Let’s start by asking about the causes of our present economic crisis and look at three long-term changes that might have something to do with it.
1. Finance and the real economy
First, is it basically a financial crisis or an economic one? Has the relationship between the financial services and the wider economy got out of balance? If so, why? It is the job of the banks to allocate capital to the rest of the economy. They have to get money to the place in which it can be most productively used. How successful is the banking industry at allocating capital to industries other than itself? The financial sector has been growing as a proportion of the economy, and has grown spectacularly over the last ten years. What is behind that? Surely it has not grown at the expense of other industries? Surely other industries have not receded as a result of the expansion of banking? What is cause and what effect in this relationship between the financial sector and the economy?
Then there is another thing. Debt with compound interest is a threat to individuals, corporations and to the long-term stability of the economy as a whole since demands for interest payments grow faster than the economy can. The curious thing is that this appeared to have been forgotten, and restrictions that every society must place on debt abandoned until very recently.
2. Older and more worried
A large population of 50-70 year olds is looking for places to put its savings, and can’t find enough places. Then individual members of this age-group realise that their savings won’t be enough to keep in them the style they were hoping for right to the end. They start to look for increasingly speculative ways of getting ahead of the crowd, so speculation becomes the norm. The children of the baby-boomers have been loaded with obligations because their own parents have been unwilling to adjust their expectations downwards.
The future is that a large dependent population is cared for by a smaller population, but the more that prospect emerges, the smaller the future population becomes as people find other things to do than have children. Can you even have a growing economy if you have a declining population?
3. Not as fiercely independent as we used to be
We have exporting our industries, and with them has gone some of the culture of work and sense of community that those old industries sustained. Work gives you confidence, perhaps enough of it to do that most public-spirited thing, settle down and start a family with someone, and then stick with them through thick and thin. If you give the children your undivided attention they have a good chance of becoming the dynamic creative economic agents of the future. As it creates more legislation the state inadvertently takes away individual responsibility and takes away the incentive to exercise it. There been a corresponding loss of willingness to start families and for partners to sustain their marriages in order to bring their children up and create that next generation of motivated economic agents. If you delegate too many of those responsibilities to the state, they and you have a good chance of slipping into a dependency culture without an easy way out. Oops.
Now we have been transferring liabilities to the state so fast that some nervous people wonder whether our government can continue to meet them. Can states go bankrupt too?
So there you are – three candidates for underlying cause of the crisis. These do not show that a financial storm blew up out of nowhere because some bankers got careless. They show that the emergence of the distended financial sector is the manifestation of an underlying crisis in inter-generational relationships and the culture that is supposed to encourage one generation to bring the next into existence. This inter-generational economics is the new wave. You heard it here first.
So much for causes of the crisis. The much more interesting part of this discussion is about the responses that Christians can make to it. Here are some hints:
1. Christians look forward to an alternative economy which they call the kingdom of God, though they could equally well call it the economy of God.
2. Modern economics makes it unnecessary for us to judge for ourselves, for we can delegate our responsibility. Ethics is over, for the market can make our decisions and if it can’t the state will take care of them for us.
3. But Christians operate a different account of human being in which no one can be stripped of responsibility. This can make life rather awkward, though also more rewarding.
4. Christians suggest that you can’t get to forgiveness without going through judgment. It looks as though we all have to be a little judgmental after all.
5. Christians pray Forgive us our trespasses. They are talking about their own trespasses, but maybe they are talking about other people’s trespasses as well. They are interceding for others. Maybe they are even bearing the punishment for others too. The secret of Christian economics is the Christian view of human being, and the secret of the Christian view of human being is Jesus Christ. The priestly and sacrificial work of Christ who, by removing our trespasses, paying our debts and taking down all obstacles to it, restores the functioning of the human economy. It is not primarily the free market that is on our side, nor even the modern welfare state. It is God who is on our side, and who, if asked, can give us the forgiveness, the resources and the new start we need.
If you are interested and in London, come along to this Saint Augustine Institute event on Friday 19th November –