Based on a lecture given at the International Theological Institute in Trumau, Austria in January 2023.
Introduction
I’m delighted to be here at the ITI. This is my second trip to this institution, but my electronic calendar does not go back far enough for me to tell you when the first one was. One thing that I can say with certainty is that back then I was already talking about the project that I will discuss tonight: creating a truly Christian approach to economics. Between then and now, I have had two books published on the subject, first an introduction, published in 2007, and then a more specialised book about money and finance, published late last year. Between those two economic books, there was another one, an introduction to Catholic Social Teaching called Counsels of Imperfection, which contains two chapters on the Church’s economic teachings.
My lecture tonight is dedicated to the new book: Money, Finance, Reality, Morality, published by Ethics International Press. However, I am going to take advantage of the nature of this audience to talk about the book in the way that I would have preferred to write it: as an explicitly Catholic effort. The book’s distinctly Christian approach is easy to see for those who have eyes to do so, but that dimension might easily pass by those whose walk in some sort of spiritual-intellectual haze. My only direct reference to Catholic Social Teaching is a single brief but enthusiastic mention in the book’s Introduction.
I admit to being slightly embarrassed about not “coming out” more firmly as a proudly Catholic intellectual in the text. My reason, or perhaps excuse, for such “staying in the closet” is evangelical. I believe that many potential readers who would appreciate the arguments would not be open to explicitly Catholic thinking. Confident that all truth is actually Catholic, I thought it was more promising to aim at letting the truth about economics lead curious readers in a Catholic direction, rather than at pushing economic truth towards already committed Catholics.
The reticence required a certain self-mastery: admirable in some ways, perhaps, but leaving me particularly eager to speak in a Catholic way without inhibition. So, I was especially pleased to accept the kind invitation of my very old friend Doctor Timothy Kelly to come to Trumau. Here I can take full advantage of your enthusiasm for the Catholic life of the mind. That is what I will do, starting with an explanation of how my economics thinking fits into a larger, and very Catholic, intellectual project: an exploration of narratives of modernity. I am writing a book on that topic, which is currently about one-third complete.
Before I dig in, I will tell you how the rest of this talk will go. After an introduction to the modernity project, I turn to economics and the economy, which are typically, or even archetypically, modern. The economic discussion starts with a lament at the nearly universal failure of professional economists, even Catholic ones, to understand the modern economy’s contours, depths strengths, and weaknesses. It moves on to an explanation of how the economy actually does work, as I understand it. From there I will place money and finance into this framing. The book has 400 pages and I only have an hour or so, so I have to leave most of the book’s contents out. Still, I hope I can bring out the main themes that will be of interest to this audience. My lecture will conclude with some explicitly Catholic comments on the modern economy.
An anti-trigger warning: capitalism and socialism
I need to preface the whole talk with a sort of trigger warning, or perhaps an anti-trigger warning. I am not engaging in the most common intra-Catholic intellectual and policy economic debate. I will neither take sides in nor adjudicate the dispute between two groups: one which confuses “Catholic economics” with the economics of anti-Catholic 19th century liberalism, and the other which confuses Catholic economics with the economics of anti-Catholic 20th century revisionist Marxism. Confusingly, Americans call the once radical Old Liberals “conservatives” and refer to the now conventional Marxists as “liberals”. It is not only the words that are hard to follow. The entire liberal-conservative debate is convoluted, confused, and sterile. I want to go beyond, or better, beneath, it, to the foundations of all economies.
That comes soon. First, though, my great project: a critical Christian description of modernity.
The next book: narratives of modernity
Modernity is a disputed idea. Is this a rough name for one period of history that is much like the others? Does is describe a portmanteau of relatively trivial novelties – modern industry, modern dance, modern philosophy – with no common essence or nature? Or is “modernity” something historically special: a new and unified way of being in the world, a way that is so different from everything that came before that the rest of history can be lumped together as pre-modernity?
With some trepidation, I take the last, historical-chasm approach. While the human experience is obviously unchanging in the most basic ways – we are born, we suffer, we die, we are (we believe) redeemed – modernity is substantially different. As both a continuing effort and an steady worldview, it is radically new in many crucial ways. Our politics, our philosophy, our cities, our families, our hermeneutics, our religion, our leisure activities, our measurement systems, our symbolic language, and so much more are all fundamentally different from their premodern antecedents. The modern economy and economics, the study of that economy, are certainly on the long list of radically new things.
Once that novelty is established, the next question to ask is whether this new thing is actually a good thing. Is it basically a flourishing of God’s gifts to humanity, in our minds, souls, and hearts, bodies, and ability to respond to the challenges of the physical world? I answer these questions with a resounding “yes”. Modernity, including the creative and enabling modern economy, is indeed good – very good, as the Lord says of the whole of creation.
But wait! There is so much to complain about modernity. Isn’t it the triumph of pride, lust, and greed over the Christian and classical virtues? Is it not the denial of God, the refusal of all authority, the magnification of destruction, and the sacrilege of creation? Isn’t modernity bad? I answer that question with an equally resounding “Yes”. Modernity, including the alienating and degenerate modern economy, is very bad. It is in the hands of the devil.
