for more regulation of markets and financial systems on Thursday, saying economic crises showed they were not able to govern themselves and needed a strong injection of morality and ethics.
A major document written by two key Holy See departments appeared to take aim at plans to further deregulate markets in some countries, such as the United States, where President Donald Trump wants to loosen strict banking rules enacted after the 2008 financial crisis.
It said profit for the sake of profit and not for the greater good was “illegitimate” and condemned a “reckless and amoral culture of waste” that has created oligarchies in some countries while leaving great masses of impoverished people “without any means of escape”.
The document attacked the “economic cannibalism” of some financial practices.
While not infallible, the Vatican’s pronouncement is considered official teachings of the Catholic Church and could affect the attitude of the church’s 1.2 billion members.
The 15-page document uses technical terms such as credit stocks, subprime mortgages, high-frequency trading, credit fault swaps, derivatives, shadow banking systems, capital outflow and interbank loans to illustrate what is says is vulnerability to abuse and illegality. It also speaks of executive salaries.
Saying that the material wellbeing of a greater part of humanity depended on markets, they need to have a strong ethical foundation in order to help all, including people who live in conditions of extreme poverty.
“The recent financial crisis might have provided the occasion to develop a new economy, more attentive to ethical principles, and a new regulation of financial activities that would neutralize predatory and speculative tendencies and acknowledge the value of the actual economy,” it said.
“On the contrary, the response seems at times like a return to the heights of myopic egoism, limited by an inadequate framework that, excluding the common good, also excludes from its horizons the concern to create and spread wealth, and to eliminate the inequality so pronounced today,” the document said.
The document, called “Considerations for an Ethical Discernment Regarding Some Aspects of the Present Economic-Financial System,” was jointly prepared by the Vatican’s doctrinal office and its department on human development.
It said some forms of financial intermediation “have not only produced manifest abuses and injustice, but also demonstrated a capacity to create systemic and worldwide economic crisis”.
The document dismissed “the belief in a presumed self-sufficiency of the markets, independent of any ethics,” saying “it is clear that markets, as powerful propellers of the economy, are not capable of governing themselves”.
“The markets know neither how to make the assumptions that allow their smooth running – social coexistence, honesty, trust, safety and security, laws, and so on – nor how to correct those effects and forces that are harmful to human society – inequality, asymmetries, environmental damage, social insecurity, and fraud,” it said.
More regulation was necessary, it said because one of the major reasons for the most recent economic crisis was “the immoral behavior of agents in the financial world,” an apparent reference to the subprime mortgage scandal in the United States.
It said that even today, some types of derivatives were a “ticking time bomb ready sooner or later to explode, poisoning the health of the markets.”
CNBC reported derivatives declined to a gross market value of about $11 trillion at the end of 2017.
The document called for separation of banks to avoid another crisis. It said ethical committees should be established in banks and that more ethics courses should be taught in major business schools.
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