Collateral Damage

Remember Gordon Gekko and his famous – infamous – speech in the 1987 movie Wall Street about how greed is good? [Watch the short video clip]

Instead of serving as a warning, Americans everywhere jumped on the free-for-all market of the 1980’s, adopting this belief in self-interest as the new gospel, the new truth – that by pursuing profit you were pursuing the common good. Wall Street was perceived not only as a respectable way to make money, but the most glamorous. There was an allure. Money would make money. Greed equaled good.

Until September of 2008, when it all came crashing down. Moses came down from the mountain and exposed the golden calf. Millions of Americans were thrown into poverty, lost their jobs, lost their homes. The collateral damage of “greed-is-good” was huge.

In the 80s our value base began to disappear and for three decades and four presidencies it continued to erode. There was a peeling away of the economic from the social in our society; growing the economy became central, social concerns were marginalized. Now Washington is debating new regulations to modernize the country’s financial regulations and hold Wall Street accountable. These efforts are a step in the right direction.

Pope Benedict XVI instructs us in Caritas in Veritate, “I would like to remind everyone, especially governments engaged in boosting the world’s economic and social assets, that the primary capital to be safeguarded and valued is man, the human person in his or her integrity: Man is the source, the focus, and the aim of all economic and social life.”

Achieving this requires innovative and fundamental change, in how we think and how we act. The Holy Father insists that it is not enough to merely bring economics and social concerns back together, but that the social element must be embodied in the economic one so that the market becomes an instrument of civilization once again. We need big, innovative ideas about how to meld our market economy with the common good so as to avoid collateral damage in the future.

In the U.K. a Robin Hood Tax has been proposed, a “tiny tax on bankers that would give billions to tackle poverty.” What do you think – is this an effective model that would produce a more inclusive economic recovery? Would this serve to connect the market and the common good, which Pope Benedict emphasizes as crucial to economic and social life? What are your ideas?

Comments

[Leonard Campbell]

Robin Hood Taxes are too specific. Let all corporations make as much money as they want. But let the corporation pay (maybe significant?) taxes on salaries that are a certain percentage higher than the lowest paid wage earner. Let the corporation pay a progressive tax on profits that are excessive.

[Richard Bruce]

We need Robin Hood taxes. Their is a world wide
savings glut. Or to put it another way there is a shortage of good solid investments.

Normally the interest rate on very safe savings, for example three month government bonds might be 2 to 3 percent above the rate of inflation, the last I checked it was 2 percent below the rate of inflation. Effectively interest rates are negative.

The US government and the governments of many other industrial nations are helping to solve the problem by borrowing lots of money. This creates financial investment opportunities that suck up the excess savings. But the public is worried about all that debt.

One way to stimulate an economy without running up the debt is to cut taxes on the poor and middle class and raise taxes on the rich, because the rich save a large portion of their income.

Reasonable, moderate, Robin Hood taxes should be used in combination with government deficits and other forms of stimulus to bring the unemployment rate down.

There is nothing radical in this, it is just standard text book economics, specifically Keynesian economics. Remember that the leader of the anti-Keynesian economic movement, Milton Freedman said, "We are all Keynesians now." Reasonable people accept Keynesian economics as one element in an economics tool kit.

I have three degrees in Economics, Bachelors, Masters, and Candidate in Philosophy or ABD, and I was a full time economics instructor at St. John's University for three years.

If you click on my name you will get my web site where I have web pages on economics and many Catholic topics.

[Mike]

Each week I sit and church and marvel at the Priest who is distressed by the decreasing income gathered at the passing of the plate. At the same time my Church and my priest espouse ideas that contribute to the blight. If "they" take more from me, I have less left to give to you. I do not have unlimited resources and my generosity is not is not limitless. Taking from those that have worked very hard to earn what they earn simply means that the Church will have less.

