Thinking Catholic: European leaders blame crisis on “speculative capitalism”

By Angelo Matera

Posted 10/7/08 at 6:53 AM


Europe’s financiers were seduced by the lure of easy subprime mortgage profits, just like everyone else, and they’re suffering now, just like everyone else. But give Europe credit for one thing: Thanks to its Catholic roots, Europe’s leaders understand that the financial crisis wasn’t caused by some vague form of “greed”; it was caused by greed purposely channeled into useless financial speculation, rather than into productive investment.

This difference was clearly recognized by European leaders when they met Saturday to deal with the financial panic. They blamed the U.S., and its brand of “Speculative capitalism” for the crisis. French President Nicolas Sarkozy personalized the difference between real productivity and speculation when he said: “We want a capitalism of entrepreneurs. We don’t want speculators.”

This echoes what Pope John Paul II said, in his encyclical, Centesimus Annus

“…Ownership of the means of production, whether in industry or agriculture, is just and legitimate if it serves useful work. It becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others, in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation or the breaking of solidarity among working people. Ownership of this kind has no justification, and represents an abuse in the sight of God and humanity. [43]

As I’ve written before, the notion that money can be misused through speculation and usury (charging exorbitantly high interest rates) has always been an important part of Catholic moral teaching, which is why it’s so much a part of the European mentality. Here in the U.S., it’s different. Because of our Calvinist roots, we’ve never had a strong sense that there is a moral basis to wealth creation, that there is a connection between money and its underlying reality. As a result, we’ve had distortions of Christianity, such as the Prosperity Gospel.

Like sex for pleasure alone, rather than within the generative context of marriage, making money through speculation—gambling on price increases caused by luck, mass psychology, or some other arbitrary reason—is a form of mutual exploitation, a zero-sum game where winners gain at the expense of losers. In real business, profit is the result of something else; of “creating a customer,” in the words of the late, great management guru, Peter Drucker.

When we consider our falling standard of living—or, more important, our declining sense of well-being—we should consider Drucker’s prescient observation about Wall Street, cited in a 1999 New York Times article, during the height of the internet stock market “bubble”:

“Typically, Dr. Drucker gave the global bankers the back of his hand: They have introduced not ‘a single major innovation in 30 years,’ he said. Rather, the financial industry has turned inward to perfecting ‘supposedly scientific derivatives,’ in a shortsighted hope of wringing the risk out of financial speculation, like Las Vegas gamblers who futilely try to devise ‘systems’ to beat the house.

Ironically, like “safe sex,” safe speculation has proved to be an illusion.