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The annual plenary sessions of the Pontifical Academy of Social Sciences, with many hours of discussion and dozens of papers over four full days, are rather too broad to effectively summarize in a few minutes. Permit me then to choose only a few highlights from our last few days.
The Pontifical Academy of Social Sciences was founded in 1994 by Pope John Paul II. For the entire life of the Academy therefore, the guiding magisterial document was the 1991 encyclical on the social order, "Centesimus Annus," supplemented in 2006 by "Deus Caritas Est." The 2010 plenary was the first to follow the publication last year of "Caritas in Veritate," so our deliberations took account of the directions indicated by Pope Benedict XVI.
In "Centesimus Annus," Pope John Paul II indicated that the powerful energies of the free economy needed a strong moral and juridical framework. One might suggest that in 1991 Pope John Paul II emphasized the energies of the free economy. In 2009, Pope Benedict XVI emphasized the moral and juridical framework. In the audience the Holy Father granted to us last Friday, he made this point explicitly:
"[The economic crisis] has also shown the error of the assumption that the market is capable of regulating itself, apart from public intervention and the support of internalized moral standards. This assumption is based on an impoverished notion of economic life as a sort of self-calibrating mechanism driven by self-interest and profit-seeking. As such, it overlooks the essentially ethical nature of economics as an activity of and for human beings."
Our deliberations were largely occupied with what that "public intervention" and those "internalized moral standards" might be.
The Economic Crisis
Our plenary addressed itself explicitly to the economic crisis. We have all witnessed the severe upheavals in the financial sector, with its consequences for the real economy, especially regarding unemployment and public sector finances. Moreover, our meeting took place during the Greek crisis, indicating that the questions we examined were as relevant as the daily headlines. Our plenary this year was marked by an analysis of recent events in a manner more immediate than is customary in the rhythms of academic life.
Among many points our academicians and our invited guests made, I would draw attention to three themes that emerged in many interventions.
Financialization of the Economy and of Common Life
The current economic crisis had its roots in the financial sector. Indeed, one invited speaker, Dr. Luca Cordero di Montezemolo, Chairman of Ferrari and Fiat, former president of Confindustria, spoke of a shift from an economy based in the real production of goods to an economy dominated by speculative activities driven by greed. The fragility of the economic system was partly a consequence of an overreliance on speculative financial activities separated from productive activity in the real economy. Two members of our Academy, Professor Margaret Archer and Professor Partha Dasgupta, spoke more broadly of the danger of the "financialization" of human relations, in which human activities, even in the family, are reduced to a merely commercial dimension. One of our guests, Professor Stefano Zamagni, pointed out the danger of thinking even of business firms in this way, where the corporation ceases to be an association of persons and become a commodity instead. Such a "financialized" approach to the social order not only narrows the vision of the human person, but creates instability in the economy.
The Consequences of the Crisis on the Poor
A common theme of our deliberations was that the economic crisis took a serious toll on the poor, even if the origin was in the wealthy countries and within the financial sector of the wealthy countries. Those who were not at fault suffered. Members of our Academy, including Professor Paulus Zulu and Professor Mina Ramirez, spoke about the suffering of the most vulnerable. Professor Sabourin of our Academy drew our attention to the fact that, for the first time, our world will soon have 1 billion malnourished people. If one compares the relative cost of the financial bailouts to the amounts needed for basic nutrition, for example, one cannot avoid the conclusion that this crisis has distracted greatly from urgent questions of development. In our attention given to questions of hunger and health, the Academy stressed also that meeting basic needs, especially for children, beginning in the womb, makes a decisive contribution to economic productivity. A focus on financial instrument reform should not distract from basic development policy and investment in rudimentary human capital – nutrition, health and basic education.
Governance of Economic Activity
A highlight of this year’s plenary was a session featuring three invited experts on banking: Lucas Papademos of the European Central Bank, Mario Draghi, Governor of the Bank of Italy, and Ettore Gotti Tedeschi, President of the Istituto per le Opere di Religione (the "Vatican Bank"). Given the presence at our plenary of Hans Tietmeyer, former president of the Deutsche Bundesbank, and Luis Ernesto Derbez Bautista, former Minister of Economics in Mexico – both members of our Academy – this extraordinary session featured a discussion at the highest level of the economic challenges facing us. The principles laid out in Caritas in Veritate about the need for stronger regulation of international finance were discussed with various concrete measures suggested in order to ensure greater transparency in financial instruments and to avoid the moral hazard problems arising from bailouts. With reference to the Greek crisis, our expert guests addressed the recent package of relief measures, as well as the possibility that new European structures might be needed, not excluding the possibility of a new treaty to better secure the foundations of the common currency.
The Pontifical Academy of Social Sciences customarily publishes the papers of our plenary sessions. The forthcoming proceedings should assist students of Catholic social doctrine to better understand the issues raised by the global economic crisis in view of the guidance offered by "Caritas in Veritate."