Professor Malinvaud, of the National Institute of Statistics and Economic Studies of Paris, addressed the 9th Plenary Assembly of the Pontifical Academy, which met from May 2-6. The title of his talk was: "Towards Some Ethical Principles for the Governance of Financial Globalization."
"When there is talk of globalization," Malinvaud said, no one is opposed to the need to make reference to ethical principles. But when a debate starts on what is more or less correct, things get complicated."
"A similar argument is applied to the Church: its duty to uphold and promote ethical values is not in question; but it is different, and more arduous, to point such values out and to specify them, keeping in mind, as well, that the Social Doctrine of the Church has kept absolute silence for more than a century about financial operations."
Q: Therefore, there is a need to inject ethics into the world of finance, dominated as it seems by the law of profit.
Malinvaud: There already are some ethical rules. To grant and obtain loans, for example, are operations that are considered legitimate. But the legitimacy is conditioned by respect for the right of the debtor not to be exploited. Because of this, when a contract is signed, there must be explicit clauses that prohibit the imposition of usurious interests that take advantage of the lack of experience or care of the debtor; moreover, if at the moment the contract is executed a very different situation is verified than the one expected by the contractual terms, a general sense of equity should prevail over formal justice.
Similarly, insurance contracts are considered legitimate. But, to obtain advantages, the one insured must be exposed to the risk in question; while the insurer cannot increase the risk artificially.
Q: In other areas, however, there is an urgency to offer incisive rules.
Malinvaud: With the development of financial markets, new types of responsibilities are increasingly important where exchanges are anonymous: responsibilities to maintain transparency -- on the part of the one who emits shares or obligations -- especially when it might influence the equity of the transaction. A just balance must be found between the legitimate right of the individual to discretion and the duties of transparency. States and markets have provided themselves with instruments to ensure the respect of these rights and responsibilities: laws on bankruptcy and usury, anti-trust measures, norms to safeguard the security of transactions, etc.
It would be interesting to know which one of these can be approved by the Church. It would be important and plausible for the Church to manifest its judgment on the morality of financial operations and the norms and laws that govern these operations. It would be a precious basis for discussion on the adoption of ethical principles to regulate financial globalization.
Q: You have insisted much on the need to introduce new norms in the markets of the developed countries.
Malinvaud: Different things have to be done. To begin with, there is the need of counter-powers to address the prevailing positions and international authorities must be reinforced in the matter of financial governance. We must insist on greater transparency in technical operations, abolish tax havens; the laws and regulations must be in step with financial growth, especially to protect those who might be left without their profits.
Q: In regard to the external debt of poor countries, you have suggested a different attitude.
Malinvaud: The Church has always been in the front line to denounce -- unfortunately, without being listened to --, the sudden decline in international aid to less developed countries and the need to re-establish it at the highest levels. When it expresses concern over the intolerability of the burden of the external debt, when it calls for cancellation, the Church puts its finger precisely on the sore, creating a strong echo at the international level. But I think that the question must be evaluated not only from the point of view of providing help to the poor, but rather from the perspective of Natural Law, which would require that the insolvent countries receive more equitable treatment.