Holy See on Economic Crisis

"The Real Crisis Does Not Appear to Be Merely Financial"

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NEW YORK, OCT. 31, 2008 (Zenit.org).- Here is the message Archbishop Celestino Migliore, permanent observer of the Holy See to the United Nations, delivered Thursday before the interactive panel of the 63rd session of the U.N. General Assembly on the global financial crisis.

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Mr President,

Many economists and analysts are agreed that the crisis can be attributed to a lack of a complete and effective regulatory system, but even more to a widespread disregard for regulatory and supervisory structures, to say nothing of the rules of accountability and transparency.

My delegation endorses this view and would go one step further: the real crisis does not appear to be merely financial, economic and technical. Rather, it extends to the broader realm of ethical codes and moral conduct. Unbridled profiteering and the unscrupulous pursuit of gain at any cost have made people forget basic rules of business ethics.

Our reaction should not be limited to deploring the crisis and offering formal expressions of sympathy to the poorer countries and social strata which have been affected. We need to come up with the ways and means to avoid similar crises in the future.

In some cases, governments and institutions which rigorously implemented rules at the lower customer level were lax in maintaining that same rigor at the higher level. The same could also be said with regard to the economic systems of poorer countries. International financial institutions which strictly implemented conditionalities and oversight in developing countries neglected to do so when overseeing developed economies. Now that the latter have collapsed, the former also have to bear the consequences.

Government is the exercise of the virtue of prudence in the enactment of legislative and executive measures capable of directing social activity towards the common good. The principle of subsidiarity requires that governments and large international agencies ensure solidarity on the national and global levels and between generations.

A second observation pertains to the responsibility of those who work in the financial sector. Lending is a necessary social activity. Nonetheless, financial institutions and agents are responsible for ensuring that lending fulfils its proper function in society, connecting savings to production. If lending is seen merely in terms of trading off financial resources without regard for their reasonable use, it fails to be a service to society. When attempts are made to conceal the real risk that loans will not be repaid, savers are cheated and lenders become actual accomplices in theft.

It must not be forgotten that at the edges of the financial system there are retired persons, small family businesses, cottage industries and countless employees for whom savings are an essential means of support. Financial activity needs to be sufficiently transparent so that individual savers, especially the poor and those least protected, understand what will become of their savings. This calls not only for effective measures of oversight by governments, but also for a high standard of ethical conduct on the part of financial leaders themselves.

A third, and perhaps even more basic, observation has to do with the general public and its choice of values and lifestyles. A lifestyle, and even more an economic model, solely based on increased and uncontrolled consumption and not on savings and the creation of productive capital, is economically unsustainable. It also becomes unsustainable from the standpoint of concern for the environment and, above all, of human dignity itself, since the irresponsible consumer renounces his own dignity as a rational creature and also offends the dignity of others.

Looking towards the future, there is a need to restore credibility and authenticity to lending, which always needs to be a part of the product chain of goods and services, and not an independent activity.

Above all, however, there is a need to invest in people. Once the inevitable financial salvage operations are over, governments and the international community should invest their money in aid to the poorest populations.

The relatively recent and positive experience of microcredit shows that, paradoxically, those who, from the standpoint of cold hard financial calculation, seem least suitable to receive credit, are by and large the most serious and reliable borrowers.

The history of developed countries also demonstrates that grants for health, education, housing and other basic services benefiting the weakest socio-economic levels of society, families and small communities, ultimately prove to be the most profitable investments, since they alone ensure the harmonious functioning of society as a whole.

Thank you Mr President.