What Modernity is, I will argue, is essentially more. It is more good and more bad. Indeed, it is ever more good and ever more bad, because modernity has an unstoppable momentum. It is always developing, and the good and the bad developments are inextricably interwoven. If we tell only the good narrative, the Promethean narrative of human achievements – practical, intellectual, spiritual - we are right but incomplete. If we tell only in the bad narrative, which I call Pandoran (after the woman with the box of curses), if we acknowledge only that narrative of human disintegrations – practical, intellectual, spiritual – we are symmetrically right, and equally incomplete.
We must, I believe, tell a different narrative of modernity, one in which the good and the bad are tied together. In the book I am writing, I will construct two versions of that complete telling. There is a secular one, which I name after Philoctetes, a Greek hero whose unbearable suppurating wound cannot be healed, and cannot be separated from his all-powerful, war-winning bow. My Philoctetes narrative of modernity is merely descriptive. The modern smelly wound, the great harm modernity has done to the human condition and the common good, cannot be separated from the moderns’ powerful bow, the great contributions modernity has made to the human condition and the common good.
My next book is tentatively titled The Moreness of Modernity: Four Narratives. After Prometheus, Pandora, and Philoctetes come the fourth narrative, which is cruciform and eschatological. I still need to do some theological work, but my starting point is Hans Urs von Balthasar’s theology of history. He sees the history of the Church and of the world as an ever-clearer battle between good and evil, between the body of Christ and the forces of the crucifixion. The battle ends with the final judgement, when good and evil are revealed in perfect clarity. Modernity is a chapter, perhaps a decisive one, in the preparation for this final clarification. The modern economy is a particularly pertinent battleground, because it is so very clearly good and bad.
Aristotle, anti-Christian academic economics, and secular modernity
It is not an accident, in my opinion, that the academic discipline of economics has largely missed the actual drama of the modern economy. I hold Aristotle partly although inadvertently responsible. He set the tone of early economic debate with his quite legitimate wonder at the ability of, to use his example in the Nicomachean Ethics, shoes to be both footwear and substitutes for houses or beds. How, he asks can the same physical thing, a shoe, be these two different things – at the same time and place. There is something ontologically wrong about it.
In his brief discussions of what we would call economics, Aristotle talks almost entirely about things, the shoes and beds, and very little about the people who make or use them. His lack of interest in craftsmen and in the daily life of consumption can be traced to his “aristocratic” understanding of the good and of the virtuous man. Like almost all premodern thinkers, he was basically only interested in the realm of freedom, while most economic activity takes place almost entirely in the realm of necessity and compulsion, both physical and social. Too much labour and consumption is too connected with the animalistic tasks of staying alive for Aristotle to consider these economic activities capable of being fully virtuous, and thus of holding much ethical and general philosophical interest.
In contrast, exchange was philosophically interesting to him, because of the ontological puzzle that I just mentioned: a thing seems to be X in exchange (a specific numerical fraction of a house) when it also seems to be Y (a covering for feet) when the same thing is not being exchanged. Aristotle wants to know how a ratio between two incommensurate X’s can also be just or unjust when the X’s are treated a exchangeable Y’s.
Thomas Aquinas understood Aristotle’s ontological interest, but modern economists have ignored it, much to the detriment of their understanding. However, the moderns have taken for granted that the focus of their attention should be the same as Aristotle’s: on things and exchange, rather than on people living and acting in the world. You may be familiar with the early economist Adam Smith’s offhand reduction of all human economic psychology to a supposedly innate and exclusively human “propensity to truck, barter and exchange one thing for another”.
As Smith’s reductive approach should suggest, the modern interpretation was initially developed with an explicitly anti-Aristotelian understanding of virtue and the good life. The understanding was not simply anti-Aristotelian. For Smith and for most of French thinkers that he worked with and against, the discussion of economic rules and interests was meant to be anti-Christian. Indeed, I would argue that the mechanistic, amoral, and uncritical approach of the 18th and early 19th century economists was to a significant extent an attempt to describe a world which by definition could not encompass Christian virtues or a Catholic understanding of the well-ordered society. The academic discipline of economics has never lost much of this fundamentally anti-Christian and especially anti-Catholic approach.
For much of the 19th century, the bias of resolutely non-Christian economists was remarkably gloomy. It was as if to say, “Once we serious economists rejected the nonsensical Christian claims about God’s love for humanity, we saw clearly just how grim the necessity of the world of economic exchange really is”. Immersed in this gloom, for almost two centuries neither liberal nor socialist economists took clear notice of the vast increases in production and prosperity created by modern industry. On the contrary, the early 19th century demographic gloom of Thomas Malthus, technically a Christian (he was a minister of the Church of England, already a very broad church), led many leading members of the nascent discipline of economics in grim directions: first to widespread expectations of imminent mass impoverishment and then to the cruel-to-be-kind endorsement of the inhumane eugenics of Social Darwinism.
