Debt, Finance and Catholics

Crisis Magazine
By Sam Gregg

Debt and deficits seem to be on everyone’s minds these days. Whether it be worries about the American government’s fiscal woes, Europe’s fragile banking system, or the debt-as-a-way-of-life culture that disfigures so many lives, many people are seeking guidance about how to extradite ourselves from this mess with our souls intact.

In this regard, Catholics instinctively turn to Catholic social teaching for direction. Unfortunately, modern Catholic social encyclicals have relatively little to say about financial questions. Even the 2004 Compendium of Catholic Social Doctrine confines itself to very broad statements about finance and foreign debt, and it never really addresses the moral dimension of private and public debt.

This absence of sustained contemporary Catholic reflection on financial questions is puzzling. Because once we get past the Dark Ages propaganda and Black Legend mythology that distorts so many people’s vision of the Middle Ages and Catholicism more generally, we discover most of the practices of finance and banking took form in a medieval Christian world — one shaped and nourished by the Catholic Church.

Indeed, for many centuries, Catholic bishops and theologians invested considerable energy in understanding the world of money because of the usury question. Catholic thinkers were consequently among the first to identify money’s primary functions, illustrate how money in the conditions of economic freedom could assume the form of capital, demonstrate the moral legitimacy of charging interest on money-as-capital, and assess the moral status of different debts in different contexts.

Here it’s worth noting that early-modern Catholic theologians assailed governments who tried to escape their debts by measures such as inflating the currency or borrowing more money to pay for interest payments on existing public debt, or who spent large portions of the taxes they raised on servicing debt or on activities that were either morally evil or simply did not fall within the core functions of constitutionally limited governments.

Sound familiar?

Today one looks in vain for Catholic thinkers studying our debt and deficit problems from standpoints equally well-informed by economics and sound Catholic moral reflection. We don’t, for instance, hear many Catholic voices speaking publically about the moral virtues essential for the management of finances such as prudent risk-taking, thrift, promise-keeping, and assuming responsibility for our debts — private or public.

Instead, one finds broad admonitions such as “put the interests of the poor first” in an age of budget-cutting. The desire to watch out for the poor’s well being in an environment of fiscal restraint is laudable. But that’s not a reason to remain silent about the often morally-questionable choices and policies that helped create our personal and public debt dilemmas in the first place.

One Catholic who has proved willing to engage these issues is none other than Pope Benedict XVI. In his 2010 interview book Light of the World, Benedict pointed to a deeper moral disorder associated with the running-up of high levels of private and public debt. The willingness on the part of many people and governments to do so means, Benedict wrote, “we are living at the expense of future generations.”

In other words, someone has to pay for all this debt. And clearly many Western Europeans and Americans seem quite happy for their children to pick up the bill. That’s a rather flagrant violation of intergenerational solidarity.

But Benedict then sharpened the argument. This willingness on the part of governments, communities, and individuals to live off debt means that people are “living in untruth.” “We live,” Benedict stated, “on the basis of appearances, and the huge debts are meanwhile treated as something that we are simply entitled to.”

In fact, it’s possible to go further and argue such attitudes reflect a mindset of practical atheism: living and acting as if God does not exist, as if the only life is this life, as if the future does not matter. Only people who have no hope — no hope in God, no hope in redemption, no hope for the future — will think and act this way.

The economist John Maynard Keynes once famously wrote, “In the long run, we are all dead.” To be fair to Keynes, he was making a specific point about monetary theory. But his words are evocative of a mindset that should trouble Catholics and other Christians.

For if we choose to live our lives according to a perspective dominated by immediate gratification or pursue economic policies forever focused on the short term (which is, more or less, Keynesianism’s Achilles’ heel), then living off debt is entirely rational. But what does that say about our priorities and conception of human flourishing?

Taking on debt is not in itself intrinsically evil. In many circumstances, it’s an entirely reasonable decision. Nevertheless, a situation of inexorably increasing debt and a failure to confront its moral and economic causes can slowly corrode our personal sense of responsibility for our freely undertaken obligations and severely tempt us to live in a fantasy world of moral and fiscal unreality.

Such attitudes don’t just weaken economies. The damage to our personal moral well being, not to mention entire societies’ moral ecology, is immeasurable.