[Mike]

PS. No one proclaiming to want an end to poverty is suggesting taxing wealth instead they propose taxing income. George Soros could end poverty for entire countries by giving his money to the poor, instead he sits on the sidelines and asks those of us that are earning incomes to pay our share.

[Brian]

Father Snyder:

The data doesn't support your hypothesis. Charitable giving hit record levels in the 1980s. People made more, but they gave more.

The loss of values began in the 1960s, and while present in the 1980s, it wasn't in the economic base.

The economy and our values are inextricably linked. Capitalism merely sets a price for something, it makes no determination as to whether something is good or bad. For that reason, capitalism cannot sustain itself without the necessary moral underpinings. I absolutely agree with that.

But I don't know if you can so simplistically tie the two together. The economic collapse of 2008 was caused by a number of factors, both macro and microeconomic in nature. The person who tried to buy a house that was worth 10x their annual income by playing games with their mortgage is just as much to blame as the executive who packaged these loans and resold them to Freddie or Fannie (eager to buy because of corrupt politicians).

We need to start thinking again. God is love combined with logic to form Agape, shared love. Love without logic can lead you many different directions. We need to bring the logic back so we know who and what to love.

[Mike]

If I remember correctly, Robin Hood stole from the rich and gave to the poor. At my first confession and when I told the priest that one of my many sins was that I had stolen, he didn't ask me if I had stolen from the rich. I am not a scholar, biblical or otherwise, but fairly certain that glorifying thievery goes agains the teachings of the bible.

Also, the more I read on the topic, the more it appears that the root issue is not poverty but envy. Yes, the gap between the rich and the poor may be wide, but our poor are better off than the middle class in most nations. In Cuba, the gap is small but the true wealth and therefor power is held in the hands of far fewer individuals who prevent access to the top. It is only here in America that the poorest of poor have the opportunity to become the richest of the rich and we should be doing everything in our power to avoid the catastrophe that is already taking place in Greece and about to fall upon all of Europe.

[Dave]

Fr. Snyder,

These comments make me proud to work for Catholic Charities. The debate comes down to the notion of value itself. Does making money for the sake of making money bring value to society? Does it increase wealth?
I tend to think not. Not today, when speculation and gambling are more "profitable" than real investment. Pope Benedict is absolutely correct in asserting that "the primary capital to be safeguarded and valued is MAN, the human person in his or her integrity."
You asked if the U.K.'s "Robin Hood Tax" (in the U.S. it was called the Tobin Tax) would be an effective way of connecting markets to the common good. Perhaps. The common good, today, depends on the abolition, or at least strict regulation, of speculation. If The Robin Hood Tax seeks to tax profit, it is simply not enough. It will be too little, too late. On the other hand, if it taxes turnover, and the percentage is set high enough, it will destroy the profitability of reckless speculation.
Another safeguard would be the re-instatement of 1933's Glass-Steagall Act, which would separate commercial banking from investment banking. This is being debated in the Senate today in the form of the Cantwell-McCain amendment to Chris Dodd's Financial Reform bill.
Man, and not money, should be the center of economic thought and action; and investment in his ability to develop should be the goal of economic policy.

[Mike]

I couldn't disagree more. It is speculation that allows success. The lack of speculation denies the man with nothing the opportunity to have something. On an international level, Microsoft was purely speculation. A man took a chance and now employs tens of thousands of people. On a local level, the manufacturing company I work for, took a chance and now supplies components to some of the biggest companies in the world. They provide me a salary and I donate a great portion of it to my local church.

Each week my pastor complains that the collection is too small to serve the needs of the church and each week he promotes policies similar to those on this web site that assure diminished collections.

What you espouse is poverty for most and wealth for a few. The human condition has never been better served than under the original intent of the United States of America and my church will be making a catastrophic mistake biting the hand that feeds it (How much money are you bringing in from France, Greece, etc).

[file llc]

I agree with Richard. Every country in the world should implement the Robin Hood Tax. This can significantly help the masses as well as the middle class. Upper class and the elites should burden higher taxes since they have the financial means.