Economists became less gloomy in the optimistic days of the 1960s. (I do not think the similar timing of the Second Vatican Council’s similarly optimistic turn in its response to modernity is a coincidence, but that is a topic for another time.) The gloom was not entirely lost, though. Economists merely passed the baton of imminent disaster to the experts of the new field of activist ecology. While these scientists wildly and inaccurately predicted imminent mass starvation, capitalist economists became almost bizarrely cheerful They started to describe the modern economy as necessarily “growing”, now and forever. They converted their long-developed dark models of recurring periods of economic misery (depressions and recessions) into light-filled models of consistent growth. Meanwhile, all but the most devout adherents to the materialist Marxist religion abandoned the theory of inevitable impoverishment of the proletariat. Indeed, since the fall of Communism, Marxists economics has all but disappeared, so when I talk of economics I refer only to non-Communist approaches.
The economists’ reversal of expected prospects did not change their anti-Christian framing of economic questions. To give you an idea, here is a sample of widely accepted non-Christian and anti-Christian notions: a pathological distrust of the competence and integrity of governments (among some economists), an equally pathological trust in the competence and integrity of governments (among others), a widespread refusal to recognise the need for hierarchies in social organisations, a misguided emphasis on money, measurement, and crude numerical pseudo-equalities, and an undeserved but unflinching trust in both the productive power of conflict and the value of utilitarian ethical and motivational analysis Also, the standard economic understanding of freedom is detached from its Christian tie to the good and the true, and the economists’ understanding of “development” remains crude. Then there is the blind faith in absurd but supposedly numerical and even precise abstractions such as demand, discount rates, and diminishing returns.
A few kind words about academic economics
I should say that my broad condemnation does not include everything that actual economists do. When numerical measures can give out information, as they sometimes can, economists are pretty good at extracting that information. A few of the basic principles and concepts in economists’ standard canon are both unobvious and insightful (I can testify to that, having tried to explain them to undergraduates.) Development economics has gradually moved from making obvious and often wrong generalisations to more plausible and again unobvious analysis. Economic history is a good melding of history with economic techniques. And the mathematical training of economists, which blinds them to much of reality, does make them relative careful and comprehending users of statistical techniques.
Four inadequate varieties of Christian economics
Still, overall, academic economics is a discipline which is not fit for purpose. Sadly, Christian economists have struggled to escape from the gravitational pull of the conventional approach, despite it being so deeply anti-Christian. As a result, Catholic and other Christian economists have failed to develop more than a fragmentary alternative approach. In particular, they have been unable to harvest fully the insights of what we now call Christian anthropology.
I divide the contemporary Catholic approaches to mainstream economics into four families: terrible, bad, helpful but limited, and good but fragmentary.
Terrible describes the Pandoran tendency to reject all industrialisation and the social changes that accompanied it as inherently anti-Christian. It is easy to see why many bishops and perhaps some of post-French Revolution popes would believe that the economic, as well as the political, arrangements of Christendom were sacrosanct. At least in retrospect, it is hard to imagine a less historically appropriate response to changes which were unstoppable, in many ways objectively desirable, and always, effectively if not always consciously, inspired by the Christian aspiration for the fulness of life and the Christian promotion of justice in this world.
Bad refers to the largely Promethean experts who cannot see the problems with conventional economic theory. In my judgement, Catholics in the self-referential world of academic economics are far too enthralled by neoclassical assumptions, almost exactly as Catholics in the self-referential world of public policy are far too enthralled by the political-social assumptions the underlie contemporary Welfare States. My judgement is controversial. I may well be too harsh. I certainly am not impugning the intellectual integrity or goodwill of the people whom I see as stuck inside paradigms that they would reject if they could stand outside of them. In any case, this is not the time and place to discuss the benefits and harms of Catholic economists’ particular inculturation with this expression of modernity.
The helpful but limited responses to modern economic theories are the criticisms of those theories, found in the writings of Popes Leo XIII and Pius XI. These pre-Second World War pontiffs could see that the extreme claims of what Pius calls “Manchesterian liberals” for the rights of capital (Quadragesimo Anno, 54) were exactly paired with the extreme claims for the rights of workers by what he refers to as “’intellectuals’ [“intellectuales”], as they are called” (QA 55). Pius XI was also very critical of the what those Socialist intellectuals were persuaded was the only way to help workers: give the state an ever more dominant state role in the economy. More positively, while rejecting socialists’ policies and materialism, he firmly endorsed their demands for what he refers to as “social justice”.
Unfortunately, the insightful diagnosis of what was wrong with these non-Christian economic theories was not matched with a firmly Christian, alternative framing of the economy. Leo went far in the wrong direction when he said, contrary to the teaching of his beloved Thomas Aquinas, that the economic problems of his era could not be solved unless it was accepted “as a principle that private ownership must be held sacred and inviolable” (Rerum Novarum, 46). His goal in that encyclical was not to give backhanded support to the liberal economists who did indeed think of property as something divine, rather than as a concession to man’s fallen state. Leo wanted only to avoid massive Socialist expropriation, but the easy resort to the language of John Locke, an early practical atheist, shows the paucity of his Catholic intellectual armoury.
Having spoken of the terrible, the bad, and the helpful but limited Catholic responses to academic economics, I turn to the final item on my list, the good but fragmentary. You will not be surprised to learn that in my book I try to make full use of these fragments – in the hope of developing a truly Catholic whole.
