more on financial crisis

My friend David Bodanis offers a thoughtful theological reflection on the financial crisis here in the Financial Times. David is writing a book on the Ten Commandments … which should be excellent.
Another wise friend, economist Bob Goudzwaard, forwarded these reflections he had written for some friends in the UK … Bob’s co-authored book Hope in Troubled Times is a brilliant engagement with the same questions I grapple with in Everything Must Change.

A Note about the Credit Crunch, Climate Change and Environmental Responsibility
Bob Goudzwaard
The word “crisis” is returning, with comparisons being made between what is happening now and what took place in 1929, just before the Great Depression. Unlike the early thirties, the central banks are pumping a great deal of money into the economy to prevent a breakdown of the stock markets. Yet almost no one speaks about the deeper roots of what is now taking place, which are related to the enormous growth of money supply (money creation) in the last decade. The statistics describing that growth are not published. They are considered secret information (already a tell-tale sign). But experts estimate that money creation has an annual growth rate of about 17%, which is far above the annual growth rate of the so-called real economy (which on average grows about 3% annually). Where did all that money go? It went largely to the new markets of so-called derivatives (options, futures etc, often traded in relation to the expected future price of currencies and resources), and to all kinds of new financial “goods” (including packets of mortgages). Money, in other words, has become something that one can buy and sell as a good. The staggering growth of liquidities (currencies) was poured into and absorbed in those highly speculative markets, thus not leading to much inflation in the real sphere. But now the enormous balloon of collective speculation has burst, trust has been lost, and the real economy is now fully under threat.
This story makes clear that behind the current developments lies the enormous driving power of greed, not only on the part of private or collective speculators, bur also on the part of the once-reliable banks. On the one hand the banks were able to create enormous amounts of money (incidentally, the creation of liquidities was the first economic sector to be fully privatized; for centuries, money creation was the monopoly of the state). On the other hand the banks fully participated in the speculative process themselves, recouping their money with big surpluses.
But is greed the only factor? Money and magic have something to do with each other. Goethe’s Faust makes that connection very clear, for example: money creation allows one to build up power in a magical way. Printed paper—now electronic or “virtual” money—does the job. It opens doors (suggesting also doors into the human mind) towards gaining more control over investments, and therefore also to more material wealth and luxury. That sounds like a powerful instrument for achieving almost every objective. But it is even more than that. Money sets people and markets in motion. In its very modern character it is a dynamic phenomenon (even now, financial markets remain the most rapidly growing markets). Its dynamism turns money into a Guide which must be followed wherever it leads.
The essence of idolatry is that high expectations, together with fear, combine to narrow your consciousness merely to interaction with your “god”, while at the same time you delegate power and influence to your god, so that you allow it to take the lead. It then forges or inscribes within you patterns of obedience.
Compare this with what has happened in recent years. Financial markets were given control over the real economy. At last, declared the President of the German Federal Bank, politicians have been brought under the control of the financial markets. Many countries, especially in the South, live in fear over what speculative capital flows might do to their economies. At the least rumor, such as a possible devaluation of the relevant currency, capital can abandon a certain country wholesale, like a herd of animals which has just heard a shot. It can leave overnight. It then strikes down somewhere else. Global capital constantly ricochets around the world, driven by its quest for maximum short-term financial gain in a climate of changing expectations. This is sometimes called the new Big Brother syndrome. Governments lower their taxes on capital and burden their economies with huge expenditure cuts, just to remain acceptable in the “eyes” of this new, ever-watchful Big Brother. Clearly, an idol has stood up, bringing with it fear, even terror. We have put our trust in the financial markets to save our real economies. But now the idol is staggering, as idols usually do, and we can make out more clearly its profound betrayal.
Like it or not, because climate change and environmental degradation are linked to the world of the real economies, they are also linked to what happens in the financial world. They are linked factually and spiritually. Factually, we see that the incessant drive of the rich countries to become ever-richer materially has cast dark shadows over the environment (because of the highly intensive use of fossil-fuel energy, with the accompanying greenhouse gases), and over the common good (including pollution, destruction of landscapes, loss of biodiversity, etc.). Moreover, China and India increasingly use and pollute. But that type of economic expansion is massively enforced, accentuated and aggravated by impulses which come from the financial markets. Driven by greed, these markets focus primarily on short-term profitability, not on sustainable long-term investments. As a result, firms and corporations have been forced to merge or to simply to give up any emphasis other than increasing shareholder gains in the short-term. This terror leads to less and less attention to environmental concerns, especially where these are costly and reduce profits. If we live and move in a financial climate of money and greed, then the actual climate always suffers.
Spiritually, potential real solutions both to today’s financial problems and to today’s environmental problems are deeply hampered by what we could describe as an entirely external or superficial understanding of happiness and well-being—as if more material prosperity, underlined by money, can give us all that we need. This modern understanding suffers from a profound loss of shalom. More specifically, the materialization of happiness and the good life, promoted by huge advertising campaigns, is a sign of adoration or veneration. It is a sign of following a false shepherd and guide in pursuit of a seemingly new life. But Jesus is the Good Shepherd, and “the sheep follow him because they know his voice” (John 10:4), as they should now too. In this text, Jesus also uses the word “abundance”: “I have come that they may have life, and have it in abundance” (v. 10). Life must be preserved so that we may enjoy it in abundance. But where, in an already rich society, material abundance itself becomes our goal, the target of maximization, then all of us, animals included, lose life and are left empty.
What good is it to conquer the world but lose your soul, your life? Is that not the message of the Gospel for today?
[Bob Goudzwaard, a former member of the Dutch Parliament, is professor emeritus of economics and social philosophy at the Free University of Amsterdam. He is the co-author, with Mark Vander Vennen and David Van Heemst, of Hope in Troubled Times: A New Vision of Global Crises (Baker, 2007), Foreword by Desmond Tutu.]