Vatican Directly Addresses Ethical Issues in Economics and Finances

Oeconomicae et Pecuniariae Quaestiones Is a Joint Document from the Congregation for the Doctrine of the Faith and the Dicastery for Promoting Integral Human Development on the Role of Financial Systems

It isn’t often that there’s an official Church document specifically about financial matters. So when one comes along like Oeconomicae et Pecuniariae Quaestiones, it’s important to take note.

The document, officially classified as a Bulletin, tackles issues relating to the role of ethics in the world of finance.

The bulletin is surprisingly long and significant parts of it address the larger financial world of banks and international economic systems. These sections are beyond the sphere of our expertise and so we will limit our comments to just the parts of the bulletin applicable to individual investors. The document is also very dense and at times difficult to read. We’ve tried our best to explain what is being discussed as clearly as possible.

Given the importance of economic and financial matters in human life, it is unusual that so few Church documents speak so openly about them. The main thrust of the message is that the market is a good thing when used for the promotion of authentic human development. To help make sure the market is the force for good that it should be, ethical rules centered on the human person need to be in place. Exactly how they take shape and are put into practice has yet to be determined. As investors, though, we are at the forefront of living out Catholic ethics in the market and must make sure the light of Christ illuminates the market.

1. Economic and financial issues draw our attention today as never before because of the growing influence of financial markets on the material well-being of most of humankind. What is needed, on the one hand, is an appropriate regulation of the dynamics of the markets and, on the other hand, a clear ethical foundation that assures a well-being realized through the quality of human relationships rather than merely through economic mechanisms that by themselves cannot attain it. This ethical foundation needs to inform a range of persons but especially those working in the fields of economy and finance. In this situation, a synthesis of technical knowledge and human wisdom is essential. Without such a synthesis, every human activity tends to deteriorate. But where it exists, it can foster progress towards the integral and concrete well-being of the human person.

The bulletin begins by referencing something most people are aware of: economic and financial forces have grown much more powerful recently and are having a profound effect on the daily lives of individuals. For human beings to thrive, human agents in charge of economic and financial systems need to have a solid ethical basis to work from. While free market capitalism is an ideal, the Bulletin points out that the mechanisms of the market are incapable of upholding virtue if the people in the market do not.

More importantly, the Bulletin declares the necessity of having both wise individuals and more technical people working together to help develop the proper system to promote the well being of humanity. This is a very important point as a group of wise idealists are likely to create a system with many unintended consequences. Conversely, a group of financiers and economists may create a system that operates very smoothly but is, at its heart, unjust. By combining both forms of expertise, we can hope to have the ethical insight and the technical know-how to develop real, workable solutions to economic and financial issues.

2. The integral development of every person, of every human community, and of all people, is the ultimate horizon of the common good that the Church, as the “universal sacrament of salvation,” seeks to advance. In the fullness of the good, which has its origin and consummation in God and is fully revealed in Jesus Christ, the head over all things (cf. Eph 1:10), lies the ultimate goal of every ecclesial activity. Such well-being flourishes as an anticipation of the Kingdom of God, which the Church is called to proclaim and establish in every sphere of human enterprise, and is the special fruit of that charity which, as the bright path of ecclesial action, is expressed even in the social, civil and political realms. This love for society “makes itself felt in every action that seeks to build a better world. Love for society and commitment to the common good are eminent forms of a charity that affects not only relationships between individuals but also ‘macro-relationships, social, economic and political ones’.” That is why the Church sets before the world the ideal of a ‘civilization of love.’” Love for the integral good, inseparable from love for the truth, is the key to authentic development.

The key takeaway here is the emphasis on the universality of the common good. The Church wants to promote the good of all people everywhere. In fact, working to promote the good of society is an act of charity. Thus, the Church wants to help foster economic and financial systems that promote a loving civilization where nobody is left behind.

3. …In order to liberate every realm of human activity from the moral disorder that so often afflicts it, the Church recognizes among her primary duties the responsibility to call everyone, with humble certainty, to clear ethical principles. The shared human reason, that ineffaceably characterizes every person, demands an enlightened discernment in this regard. Moreover, human rationality searches, in truth and justice, for the solid foundation that sustains its operation and maintains its sense of direction.

The Catholic Church, living up to the literal definition of its Catholic name, is a truly universal Church. Thus, the Church calls all people to follow the same ethical principles. In a world where the powerful are sometimes perceived to live by a different set of expectations, the Church is making it clear that the same moral laws govern all people.

4. Therefore, the proper orientation of reason can never be absent from any area of human activity. It follows that there can be no area of human action that legitimately claims to be either outside of or impermeable to ethical principles based on liberty, truth, justice and solidarity. This is true for those areas in which the political and economic laws apply: “Today, with a view towards the common good, there is urgent need for politics and economics to enter into a frank dialogue in the service of life, especially human life…”

Here, the Bulletin is addressing the potential counter-argument that economics and finance are outside the sphere of ethics. Even if they can both be reduced to mathematics and statistics, there are still human beings behind every action in the market. Because of this, we cannot argue that the normal moral principles that govern daily life somehow do not apply to the market. Rather, we need to seriously examine if and how the market is actually working to promote the common good.

5. Although global economic well-being appears to have increased in the second half of the twentieth century with an unprecedented magnitude and speed, at the same time inequalities proliferate between various countries and within them. Moreover, the number of people who live in conditions of extreme poverty continues to be enormous.

