Saturday, October 25, 2008

Rerum Novarum - a letter from Rome

Hotel Cisterna, Trastevere

23rd October

From John Christensen

I have just spent a remarkable day as guest of the Pontifical Council for Justice and Peace at the Vatican. Hosted by His Eminence Cardinal Martino, and chaired by Oscar de Rojas, executive secretary of the UN Financing for Development Conference, the study day brought together around a dozen experts on poverty alleviation, financial markets, governance and development issues to discuss the Holy See's preparations for the forthcoming Doha follow-up international conference.

In his opening address the Cardinal noted the moral and ethical dimensions of the current crisis. "The world today is overshadowed by a fragile peace and marked by broken promises" he said. "Too many people live lives without hope, with little opportunity toward realising a better future for themselves, their children and future generations." He also cited the first great social encyclical letter, Rerum Novarum, on capital and labour, issued 15th May 1891, in which Pope Leo XIII offered the following thoughts on development:

"Every programme geared to increased production must have no other end in view than to serve the human person, namely: to lessen inequalities, to remove discrimination, to free men from the bonds of servitude and to enable them to improve their condition in the temporal order, achieve moral development, and perfect their spiritual endowments. When we speak of development, care must be given both to social progress and economic growth."

It is worth reflecting on how far development studies, particularly the crude, mathematically based economics of the past century - rightly lampooned by the post-autistic economists - have strayed from this inspirational advice. Listening to Cardinal Martino, I was struck by the enormity of the gap between the sentiments of the early economists -- many of whom rooted their studies in the field of moral philosophy -- and the debased ethics of Capitalism v2.2, which were superbly summed up by TJN's friend and colleague Raymond Baker, who has described the current state of globalisation as follows:

"For the first time in the 200-year run of the free-market system, we have built and expanded an entire integrated global financial structure the basic purpose of which is to shift money from poor to rich. [It is] the ugliest chapter in global economic affairs since slavery . . ."

Neither Raymond nor I are anti-globalisation, far from it, we both favour free and fair trade, but the globalisation model pursued since the late 1970s has drastically over-emphasised capital market liberalisation and de-regulation, and we are now witnessing the inevitably outcome of this lack of understanding of how financial capitalism can run amok.

Much of today's discussion has focused on the financial market crisis, which is increasingly tending towards catastrophic proportions for many poorer countries. There was complete agreement that lax and fragmented regulation had exacerbated the irresponsible behaviour of the banking community. Tax havens were identified as a weak link in global regulation, forcing the process of the deregulatory 'race-to-the-bottom.'

Tax evasion was also discussed at length, and the audience were visibly shocked by the scale of this problem and its impact on poor people. I am hopeful that the Holy See will have some strong words to say about the morality of the tax evasion and avoidance industry. In his summing-up Oscar de Rojas commented that international tax cooperation must be made a central feature of Capitalism v3.0.

In light of the appalling growth of inequality, the steady decline of the ability of governments in poorer countries to fund essential services, and the social damage caused by tax evasion, the case for strengthening cooperation on tax matters is stronger than ever. Sadly, however, in Geneva on Tuesday I witnessed the sordid spectacle of three major tax haven countries, Belgium, Ireland and the United Kingdom, voting against a proposal to strengthen the role of the UN Tax Committee, flying in the face of the wishes of the developing countries, who voted en masse in favour. It is fair to say that the majority of the expert members, observer countries and civil society participants at the Geneva meeting seethed with anger at the naked power play by these tax haven economies.

Despite the fine words of Prime Minister Gordon Brown, who told the United Nations General Assembly in September that "we must now build a new global financial order founded on transparency not opacity", Britain remains committed to obstructing progress in this important area. Deeds, as always, count more than words, and the rich and powerful countries remain committed to a global financial order that is neither stable or progressive.

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