Christian economic insights
Several great, essentially Christian economic insights are not relevant to this book. Because I love these insights, I cannot let all of them go unmentioned. Here are three particularly helpful approaches: first, the Pandoran work, mostly by Catholics such as Romano Guardini, Ivan Illich, and Jacques Ellul, on what Pope Francis calls the technocratic paradigm; second, the effort (in my opinion still very fragmentary) to use the distinct Christian understanding of the central position of humanity in creation as the anchor for thinking about environmental issues; and third, the economic aspects of a cultural critique which Francis summed up as modern people having “too many means and only a few insubstantial ends” (Laudato Si’, 203).
For my purposes, two other good Catholic economic fragments are particularly relevant. The first is John Paul II’s discussion of labour in his early encyclical (1981), Laborem Exercens. I mention that it was early, because it was based on the intellectual encounter of the Polish cardinal with socialists’ fundamental appreciation of the dignity of labour and labourers. The intellectual progression that leads from Aristotle to Marx to John Paul II is hardly mentioned in the encyclical. It is fascinating, though, but unfortunately not directly relevant to this book, so I can only mention it in passing.
What is relevant to my work is the pope’s rebasing of economics on the good of the worker, the human person. This is sometimes stated as the priority of labour over capital, which is fair but incomplete. John Paul has much more in mind. Like Marx, John Paul wants to de-commodify labour. Labour should not be looked at as simply “a factor of production”, reducing human beings, created in the image and likeness of God, into interchangeable parts of the production process, parts which (not “individual people who”) can be swapped for either machines or other “human resources”.
Unlike Marx, the pope does not think the problem can be solved by giving labour control of capital. He wants a far more fundamental change, really a conversion. He wants economies and economists to treat “labour” as one of the ways in which each human being lives out his or her specific, God-loved humanity. We are all labourers, and good labour is part of the good life.
In my analysis, I connect the goodness of labour itself and of the communities of labourers with the goodness of the fruits of this labour, what I call consumption. I also focus on the total independence of the goodness of labour from money. Unpaid labour is just as much truly labour as paid labour. Both paid and unpaid labour are expressions of our human excellence (and both can be just as much failures to express that excellence).
In other words, once the subject matter of economics is understood correctly as essentially human, it will be clear that money, money-numbers, and individual monetary exchanges are in fact far from the centre of the economy, and that they should be far from the centre of the academic discipline that studies the economy. As I explain in the book, at the actual centre of the economy are the ubiquitous, communal, personal, and intimately tied efforts of labour and consumption, which I call the Great Exchange, with upper case letters.
The labours of the Great Exchange are not all paid directly, even in the heavily monetised modern economy. Far from it. There are unpaid labours of love and care, labours of learning, and the ontologically crucial labours of simply being. Similarly, much consumption in unpaid. The reason that the quantitative token known as money is so widely used is that it is very useful in this Great Exchange, especially in the complex modern version of it. Money need not be a harmful tool, but it must be recognised for what it really is: a numerical technique for supporting the coordination and excellence of labour and consumption. Both of these activities are human, which means that they both are necessarily and essentially non-quantitative.
I am getting ahead of myself with this description of how I widen and augment John Paul II’s great insight on the Christian meaning of homo laborens. Before I talk more about what I have done with the available Catholic intellectual resources, I want to mention the other fragmentary idea from Catholic Social Teaching that is foundational to my thinking: the recognition of the central economic role of gratuity.
Pope Benedict XVI has probably done the most to bring this anti-quantitative and pro-charity idea into the Church’s modern social teaching. In doing so, he was standing on the shoulders of giants. Economic gratuity cannot be understood fully outside of the great theological explanations, from the gospel of John onwards, of the gratuitous nature of creation and especially of redemption. Full membership in the body of Christ requires participation in and imitation of the unmerited divine generosity. Since the divine will is for all humanity to be saved, current unbelievers as well as believers, redemptive economic generosity is integral to the Christian life. Christians should understand that the economy of labour and consumption is fully subsumed in the “economic Trinity”.
As an answer to sin, gratuity is sharply different from – and much nobler and more Christian than – what John Rawls calls justice as fairness, which neoclassical economists translate into “free and fair markets”. Gratuity is justice, but justice infused with mercy and love. Gratuity is the free offer of what we have without a clear notion of what we or others deserve or what we will receive in return. Gratuity is the correct human response to God’s gift to us of the world and of each other. Sin limits our ability to give as freely and to receive as gratefully as God wants us to, but our natural craving for supernatural grace (to speak with Henri de Lubac) ensures that we cannot be fully human without trying to go far beyond fair.
I do not think that even Pope Benedict fully grasped the help that gratuity can provide for economic thinking and action. In Caritas in Veritate, he merely offers gratuity as a sort of supplement to the commutative justice of markets and to the distributive justice of governments and other socially encompassing organisations. I would reverse the emphasis. He says, “authentically human social relationships of friendship, solidarity and reciprocity can also be conducted within economic activity, and not only outside it or ‘after’ it” (CiV 36, emphasis added). I would say: economic activity cannot thrive unless it is conducted through human relationships of friendship, solidarity and gratuitous reciprocity.
The essentially communal and gratuitous core of the actual economy – as compared to the self-interested individuals postulated in the standard economic model – is especially clear in the gigantic collection of complicated and interconnected production systems in the modern economy. Our economy simply could not function without the presupposition of nearly universal trust, willing co-operation, and the regular expectation of sharing with much of the human community: sharing almost all that we know, can do, and actually produce with our labour.
