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SUNDAY SPECTATOR
December 14, 2008
Market failure
There was a little puff of journalistic excitement, at least in Italy, recently, when the country's finance minister, Giulio Tremonti, declared that Pope Benedict XVI -- or, Cardinal Ratzinger as he then was -- had predicted our financial meltdown in 1985. That, at least, was the headline. In less sensational detail, the finance minister was referring to a paper the future pope had presented to a symposium in Rome, titled Market Economy and Ethics. (It is archived in English on the website of the Acton Institute.)The then cardinal argued that a market economy not moored to solid ethical underpinnings will sooner or later blow away. Further, a society not rooted in firm religious convictions cannot provide those ethical underpinnings. Our society is like that, and so we are adrift -- not only spiritually but now materially. It would follow that we cannot fix our economic problems with clever financial tricks, let alone by such cumbersomely counter-productive methods as massive bailouts for the least efficient companies. Our economic problems reflect deeper social problems that have nothing to do with the "inequalities" about which the Left is always squealing. Instead, we must consider not only the moral but the economic consequences of the kind of kiting that is involved, when a whole social order is strung upon instant consumer gratification, and this in turn sails upon credit instruments. We buy things we don't need with money we don't have. But beyond this, our recklessness devolves upon ten-millions of children who, thanks to consumer gratifications from condoms to abortions, were never born. We lived as if there were no tomorrow, but that was yesterday. Now it is tomorrow, and as we retire, a small number of children inherit a big wind. The best short discussion of the subject I have seen is by a contributor to Asia Times Online, who signs himself "Spengler," I assume after the gloomy German pessimist Oswald Spengler, who wrote The Decline of the West in 1919, and had the good luck to die in 1936, after predicting the Nazis would not last 10 years. I do not entirely agree with our contemporary Spengler (is there anyone with whom I have ever entirely agreed?) but in passing recommend his column as one of the most consistently interesting that appears today, informed by a breadth of learning and distaste for trivialities that is rare among journalists. This Spengler refers back to his own arguments, over time: "Underlying the crisis is the Western world's repudiation of life, through a hedonism that puts consumption or 'self-realization' ahead of child-rearing." He saw the U.S. banking crisis coming, and connected the dots between demographic developments and financial catastrophe. He affirms the Ratzinger argument, that we must competently analyse mechanisms of supply and demand, and avoid cheap moralizing by recognizing that these are written into nature. But a moral order is also written into nature, and by denying it, and exclusively focusing on supply and demand, we finally turn the economy itself belly up. "If moral rot has taken hold of a society, the market mechanism will take it to hell faster and more efficiently than any of the alternatives." Spengler again, echoing the Pope: "The market does not spring into being like warriors from the dragon's teeth sown by Cadmus. Markets are part of society, and if society passes the demographic point of no return, the market will die along with all other social institutions." Now curiously, several of the greatest modern economists, including most obviously Joseph Schumpeter, but more subtly Friedrich von Hayek of my adored "Austrian school," made this point in their "secular" ways: that it is not enough to have free markets, that indeed free markets can achieve anarchy and destroy the social order that created them, left entirely to themselves. They must be married to a moral and ethical regime that can effectively resist decadence. Hayek was a diehard anti-socialist, and champion of human freedom. He was not even slightly religious, but he was clear on the main point: that if something is intrinsically wrong, we must have laws against it. Moreover, the free market itself can only survive within a moral regime that is itself favourable to freedom. In his paper of 1985, Cardinal Ratzinger simply went the extra step, to tell us what that regime is. He reminds us that "Western Civ" created free markets, and not vice versa; and inevitably, that the Roman Catholic Church created Western Civ. Like every other component of a high civilization, the market economy is, in itself, a mixed blessing, therefore a dangerous idol. All my adult life, it seems, I have been explaining to libertarians that this is the difference between us: that we're both in favour of free markets, but only one of us is also in favour of civilization. I am not a social liberal, like most of them, but rather an intense social conservative. Moreover, I hold that all civilizations remain "socially conservative" until such time as they begin to collapse: as true of Confucian China as of the Christian West. The rebuilding we need begins with church and family. David Warren
© Ottawa Citizen
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