The document of "Iustitia et Pax" on the global financial crisis is blasted with criticism. The secretary of state disowns it. "L'Osservatore Romano" tears it to shreds. From now on, any new Vatican text will have to be authorized in advance by the cardinal
In the hot seat was the document on the global financial crisis released ten days earlier by the pontifical council for justice and peace. A document that had disturbed many, inside and outside of the Vatican.
The secretary of state, Cardinal Tarcisio Bertone, complained that he had not known about it until the last moment. And precisely for this reason he had called that meeting in the secretariat of state.
The conclusion of the summit was that this binding order would be transmitted to all of the offices of the curia: from that point on, nothing in writing would be released unless it had been inspected and authorized by the secretariat of state.
Of course, the fact that Bertone and his colleagues had seen that document only after its publication is astonishing in itself.
Already on October 19, in fact, five days ahead of time, the Vatican press office – which reports directly to the secretary of state – had made the announcement of the press conference to present the document, at which the speakers would be Cardinal Peter Kodwo Appiah Turkson, president of the pontifical council for justice and peace, and Bishop Mario Toso, the council's secretary.
Toso, a Salesian like Bertone and his longtime friend, was chosen for this office by the cardinal secretary of state himself.
As for the text of the document, the Vatican press office had given notice that it was already available in four languages, and would be distributed to accredited journalists three hours before it was made public.
On October 22, a further notification added the name of Professor Leonardo Becchetti to the ticket of the presenters.
Becchetti, a professor of economics at the University of Rome Tor Vergata and an expert on microcredit and fair trade, is believed to have been the main architect of the document.
And in fact, at the press conference presenting the document on October 24, his remarks were the most specific, centered in particular on calling for the introduction of a tax on financial transactions, called a "Tobin tax" after the name of its creator, or a "Robin Hood tax."
At the G20 summit in Cannes, the idea of this tax popped up in some of the comments of Barack Obama and Nicholas Sarkozy, but nothing concrete was done about it.
Another assertion of the Vatican document, according to which the economy of Europe is in danger of inflation rather than deflation, was contradicted on November 1 by the decision of the new governor of the European Central Bank, Mario Draghi, who lowered the interest rate of the euro instead of raising it, as is always done when inflation is a real threat.
As for the main objective of the document, nothing less than a one world government of politics and the economy, this came out of the G20 in Cannes shredded to pieces. Not only did no one even speak vaguely of such a utopia, but the little that was decided in the concrete went in the opposite direction. The disorder in the world is now more severe than before, and has its most serious deficit in the increased the inability of European governments to guarantee "governance" of the continent.
It is little consolation for the Vatican document that it has been compared to the views of the "Occupy Wall Street" protesters. Or that it was echoed in a pugnacious article by Anglican primate Rowan Williams in the "Financial Times" on November 2, in favor of the "Robin Hood tax."
But more than these terrible grades, what has been even more irritating for many authoritative readers of the document of the pontifical council for justice and peace is the fact that it is in glaring contradiction with Benedict XVI's encyclical "Caritas in Veritate."
In the encyclical, pope Joseph Ratzinger does not in any way call for a "public authority with universal competency" over politics and the economy, that sort of great Leviathan (no telling who gets the throne, or how) so dear to the document of October 24.
In "Caritas in Veritate" the pope speaks more properly of the "governance" (meaning regulation, "moderamen" in Latin) of globalization, through subsidiary and polyarchic institutions. Nothing at all like a monocratic world government.
When one then delves into the analyses and specific proposals, it is also stunning how strong the divergence is between what is written in the document of the pontifical council for justice and peace and what has been maintained for some time in the financial commentaries published in "L'Osservatore Romano" by Ettore Gotti Tedeschi, president of the Institute for the Works of Religion, the Vatican bank, also chosen for his post by Cardinal Bertone.
For example, not even one line in the document attributes the global economic and financial crisis to the collapse in the birth rate and to the resulting higher and higher costs of population aging.
It was easy to predict that Gotti Tedeschi would not remain silent. And in fact, on November 4 – the same day as the summit convened by Bertone in the secretariat of state – "L'Osservatore Romano" published an editorial by Tedeschi that reads like a complete repudiation of the document of the pontifical council for justice and peace.
The editorial follows here. And reading it raises the suspicion that the first draft was even more devastating . . .
FACED WITH DEFLATIONARY PROSPECTS, A NEW MODEL OF LEADERSHIP
by Ettore Gotti Tedeschi
There have been serious errors, which continue to persist, in interpreting and underestimating the current economic crisis.