Of course, the stains of sin get in the way of gratuity, in the modern economy as in any human organisation and activity. There are cheats, there is greed, there are many varieties of rapaciousness. However, the rarity of the non-gratuitous exceptions in the economy demonstrates the great extent rule of gratuity. For example, we can count on safe flying or safe driving, because we can be certain that the tiny proportion of the people involved who do less than they are supposed to are much more than compensated by the vast number of people who do at least as much as they are supposed to – often quite a bit more.
For the purposes of my book about money and finance, the lesson of putting gratuitousness at the centre of the economy is exactly the same as the lesson of defining the economy as the Great Exchange of labour and consumption: money is largely irrelevant and money-numbers are largely misleading.
Why would I want to write about money and finance?
By now, I hope that some of you are wondering why I would write a book about money and finance. After all, I just told you that money is at best peripheral to this human and essentially gratuitous social arrangement. As for finance, by which I mean, very roughly speaking, monetary arrangements over time, it has almost nothing to do with the basic economic activities of labour and consumption. It is very much secondary to money, which is itself very much secondary to so many economic things: labour, consumption, production, distribution, creation (or the environment), justice, and in the modern economy, bureaucracies, regulation, political systems, and perhaps several more.
So, then, why did I write this book? Well, partly by accident. My own money-wages came from my labour in finance and in financial journalism, so finance stared me in the face every working day for many decades. I could not help but wonder how it fits into the economy and into human relations. When I came to a clear understanding of its role, which required a clear understanding of the role of money, I felt almost obliged to share what I had learned. The more immediate spur was the global financial crisis of 2008. It prompted me to deepen my analysis of the money-finance system and its interactions with various human strengths and weaknesses.
I also had a more polemical reason for writing. I wanted to express and justify my dislike of the bulk of the standard discourse about finance and money. Many thinkers whom I respect greatly, both economists and cultural commentators, seemed to get all tangled up when they wrote about these topics. They did not separate out the various claimed or possible social and moral meanings of money from money’s economic role. They accepted the finance industry’s 'party line' about the economic importance of finance and the financial and economic importance of central banking. Crucially, they were too deeply entangled in the weeds and sticky vines of neoclassical thinking to find the intellectually sunny uplands which had been cleared by the scythes of Christian anthropology. Writing about money and finance, I thought, would help economics on this journey, letting thrive the crop of Really Christian Economics.
Money, in particular the particularly useful token-money
I have already told you what money does in the economy – is serves as a useful token. I will now be a bit more specific. In the Great Exchange, labour always leads to consumption, but this labour often does not clearly lead to that consumption. On the contrary, simple connections are rare, if not non-existent. A hermit who consumes nothing other than the fruits of his own labour might think he faces no difficult practical or ethical decisions about who gets what share of his fruits. He simply and naturally gets it all. However, perhaps he ought to think some more. Does not justice require and gratuity ask him to offer some of his production to the government that protects him and to the spiritual and agricultural teachers who made it possible for him to spend so much of his life in prayer and study?
Within a family or a household, the labour and consumption are typically shared without too much fuss, although siblings do fight over who gets the larger slice of cake. In premodern villages, production and the allocation of what is produced were usually simple enough to be managed almost entirely through arrangements based on some mix of custom, power, and solidarity. In our complex modern economies, however, both labour and consumption come in many, many changing varieties, so the challenge of arranging and allocating labour and its fruits is great and unending.
Money can help meet societies meet this economic challenge. The money-system takes advantage of the great equivalence of the Great Exchange: that all the labour creates all the consumption, exactly as all the consumption supports all the labour. Money converts a portion of this qualitative equivalence of labour and consumption into a quantitative equivalence. In the paid-for portion of the economy, the labour-consumption equivalence becomes a simple equation: total wages equal total prices. (That equation is merely conceptual – there are enough practical deviations to keep monetary experts very busy.)
Here, then, is the money-story. The two totals, of wages for labour and prices for consumptions goods and services, are divided up. Each paid labourer receives as pay some share of the total supply of money, and each consumer of paid-for goods and services some portion of the total of prices to each seller. The individual money-numbers, whether prices or wages, cannot disclose much about “values” of any sort. This is less of a judgement than an observation. Human values are not numerical, so no numbers, including money-numbers, cannot describe them. However, the money-numbers are extremely useful in the allocation of labour, production, and consumption, not to mention the reallocation of economic activity through the taxes, spending, and benefits of governments. Among many other good things, money-numbers can provide helpful information for people deciding whether or where to build factories or schools, can help governments serve the common good, and can help people have more choices in their own consumption and labour.
Symbol-money
Now, I firmly believe that no tools are ethically neutral. The money of the economy, which I call token-money, is no exception. However, the many ethical and also symbolic meanings of token-money have almost no bearing on its actual economic role, which is pretty close to being purely pragmatic. To separate the resonances from the use, I distinguish “symbol-money” from token-money. In the book, I provide a list of two dozen symbolic meanings, from unifying a people through a common currency to dehumanising humans through taking money-numbers too seriously.
