Krugman flagged this over the weekend from the Vatican’s chief banker–who knew such a post existed, right? Well it turns out this guy wants to exorcise Keynesian economics from the planet.
In simple terms, Keynes taught that in times of economic crisis, consumer demand must be stimulated by government investment and an “attitude of saving” must be discouraged, Tedeschi wrote.
He said Keynes’ crisis-averting tactics can be seen in the U.S., where government economic policy has focused on increasing public expenditures – and public debt – in order to stimulate private economic activity, including consumer demand and employment.
In addition, also following Keynesian wisdom, the U.S. is printing more money and has looked at increasing taxes in an effort to generate more public revenues.
Tedeschi warned that these policies are leading to a “nationalization” of private debt in the U.S. He also criticized the government bailouts of private banks that offered too much credit without adequate guarantees. This too is leading to increased government control of the economy in the U.S. — a “nationalization” that is being paid for with newly printed currency.
All of this reminded me of my first graduate seminar twenty five years ago in which I wrote a fifty page paper on Max Weber’s Protestant Ethic and the Spirit of Capitalism. Weber said that the roots of modern capitalism took root in the early modern world in every place where Reformed theology had become dominant. Why? Because Calvin’s doctrine of predestination required the concomitant teaching on the perseverance of the saints. How does one know if one has been predestined by God for salvation? One can never be certain, but if it has in fact occurred, the evidence thereof will be made manifest in one’s life, specifically in one’s work. Sacred work is no longer the province of the priest or nun. In Reformed theology, all work has the possibility of sacredness. If one bakes bread, one bakes it as unto the Lord. If one digs a ditch, one digs it as unto the Lord. Weber argued that this sacralization of work, not found in the competing Catholic, Lutheran and Anglican traditions. led to a rationalization of economic activity, imbued with theological legitimacy, that was found nowhere but in the Reformed lands.
What does this have to do with our Catholic central banker? In his view, savings is the summum bonum, the goal to which both states and individuals should strive. Certainly this is a virtuous practice, but Keynesian economics could teach the papal purse-holder a thing or two. Keynes was not at all against saving, but knowing when to save is the measure of discernment. When an economy is shrinking or flat, as it has been worldwide for several years, telling people or governments to save is simply the recipe for putting their neighbor out of work. The time to save is when the economy is booming, not tanking. My state has 12% unemployment–if all of the Christians in my state started organizing their economic activity right now to direct it towards savings as the Vatican’s guy says we would just run that number in the wrong direction. For those of us who had money to save we might better our own prospects, but for the million people in my state who need work, my own mother included, that would be disastrous. What’s more, as Calvin knew, work has more benefits than just the betterment of one’s economic position. It gives meaning and purpose for existence–for some, even the presence of God in their lives–, it provides fellowship and camaraderie, and promotes cooperation and civic unity. Not working, by contrast, is corrosive of all of these things and places both individual and community under great stress.
Keynes was right. People need to be put back to work.