The true origins of the collapse of birthrates and the consequences of the increase of taxes on the GDP to absorb the costs of the ageing of the population were wrongly interpreted. The effects of the decisions made to compensate for these phenomena were underestimated, especially with the de-localization of production and consumer debt.
Then, the urgency to intervene and the criteria to follow in order to “deflate” the debt produced were not taken into enough consideration. Thus, the collapse of trust which led to the reduction of the value of the stock market and the debt crisis was not anticipated.
At this point, there are no longer many solutions.
To deflate the total debt – public, banking, business and family – and bring it back to pre-crisis levels, that is, to around 40% less, it is possible, though not advisable, to cancel a part of the debt with a type of “preventive agreement,” where creditors are paid at 60%.
It is possible, but it would be a hypothesis without a future, to invent some new bubble to compensate for debt with an increase in the value of real estate or goods.
It could be considered – but we hope it is only a temptation – to tax the wealth of families, sacrificing however, a necessary resource for development and at the same time creating an injustice.
One could also look for a way for rapid development, thanks to a growth in competition, which however in the global crisis is not easy to generate. There is no capital to invest, the banks are weak, the demographic problem penalizes demand and investments. In this context, besides, consumer debt is not even imaginable.
Western countries are expensive and to make them economical in a short period, one must intervene on the cost of labor. Protectionist interventions to sustain businesses that are not competitive however, would produce disadvantages for consumers and would reduce buying, already in decline
The single currency could be devaluated, but this would lead to an increase in the price of imported goods.
Someone, to lower the debt, has also thought of inflation. But inflation does not happen if economic growth is at zero, salaries are at a standstill, the shadow of unemployment looms and even the price of raw goods is diminished.
One could say that the spiral of inflation will not occur as long as there is lack of faith in one’s currency. The problem is that today, one cannot have faith in any currency: all of them, including the euro and the dollar, are weak.
Inflation will not take off also because liquidity does not circulate, but mostly because that created by the central banks has substituted that produced by the banking system to sustain debt growth.
The first problem today, then, is not inflation but deflation. Markets, in fact, are privileging liquidity. This is because in a deflationary regime, the value of currency increases while during inflation, it decreases.
To advance the economy today without increasing public debt means correlating interest rates with the GDP. For public debt superior to 100% of GDP, it is evident that to obtain a growth of 1%, without increasing debt, means not having taxes superior to 1% and penalizing savings.
The solution is in the hands of governments and central banks who must come up with a coordinated strategic action of re-industrialization, strengthening of credit institutions and support for employment.
This will take time, a time of austerity in which the foundations of economic growth must be rebuilt.
Above all, governments must restore citizen and market trust through a governance that is adapted to the times and which, more than just being technically competent, is also a leadership model. A governance which aims for the common good.
Among Ettore Gotti Tedeschi's many discussions of the collapse in birth rates as the ultimate cause of the current economic crisis, here is a summary of the article he published last summer in "Atlantide," the magazine of the Foundation for Subsidiarity, part of Communion and Liberation:
> Riprendiamo a fare figli e l'economia ripartirà
In "L'Osservatore Romano" on August 27, 2011, Gotti Tedeschi also argued forcefully against the taxation of assets supported by politicians, union leaders, economists, entrepreneurs, and businessmen of various countries, as well as by numerous Catholic figures:
> Noah's Horizon. For a Real Solution to the Crisis
Gotti Tedeschi is also staunchly opposed to the taxation of financial transactions in a country like Italy, in which the household savings rate is very high. In his view, these private savings, instead of being punished with new taxes, should be used, with guarantees on the part of the state, to finance the small and medium-sized businesses that are the backbone of Italy's productive economy.
A clear rejection of the document of the pontifical council for justice and peace has also come from an authoritative secular Italian economist, Professor Francesco Forte, the successor at the University of Turin to the post of the great liberal economist Luigi Einaudi, governor of the Bank of Italy and then president of the republic from 1948-1955:
> Il professor Forte boccia il temino targato Bertone
The October 24, 2011 document of the pontifical council for justice and peace:
> "Towards reforming the international financial and monetary system in the context of global public authority"
And the presentation made by Cardinal Turkson, Bishop Toso, and the economist Becchetti:
> Conferenza stampa del 24 ottobre 2011
The "social" encyclical of Benedict XVI:
> "Caritas in veritate"
English translation by Matthew Sherry, Ballwin, Missouri, U.S.A.