Responding to the Vatican Justice and Peace Commission's paper on financial regulation, Prof. Philip Booth, Editorial Director at the Institute of Economic Affairs, commented:
"The document makes some interesting points but, on close inspection, the position taken by the Commission is very weak.
“The sorts of systems of global financial regulation that the Commission calls for exacerbated the financial crisis as they led to many countries having the same failings in their banking systems at the same time. Indeed, many of the specific problems we faced in Anglo-Saxon banking systems were caused by financial institutions attempting to "game" regulations imposed by global financial regulators.
"Elsewhere, the proposal for a world fund to bail out banks is reckless. If anything, the current attacks on democracy, about which the Commission is concerned, are fuelled by the perceived injustice of banks being bailed out at the expense of taxpayers. The creation of a world bailout fund would raise moral hazard and lead to more reckless behaviour in the financial system and certainly would be perceived as a major injustice by taxpayers.
“As ever with Justice and Peace Commission documents, there is an unduly pessimistic tone. The world is described as having moved in a problematic direction with regard to its economies and the prospects for peace. Yet, since the liberalising reforms in India, reported hunger has fallen by 90%; in the last decade the number of civil conflicts in Africa has more than halved; in the last couple of decades Vietnam has probably reduced poverty more rapidly than any country in the economic history of the world. Dire poverty, as John Paul II pointed out, is most prominent in those countries that do not engage in the global economy and trade - the process of globalisation cannot be held responsible for this.
“Throughout the document the Commission wrongly asserts that liberalism is a theoretical ideal divorced from reality. It is quite extraordinary then that the main proposal is for a world legal authority. In reality such authorities invariably become captured by cliques and special interests and are rarely at the service of the people - from whom, of course, they are so remote. Indeed, they often seem directly opposed to the very values for which the Church stands.
“All in all, despite some interesting perspectives, the Commission has produced an extremely disappointing document."
To arrange an interview with Prof Philip Booth, Editorial Director at the IEA, please contact Nick Hayns, Communications Officer, on 020 7799 8900 or firstname.lastname@example.org
Notes to Editors
Prof Philip Booth is the editor of Catholic Social Teaching and the Market Economy
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.