While not discounting the amazing explosion of wealth and prosperity of the West in the post-World War II era, the Church points out that there’s still a long way to go. Parts of the world still suffer from extreme poverty and even well to do countries have poverty-stricken areas. The financial and economic powers of the world need to work to help all people be lifted up out of the depths of poverty.

6. At stake is the authentic well-being of a majority of the men and women of our planet who are at risk of being “excluded and marginalized” from development and true well-being while a minority, indifferent to the condition of the majority, exploits and reserves for itself substantial resources and wealth. Therefore, it is time to initiate the recovery of what is authentically human, to expand the horizons of minds and hearts, to recognize faithfully the exigencies of the true and the good without which no social, political and economic system could avoid bankruptcy, failure, and, in the long term, collapse. Selfishness, in the end, does not pay while it makes everyone pay a high price; hence, if we want the real well-being of humanity, “Money must serve, not rule!”

The very beginning and end of this paragraph summarize two important Church teachings with regards to money and finance. First, the financial world directly impacts real people and, when misused, can cause serious and lasting harms. This stems, in part, from an attitude that money is a goal in and of itself. When this view pervades society, money becomes our master rather than our servant. Money in and of itself is not bad, but it must be used properly.

8. Every human reality and activity is something positive, if it is lived within the horizon of an adequate ethics that respects human dignity and is directed to the common good. This is valid for all institutions, for it is within them that human social life is born, and thus it is also true for markets at every level, including financial markets.
It must be noted that the systems that give life to the markets—before deploying the anonymous dynamics made possible by ever more sophisticated technologies—are in fact founded on relationships that involve the freedom of individual human beings. It is evident therefore that the economy, like every other sphere of human action, “needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centered.”

This paragraph easily stands on its own as a defense of the market and financial systems in general. The Church is essentially saying that human activity is good when there is an overriding moral sense that it obeys and that promotes the genuine good of humanity. The market, at its core, is based on human freedom. This free exchange of goods between people has been obscured by modern technology, but it still forms the heart of the market. Catholic investors, by actively engaging in the market, are doing something good.

The Church raises a warning flag at the very end of this paragraph. Just like law, medicine and any other category of human activity must have its own ethical basis to function properly, so must the market. More importantly, the ethical system on which the market is based must be centered on the good of the human person. Any other foundation for the market will surely lead to problems.

9. It is evident that without an appropriate vision of the human person, it is not possible to create an ethics, nor a practice, worthy of the dignity of the human person and the good that is truly common. In fact, however neutral and detached from every basic concept one may claim to be, every human action, even in the economic sphere, implies some conception of the human person and of the world, which reveals its value through both the effects and the developments it produces.

Without getting too deep in the philosophical arguments behind this paragraph, it’s important to point out that the Church is saying that everything we do is ultimately based on our view of the world and humanity. The easiest way to understand this is to question why a person performs any action. For example, why is this person buying this stock? Because he thinks it will make him money. Why is that important? Eventually, you’ll get to the assertion that deep down, this person thinks this action will help make him happy. Here is where we finally get to what the Church is saying: Why does this person think this action will help make him happy? The answer will reveal a certain insight into how this person views humanity and human happiness.

Because of this, it’s very important the ethical foundation of the market be based not just on human values, but on an authentic, accurate view of humanity and the common good. This is, in part, why the Church and Catholic investors have important roles to play. The Church can help guide the creation of an ethical system to underpin the market while the faithful must live it out in the world. Exactly how this will look in practice appears to still be developing, but it may take the form of something like the USCCB Investment Guidelines.

10. …Such relational anthropology helps the human person to recognize the validity of economic strategies that aim above all to promote the global quality of life that, before the indiscriminate expansion of profits, leads the way toward the integral well-being of the entire person and of every person. No profit is in fact legitimate when it falls short of the objective of the integral promotion of the human person, the universal destination of goods, and the preferential option for the poor. These are three principles that imply and necessarily point to one another, with a view to the construction of a world that is more equitable and united…

At the heart of this paragraph is the assertion that profit is ill-gotten when it harms the human person. Profit is not a bad thing in and of itself, but the Church rightfully points out that profit is subordinate to the promotion of human well-being. This is fundamental to the USCCB Investment Guidelines and the exclusion of certain companies from Catholic investment portfolios. Here, the Church seems to go one step further. A logical conclusion to this line of reasoning is not just that it is immoral to invest in companies that profit through the commission of evil, but that it is actually a misuse of the market as a whole.

11. Well-being must therefore be measured by criteria far more comprehensive than the Gross Domestic Product of a nation (GDP), and must take into account instead other standards, for example, safety and security, the growth of human capital, the quality of human relationships and of work. Profit should be pursued but not at any cost, nor as a totalizing objective for economic action…

The Church is finally getting down to the essentials. What actually is the well being of humanity as regards economic systems? Many of the criteria listed here are hard to measure and may not be directly applicable to the market. But some of them are and should, insofar as possible, be considered in relation to the market and the Catholic’s place in it.

13. In principle, all the endowments and means that the markets employ in order to strengthen their distributive capacity are morally permissible, provided they do not turn against the dignity of the person and are not indifferent to the common good…

Like paragraph 8, this is almost a stand alone defense of the free market. The Church actually says that the market is free to function as long as it does so for the benefit of humanity. The rest of the paragraph warns against allowing the market to run unsupervised as the mechanisms in play do not reason or actively work for human good. Rather, it is the people who make use of the market that can work for or against it.

The remainder of the document then turns to address international banking and other topics outside the scope of our interests. For those who wish to read the entire document, you can do so here.

Contact our Catholic investment advisors to begin the process of investing in line with Church teaching.

Post from: Insights