While I think that the category of symbol-money can help people focus on the economic work of token-money, the distinction between the two is a matter of convenience, not essence. Symbol-money and token-money are the same money at the same time and place, just looked at in different ways. In contrast, what I call savings-money is essentially different from token-money. It is money that is not token-money, that is it is money which is not being used in the paid-for section of the Great Exchange.
Savings-money
You are all familiar with savings-money, although you are unlikely to think of it as conceptually different from the equally familiar token-money. Savings-money is, as the name suggests, saved: separated out from the cycle of wages into prices and prices into wages. Savings-money can be quite simple: physical coins or notes that are buried in the ground or stuffed into a mattress. In our economy, though, savings-money is more often immaterial, represented by a computer code or by a legal record that indicates ownership of what I call a money-thing: bank accounts, stocks, bonds, the non-consumption portion of property…
Savings-money has a clear connection with the actual economy of the Great Exchange, because it can generally be converted into token money. The money in the mattress can be taken out and taken to the shops and the money-thing can be sold and the proceeds spent in the shops. However, conversion is not guaranteed – coins and notes can be cancelled, withdrawals from bank accounts can be prohibited, shares and bonds can become worthless. Also uncertain is the 'exchange rate' – how much token-money, and, more important, what portion of the labour, goods, and services in the economy the savings-money will provide when the 'conversion' takes place.
A purely economic analysis cannot provide much insight into these uncertainties, or into the social meaning of the money-things that hold savings-money. An even halfway decent analysis of savings-money requires calling on the tools of sociology, because this species of money is always part of societies’ symbolic life and power-structures.
The need for sociology was a bit unfortunate for me, as I really wanted to write a narrowly economic book about money in the economy, and not about the economy in society. That desire proved unrealistic. There is a fairly clear conceptual separation between society and the economy that is embedded in it, but for finance, even more than for the symbolic meanings of money, the two are in practice too deeply entwined to be fully detached.
The bad infinity of savings-money
One observation about savings-money, its infinite potential, is more ethical than strictly sociological. The total quantity of token-money in any economy is necessarily finite, because all the current token-money is always and solely being used to pay for the finite collections of paid-for labour and consumption. Additional token-money can always be created, but if the size of the paid-for economy does not also increase, then the only effect of the new token-money is to increase prices and wages.
Savings-money is quite different. Since it has no necessary connection with the finite Great Exchange, there can be an indefinitely large quantity of it. This limitlessness attracts greed, because we can always want more of it than we currently, no matter how rich we are in it. As Aristotle noted, the limitlessness is also somehow unnatural, because nothing even vaguely connected to world of generation and decay can be truly infinite. Hegel followed Aristotle in seeing a “bad infinity” lurking in economically unanchored savings-money.
That is about as far as the pure ethics of savings-money can go. After that, there is only sociology and politics. I tried to keep such topics to a minimum in the book, because full treatment requires more theorising than I had either space or competence for. My principal venture in this direction was a description of finance’s two purposes.
Economic finance and no-money-now problems
My name for the first purpose, or type, of finance is economic finance. The economic purpose is to provide solutions to what I call no-money-now problems. The name is clear. No-money-now problems occur within the paid-for portion of the Great Exchange whenever people or organisations need, or want, to spend more money than they currently have. The shortages have various causes. Sometimes they occur when some sort of labour is unpaid. For example, two parents who labour only in in unpaid portion of the modern economy have a big no-money-now problem. Sometimes, governments or charities decide to provide some good or service to consumers who will not be expected to provide enough money needed to pay for the provision of the good or service. Free-to-user healthcare and education are leading examples. Finally, no-money-now problems occur when the fruits of some sort of labour will not be harvested soon enough to provide the token-money needed to pay the producing labourers’ current wages. Companies doing research, introducing new products, or building new factories are in this position.
There are several possible solutions for these no-money-now problems. Money-short labour can be yoked to money-surplus labour, whether within a one-income family or by a corporation whose existing customers unknowingly pay the costs of expansion and innovation. Alternatively, governments can collect the money needed through the tax system. Also, people can give money unconditionally or create an insurance pool that provides money conditionally. Sometimes, the best solution is just to change needs or desires. The no-money-now problem caused by my currently unaffordable holiday plans can be solved by adopting more modest plans.
Financial arrangements belong on the list of solutions. In these arrangements, some person or organisation provides money now in exchange for promises of receiving future money-flows in the future. Financial solutions to no-money-now problems have many disadvantages. They are designed to be fair rather than gratuitous, so their motivational structure is essentially different from the structure at the core of the real economy. They are not particularly efficient. On the contrary, their complicated terms and dependence on the unpredictable future ensure that they are more cumbersome than most alternatives. The desire for fair finance also runs into conceptual problems, because there is no obvious way to equate monetary values over time. In my judgement, finance’s practical weaknesses are so significant that it is worth wondering why economic finance is used as much as it is in our supposedly efficiency-seeking economies.
