Acton Institute Powerblog

Can Any Good Come from a Recession?

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Following its new-found interest in sound economics, the Vatican’s newspaper, L’Osservatore Romano, has turned its attention to what now seems to be a global downturn.

The usual European trope is that the current troubles are the result of American overspending, overconsumption and unsustainable debt burdens, so it is very surprising to see a contrarian view in Sunday’s paper entitled “The Morality of the Recession.”

Italian banker Ettore Gotti Tedeschi evaluates the credit crunch affecting the U.S. economy and the Federal Reserve’s reaction to lower interest rates as problematic for the rest of the world, but he also sees an opportunity for renewal and reform.

The moral lesson for Europe? Take the chance to reduce wasteful public spending, lower taxes, increase productivity and attract foreign investment. Citing Pope John Paul II’s 1987 encyclical Sollicitudo rei socialis, Gotti Tedeschi draws the conclusion that now is the time for Italy to adopt more flexible economic mechanisms and rid itself of its welfare-state mentality.

Italian elections are just a month away, so it is extremely unlikely any politician would advocate such a bold program; it is, however, exactly what Italy needs. Let’s hope that Vatican officials, at least, are paying attention. Kudos to L’Osservatore Romano and Gotti Tedeschi for taking another courageous stand.

Bernd Bergmann


  • Clare Krishan

    Do Acton fellows have an “Austrian” point of view to share on the blog re: the influence to the US economy of insuring credit default at market rates when recession hits?

    The interview with de Soto at

    posits that Keynes “corrupted” economics with his innovations to commerce in life insurance, since classical “supply and demand” data can only be mathematically analyzed post facto not contemporaneously with the market.

    “de SOTO: It turns out that Keynes not only corrupted economics. He also corrupted the practices of life insurance. He broke with the traditional policies of his company by valuing assets at market value instead of historical value. In the short term, it gave him an enormous competitive advantage. Keynes was able to distribute dividends to his clients against unrealized capital gains.

    When the stock market was going up, it was wonderful. But when the Great Depression arrived, his company nearly went bankrupt. Both the British and the American insurance industries are suffering from his disastrous departure from tradition. On the continent it is still the practice to value assets at historical cost and only pay dividends against realized capital gains.”

    Does this “continental practice” explain a certain immunity to the ravages of the sub-prime mortgage crisis, indeed point to the cause of a certain trade imbalance, that leaves the continent(s) (Asia included) as creditor to the US’s burgeoning debts? I have read recently that up to a third of the US economy is now fuelled by financial services (whereby the demand is domestic but the profits are foreign). How does this help j6p build a secure future for his family, and how is this good foreign policy in defense of Christian Truth? How does a nation act morally if its markets do not?

    Any insights appreciated…

  • Clare Krishan

    Oops – my bad, I see there’s a commentary

    posted today on exactly this point (and the author is brave enough to speak truth to power, “fraud” is indeed what we are observing at the highest levels of our government…

  • Clare Krishan

    Is our indebtedness corrupting our political perspicacity? Reuters reports a muting of defense of human rights in Tibet, while Maurizio d’Orlando claims the West now tolerates “economic dirigisme that are only superficially different” in China and Japan see

    Sorry to highjack this thread, but the topic is being neglected in the MSM in fear.