Vatican Calls for Global Financial Reform: What Exactly is the Church Advocating?

The Vatican on Monday called for an overhaul of the world's financial systems, calling for the establishment of an international political authority that would possess broad powers to regulate financial markets, saying it is necessary in order to create an economic system that promotes democratic and ethical principles in a globalized world.

In a report issued by the Pontifical Council for Justice and Peace titled Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority, the Catholic Church states that existing institutions such as The International Monetary Fund has not effectively responded to global economic problems that has led to wide differences in economic equality between rich and poor nations. Moreover, the Vatican argues that, for Christians, every individual and every community shares in and is responsible for promoting the common good, and that politics, being responsible for the common good, will be necessary on a world-wide scale to achieve a global financial policy that works toward that purpose.

The report, which is organized into four sections that expand on the Church's objectives, comes at a time when people across the planet have taken to the streets to protest against corporate greed and financial policies that have resulted in growing income equality in many nations, particularly in the United States. Pope Benedict XVI, according to the Vatican's pronouncement, hopes the reflection can be used as a resource for world leaders and Catholics across the world toward reforming the international and monetary systems in the context of global public authority.

Economic Development and Inequalities

The report points to the world's financial markets and big banks as major causes of the grave economic and financial crisis which the world is going through today. While the Vatican said the current state of affairs has been brought on by multiple factors over the years -- such as the structural weaknesses of political, economic and financial institutions and questionable ethics in a system that encourages utilitarianism and materialism -- it emphasized the role of banks, which the Church said endlessly extended credit until the economic system was driven towards an inflationary spiral.

The consequences for the real economy, what with grave difficulties in some sectors -- first of all, construction -- and wide distribution of unfavorable forecasts, have generated a negative trend in production and international trade with very serious repercussions for employment as well as other effects that have probably not yet had their full impact. The costs are extremely onerous for millions in the developed countries, but also and above all for billions in the developing ones, the document states.

Advocating a fair distribution of wealth should be a moral imperative for Christians, according to the Pontiff. As a result, the Vatican argues that imperfect though they may be, regulation and controls must be applied at the international level to lessen the inequalities of capitalist development in both developed and developing countries, a denunciation of free-market theology that is often defended by both Republicans and Democrats in the U.S.

The Vatican said a rule of law on the supranational level is necessary to promote these values, suggesting the reform process begin with the United Nations as a point of reference.

The Role of Technology and the Ethical Challenge

While the advancement of technology has undoubtedly benefited out society in a plethora of ways, the Vatican wrote that the application of information technologies in the economy -- most significantly, finance - can create a technocracy ideology that minimizes the importance of choices by the human individual by reducing them to technical variables.

Being closed to a 'beyond' in the sense of something more than technology, not only makes it impossible to find adequate solutions to the problems, but it impoverishes the principal victims of the crisis more and more from the material standpoint, according to the report.

An absence of ethical behavior has revealed behaviors such as selfishness, collective greed and the hoarding of goods on a great scale, which contributed to the financial crisis in 2008 and the recession that followed. The Catholic Church does not have any solid suggestions to change this culture, aside from calling on the world to adopt an ethic of solidarity as the animating core of their action and putting the interests of people before profits to avoid a climate of hostility and even violence that could ultimately undermine the foundations of several democratic institutions.

The comment has been interpreted as a reference to the Occupy Wall Street movement and its extensions across the globe, which has targeted major corporations that the movement claims have put ever-growing profits ahead of the interests of the general good. In particular, demonstrators have called out companies that continue to pay massive executive salaries while laying off workers and fiercely objecting to government tax increases.

An Authority over Globalization

In an increasingly globalized planet, the Vatican says it is more important than ever to have an international political authority to ensure the universal common good in a world heading towards greater unification.

A world political authority would first and foremost exist to, once again, serve the common good, but should also be favorable to the interests of effective monetary and financial systems. Free and stable markets, according to the Vatican, should be overseen by a suitable legal framework, support sustainable development and social progress and be inspired by the values of charity and truth. Moreover, such a global political body should be gradually established and should be done so in a way so that the diversities of all nations are recognized and fully respected.

It is the task of authority to be at the service of the person, consistent with the pre-eminent value of human dignity. Likewise, governments should not serve the world Authority unconditionally. Instead, it is the world Authority that should put itself at the service of the various member countries, according to the principle of subsidiarity, the document states.

Towards Reforming the International Financial and Monetary Systems in a way that Responds to the Needs of all Peoples

The Vatican points to the G20 -- the Group of Twenty Finance Ministers and Central Bank Governors -- previously the G7, as a world organization that has developed in a positive and beneficial direction by including developing and emerging countries with larger nations in shaping global finance. In particular, it pointed to a statement made by the G20 leaders themselves in their final statement during the 2009 conference in Pittsburgh: The economic crisis demonstrates the importance of ushering in a new era of sustainable global economic activity grounded in responsibility.

Actions that would benefit the common good, according to the Church, include taxation measures on financial transactions -- such as the 1 percent Robin Hood tax on the financial sector that has been advocated by some of the Occupy Wall Street protesters -- the recapitalization of banks with public funds conditional of whether those institutions have virtuous intentions aimed at developing the economy and a better definition of the domains of ordinary credit and of investment banking.