Post-aristocratic finance
Many financial arrangements are not at all, not primarily, or not permanently solutions to no-money-now problems. They belong to the second type of finance, which I call 'post-aristocratic'. The name refers to the aristocratic proto-financial pattern: tenants transferred some of their labour and produce to lords. In post-aristocratic finance, the relatively poor transfer money, generally token-money, to the relatively rich. Examples, explained in more detail in the book, include loans made to consumers and government debt sold to taxpayers. My tentative political-sociological explanation for this phenomenon is they are a politically acceptable means to exemplify and indicate the continued social power of the rich in a society that claims to endorse some sort of egalitarianism. Whatever the explanation, these non-economic financial arrangements are currently flourishing.
Financial greed and the financial exception
There is of course much more to be said about post-aristocratic finance and modern society, some of which I try to say in the book. Rather than summarise that discussion here, I will now turn to the book’s essentially moral conclusion. The morality of finance has several aspects, but I am most interested in one of them: the unjust and destabilising effects of greed in the money-finance system. Greed is an issue in finance because the financial system welcomes, indeed it encourages, the sin of greed. In the book, I discuss what I mean by greed in some detail, but the basic idea is that people generally negotiate their financial arrangements with the clear and unjust intention of receiving higher returns than they deserve – deserve according to some standard of justice, whether subjective, objective, or social.
The conventional economists I discussed towards the beginning of this lecture are neither surprised not unhappy about the prevalence of greed in finance. On the contrary, they expect nothing else, since their reductive psychology starts and basically ends with self-interest, which is largely a euphemism for greed. However, the flaccid social response to financial greed should be surprising and definitely is distressing.
The response should be surprising because, as I said earlier, most of the modern economy actually relies far more on gratuity than on greed. Greed is certainly not hard to find in the economy, but it is usually constrained – by custom, law, shame, and expectations. Even the highest paid executives rarely admit to wanting more than they deserve. Only the most ambitious and conspicuous shopaholics reject moderation in consumption on principle, and those extreme cases are widely mocked. For the most part, greed is only acceptable in the economy when it is covered over with some veil of virtue: customer satisfaction, hard work, public service, hospitality, generosity.
Finance is the one systematic exception. Only in finance is the generally negative economic approach to greed firmly rejected. In most countries, the desire to “make as much money as possible” is almost universally accepted as a perfectly good reason to buy a house, invest in shares, or simply open a bank savings account. Speculation in the financial markets, which takes that greedy craving for something-for-nothing to a higher level, is now considered a dignified and worthy profession. In other words, we are all encouraged to think that out financial activity should provide us with rewards that are far greater than we can justify – we are encouraged to be greedy. The social willingness to accept that this vice and the equally vicious unjust arrangements that it leads to has been great enough to all but destroy some once lively non-greedy types of finance.
Whether or not the social acceptance of financial greed is surprising, the acceptance is, or should be, distressing, because its effects are very undesirable. The direct harm of greed to the moral condition of each greedy person is obvious, at least to Christians and Aristotelians. The social enthusiasm for greed ensures that there will be more greedy people and less pressure on each of them to master their vice. More subtly, the intellectual distortions created by the almost magnetic attraction of greed on people’s thinking has encouraged the retention and creation of many greed-friendly practices in finance. These practices are also economically destabilising, for reasons that I explain in the book. Their prevalence, and the greed-fuelled lack of discipline in moderating them, lie behind what I call the financial exception. That exception refers to the uniquely strong tendency of the money-finance system to collapse deeply and recover slowly. Also unique is this system’s ubiquitous presence in economic downturns. Financial failure has either caused or massively amplified every single major economic setback in the last 200 years.
The pattern is simple. Financial greed reinforces itself, as past gains lead to more buying which pushes up prices, which creates more gains, which eventually reverse, often when the savings-money frenzy distorts token-money spending in unexpected ways. The reversal creates fear, which brings financial losses, which increase fear, which decreases economic activity, which creates more losses, and so forth until eventually the gloom becomes so exaggerated that some morsel of good news – or these days some government policy – changes hearts, minds, and spending patterns. The toxic moral-financial patterns start easily and always end badly. In a way, it is comforting to know that greed, like all sins, does not pay in the long run. People and institutions working in finance have not learned the lesson.
How money and finance fit with my modernity project
Coming to the end of this lecture, I want to come back to my Catholic modernity project. My fairly positive practical and ethical judgement on the role of token-money in the modern economy and my quite harsh practical and ethical judgement on the role of and approach to finance in the economy and society fit right into that project.
On one side, modern people have been the first in history to comprehend clearly that money is a social token with no relation to gold or silver. By integrating that knowledge with the uniquely modern ability to gather and manage vast quantities of information, modern people have created national token-money systems that are effective, efficient, and flexible. The story of modern money merits inclusion in Promethean narratives of modernity. On the other side, most of the financial system is part of the dark narrative of modernity. It is a clear and socially important example of modern moral incontinence. The immoral, inefficient, and brittle financial systems that greed has kept going have done great and totally unnecessary economic and social damage. I have various suggestions for improvements of the system, but none of them can be implemented without recognising and condemning, in practice as well as in rhetoric, financial greed. I strongly suspect that the Pandoran momentum in economic thinking is too strong for that to happen. As always in modernity, we are stuck with trying to help Philoctetes be a bit less wretched.
