Acton Institute Powerblog

Debt, Credit and the Virtuous Life

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This week’s Acton Commentary:

Our economic life is concerned with more than just the objective exchange of goods and services. Far from being morally neutral, it is an expression of how we understand our dependence on God and neighbor and is the means by which we fulfill, or not, our obligations toward them. Both for reasons of morality as well as long term economic efficiency, we cannot overlook or minimize the centrality of personal virtue, and of a culture of virtue, to the success of the free market. It is not enough for me to be good; we must be good together. Or at minimum, and whatever our personal moral shortcomings, culturally we must value and reward moral excellence.

Jack Cashill understands this and in his new book, Popes & Bankers: A Cultural History of Credit & Debt, From Aristotle to AIG, he traces the changing moral attitudes towards lending and borrowing in Western culture. From the beginning the author is clear that we cannot separate a conversation about debt and credit, and so the economics of the free market, from a conversation about our personal and cultural moral lives.

Quickly the author takes us through some 25 centuries of social history. Along the way we hear from Dante and Shakespeare. To my delight, The Merchant of Venice has a recurring role in Cashill’s analysis and he uses effectively the changing portrayals of Shylock to illustrate shifting cultural attitudes toward debt.

Aristotle and Aquinas also make an appearance and join a cast that includes Medieval popes, Renaissance Jewish lenders, Protestant Reformers, 19th Century American robber barons and financiers. And of course our favorite villains, the bankers, lenders and borrowers who figure so prominently in the recent economic collapse make an appearance. Though the tone is at time a bit too flippant for my tastes (especially when discussing the Medieval Catholic Church), the text offers a good historical overview of the cultural and moral debate about debt. Throughout the author highlights intimate connection between moral character and economic life.

Cashill locates our current distress in the gradual cultural changes in the “fifty or so years since interest rates” were last at 1 percent. This cultural shift has “had less to do with the behavior” of lenders and more to do with our unwillingness to censure “the behavior of consumers, especially the prodigal” among us. While not minimizing the “downside” of “major investment houses” shifting “from partnerships to corporations” (which both “democratized Wall Street” even as “it diminished long-term loyalty and distanced executives from the consequences of failure”) he locates our moral failure in our growing evermore “dependent on credit.”

Through governmental and private institutions, Western culture is now eager “to oblige its prodigals” and extend to them the credit that allows them to live, for a short time at least, above their means. In addition where once we thought of “prodigals as sinners” today we “think of them as they think of themselves–as victims.” Cashill points out that “the real divide in America today is not between left and right but between those who would sympathize” with the prodigals among us “and those who would not.” While we condemn “predatory lenders” we never even discuss, much less censure, the”predatory borrower” who also played a central role in the collapse of the housing market.

Ideally our willingness to go into debt reflects our confidence in the future and rather than a desire to fulfill momentary desires. For this reason, we should think of debt, as Cashill does (and as Western cultural has historically) as a profoundly moral and is not simply economic question. Because we have lost sight of the necessary connection between virtue and an efficient free market, we now face a widespread lack of confidence in the economy.

Our lack of confidence reflects a more fundamental a lack of trust in the future. To borrow from moral theology, the economic crisis is a crisis of despair; we have lost faith in the goodness of tomorrow.

So how do we reclaim hope in the economic sphere? As Aristotle has it, we must be “liberal.”

Needless to say Aristotelian liberality is markedly different than our contemporary understanding. For Aristotle to be liberal means that we not spend more than we have and then spend only “on the right objects.”

But true liberality can only exist within a living tradition of moral virtue. In our current circumstances we are sorely tempted to settle for merely technical solutions. Yes, these are important but what is needed most is repentance and the cultivation of the cardinal, and dare I say, theological, virtues. Whether this will happen or not depends on how we exercise our personal freedom and the decisions we make as a culture.

In any case Cashill’s work offers us a sound foundation from which to argue in the public square that our economic pursuits must take place within a “culture of life” and this is necessary not only morally but also for the efficient working of the free market.

Rev. Gregory Jensen The Rev. Gregory Jensen is a psychologist of religion and a priest of the Archdiocese of Washington, D.C. (Orthodox Church in America). He also blogs at Koinonia and The American Orthodox Institute. Fr. Gregory was a Lone Mountain Fellow with the Bozeman, Mont.-based Property and Environmental Research Center (PERC) during the summer of 2013.


  • Roger McKinney

    I agree that the crisis is related to moral failure, but not on the part of bankers or borrowers. The moral failure belongs to the Federal Reserve. The Feds reduce interest rates for a reason: they want people to borrow more. If people refuse to borrow at the current rates, the Fed lowers interest rates until people start borrowing more. They frequently lower rates to 0%. With such low interest rates, why is anyone shocked that people borrow money? That was the Fed’s intent.

    Prudent people will borrow prudently, but there will always be a small group of people without prudence. They will borrow more than they can repay and the Fed depends upon those people to borrow. If imprudent people didn’t exist, the Fed would be impotent to boost the economy through low interest rates.

    Also, there are people on the border line who are prudent most of the time, but when they see the imprudent doing exceptionally well in the short run, the temptation to join them is too great. That is probably the largest group of people. Some research has shown that low interest rates encourage risky behavior. It’s a moral hazard problem, like insurance.

    It’s amazing how prudent and moral people become when the market sets the interest rate. Does anyone really think we would have had a housing bubble if mortgage rates were 10% instead of 5%?

  • Roger,

    Thanks for the comment and the analysis.

    In the main I agree with your observation about the Fed and interest rate. Your comments, at least as I understand them, don’t contradict Cashill’s however that the crisis reflects the moral failures of both lenders and borrowers. What you have done, and what I thank you for, is remind me that the failure was not simply a failure of private (i.e., non-governmental) institutions but of governmental ones as well. This was not as clear in my review as it could have been.



  • Roger McKinney

    FrG, In addition, I think we should not give equal wait to the sins of the borrowers and those of the lenders. Human nature is weak. If someone gives away free liquor with no limits, a lot of people who are trying to remain sober will start drinking again. The Feds depend upon enticing people who would refrain from borrowing under normal conditions. The Fed is guilty of tempting others to sin. If the Fed didn’t tempt people to act irresponsibly, then fewer people would act that way. The weakest and greediest among us give in to the temptation. Most of us are not Josephs who can reject the advances of Potiphar’s wife. The Fed is Potiphar’s wife.

  • Roger,

    I’m a priest and a psychologist not an economist. But from the vantage point of my own pastoral and professional work you comments about the Fed make sense.

    And this leads me back to Cashill’s central argument: Our current financial mess is symptomatic of the loss of a shared moral framework/tradition within which to analyze debit. I would argue–as I suspect you would as well–that we can’t divorce our monetary policy from a sound anthropology.

    To know what debit is for we need to know what man is for. If he is only for consumption, if there are no limits on his desires, then free liquor for all is fine. But while man is a consumer, he is also a creator and creation is itself an act of self-donation. And our self-donation is itself rooted in self-knowledge and self-acceptance of the limits (physical, moral, social and economic) within which we live. The real evil of Potiphar’s wife is that she offered Joseph a cheap imitation of love; Joseph’s virtue was that he recognized the lie.

    Like I said, I’m not an economists so I can say with professional certitude, but I suspect you are correct, the Fed played on human weakness. But at the same time we, as a society, allowed ourselves to be played. Even if our guilty is less, this does not exempt us from a serious examination of our own personal and social moral failings–we have embraced, and rewarded, our own defective vision of humanity.

    Again, good comments thank you.