"At a cardiac arrest, the first procedure is to take your own pulse."
--Samuel Shem, House of God
It's been a wild week plus in Washington and on Wall Street. The level of panic is the highest since 9/11, especially if you watch certain cable finance channels.
What happened? It depends on who you ask. Wall Street greed (when wasn't it about profit?). Deregulation and dangerous innovations in financial instruments. The Democrats with their low-income home loans. Or all of the above. Is the production of fear itself part of the formula? For whatever reason, here we are in a major financial panic.
It seems likely that even after the first failed vote in the House for Paulson's $700B bailout plan, with some modifications, that basic plan will be pushed through Congress. The libertarian models are not palatable to most, and public anger is subsiding as fear and resignation take its place. How much is $700B? For comparison, we have spent $648B to date on the Iraq war.
The free market ideology itself may be the biggest culprit in this disaster, because it places market efficiency over human factors, whether of realism in lending or of responsibility in handling financial instruments which at their worst threaten the entire global web of economic relationships.
The president of the Pontifical Council for Justice and Peace Cardinal Renato Martino stated: "The economic crisis, which is manifested throughout the world, perhaps is a sign that the world is not made up only of bills, money and the economy. […] [The crisis] serves as a reminder that the human person must be put at the center of the whole of world."
The U.S. Bishops also addressed a letter to Secretary Paulson and the Congress offering not technical solutions but moral principles centered on the person in approaching the economy:
- Human and Moral Dimensions: This crisis involves far more than just economic or technical matters, but has enormous human impact and clear ethical dimensions which should be at the center of debate and decisions on how to move forward. Families are losing their homes. Retirement savings are at risk. People are losing jobs and benefits. Economic arrangements, structures and remedies should have as a fundamental purpose safeguarding human life and dignity. The scandalous search for excessive economic rewards even to the point of dangerous speculation that exacerbates the pain and losses of the more vulnerable are egregious examples of an economic ethic that places economic gain above all other values. This ignores the impact of economic decisions on the lives of real people as well as the ethical dimension of the choices we make and the moral responsibility we have for their effect on people.
- Responsibility and Accountability: Clearly, effective measures are required which address and alter the behaviors, practices and misjudgments that led to this crisis. Sadly, greed, speculation, exploitation of vulnerable people and dishonest practices helped to bring about this serious situation. Many blameless and vulnerable people have been and will be harmed. Those who directly contributed to this crisis or profited from it should not be rewarded or escape accountability for the harm they have done. Any response of government ought to seek greater responsibility, accountability and transparency in both economic and public life.
- Advantages and Limitations of the Market: Pope John Paul II pointed out that "the free market is the most efficient instrument for utilizing resources and effectively responding to needs. But there are many human needs which find no place on the market. It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied." Both public and private institutions have failed in responding to fundamental human needs. A new sense of responsibility on the part of all should include a renewal of instruments of monitoring and correction within economic institutions and the financial industry as well as effective public regulation and protection to the extent this may be clearly necessary.
- Solidarity and the Common Good: The principle of solidarity reminds us that we are in this together and warns us that concern for narrow interests alone can make things worse. The principle of solidarity commits us to the pursuit of the common good, not the search for partisan gain or economic advantage. Protection of the vulnerable "workers, business owners, homeowners, renters, and stockholders" must be included in the commitment to protect economic institutions. As Church leaders we ask that you give proper priority to the poor and the most vulnerable.
- Subsidiarity: Subsidiarity places a responsibility on the private actors and institutions to accept their own obligations. If they do not do so, then the larger entities, including the government, will have to step in to do what private institutions will have failed to do.