Four good Catholic responses to the modern economy
I will end this lecture with something like an addendum – my responses to a question that I am often asked: what should the Catholic Social Teaching teach about the economy? I will offer you four answers, all of which should weave in with the ideas I have presented so far this evening.
I already alluded to the first, negative answer. Catholics should stay well away from the categories of conventional economics. They should avoid both liberal and Marxist economic oversimplifications and they should stop arguing about capitalism and socialism. The world’s one successful economic “model” is neither capitalist not socialist. It includes some of the fierce competition of classical economic theory, much more of the carefully controlled competition noted by some post-neoclassical economists, a quite large amount of non-competitive activity, extensive and intrusive governments, and immense bureaucracies all around. Some collection of very different arrangements could conceivably be better than the current ones, but for now the current ones are not simply the best we have; they are all we have. Dreams of either totally free markets or of governments that are totally controlling and completely beneficent are both totally uncatholic and a total waste of time.
The remaining three items on my proposed Catholic economic agenda are positive. Rather parochially, I start with finance. Catholics are especially well placed to make the prudential judgements that are required in battles against pervasive sins. Greed is a pervasive sin in finance. I hope that the institutional memories, gained from centuries of experience in the confessional and in governments, have given Catholics the institutional expertise needed to preach and practice effectively against financial greed. The correct goal is to change the popular and professional responses to financial greed from enthusiastic approbation to as close to disgust as morally weak humanity can come. Catholics should work on discerning the right mix of laws, regulations, education, exhortation, and organisational structures to do that.
The next positive agenda-item for Catholics is to resist economic gloom. Such gloom is widespread in some Catholic circles. I should be clear. There is no reason to resist the gloomy but just accusation that the current version of modernity is far too concerned with the economy. Anyone articulating that accusation is doing God’s work. The gloom I object to is intra-economic, the idea that the economy itself is now, or is soon going to be, a disaster.
This is a bizarre reading of reality. After two centuries of remarkably intense practical and intellectual focus on economic improvements, the economies of rich countries already do a very high proportion of what labour and consumption can possibly do to support human flourishing. Of course, these economic systems are imperfect. Like everything else in this fallen world, the economy is always in need of reform. However, economic reforms continue to come, bringing, among other good things, the steady spread of industrial prosperity, which is eventually accompanied by significant decreases in industrial pollution.
I would argue that where there are fairly serious problems in the economy – for example in the cost, effectiveness, and attitudes in the healthcare sector – the best approach to them is never narrowly economic. The disorders are much better understood as symptoms of disorders at what might be considered a level of human flourishing that is – as Aristotle and almost all the rest of the premodern Western tradition simply assumed – intrinsically higher than labour and consumption: the social, cultural, and moral aspects of the common good. The cures for such disorders do not start with economic changes, whether price controls, new regulations, or revisions of bureaucratic structures. Cures start with conversions of hearts, minds, and social priorities.
Christians in rich countries can join in campaigns for conventional economic improvements, for example for increases in GDP and decreases in 'unemployment'. However, I would suggest that they have little more to contribute than well-intentioned secularists, and should mostly leave that work to them. What Christians should do is, to use a concept from conventional economics, look for their competitive advantage in their response to the current iterations of modernity. Thad advantage is best found in studying, protesting, and countering the spiritual harm done by Pandoran modernity. It is primarily modern social, political, moral, and cultural practices – not economic practices – that have left far too many people as sheep without any sort of religious, or even spiritual or cultural, shepherd. Switching the analogy from the pastoral to the agricultural, Christians are well equipped to harvest the souls that have been lost and or deeply troubled by so much of Pandoran modernity, while the distinctly Christian pickings from gleaning the leftovers from the rich and largely Promethean economic harvest will necessarily be relatively meagre.
I am well aware that economic satisfaction is less appropriate for what is now known as the developing world – the people who do not enjoy the full benefits of modern prosperity. This group has been shrinking, both proportionately and absolutely, but still constitute something between 50 and 80 percent of the world’s population, depending on what is considered 'developing' or 'poor'. However many people there are, all of their material poverty is unwanted. All of it undermines their human dignity. And – this is the distinctly modern part of the challenge – all of it is now basically unnecessary. Still, there are more than enough secular experts and enthusiasts in poor places eager to take on the challenges of material enrichment. Christians should worry less about the slow pace and even the inequities of the economic modernisation of the global poor. They should worry more about the spiritual impoverishment which is, I argue, in practice and perhaps by nature almost inseparable from the way the modern world is materially enriching.
My final economic agenda-item for Catholics is the promotion of the economy of gratuity. I know the Church makes efforts in this direction – for example the Economy of Francesco and some of the work of the Focolare. I would like to see much more of this, but also something more conceptual. I would like Christians to learn how to describe the economy in moral terms, to learn that the modern economy actually is built on trust, sharing, and God-given wisdom far more than on self-interest and heartless competition, to learn not to crave or blindly to trust inhuman economic numbers, to learn what human goods the economy can and cannot be expected to produce, to learn what economic evils can and cannot be eliminated or sharply reduced, and, a small thing but it matters to me, to learn to separate out the small amount of good grain from the vast amount of chaff in mainstream economics.
Thinking over that description of a new economics, it looks like a good first step would be to read my book! With that thought, I want to thank you again for your invitation and your kind attention.