Returning to the Real Economy
In the April 24 edition of the Vatican newspaper L’Osservatore Romano, Ettore Gotti Tedeschi focuses on the origins and lessons of the global financial crisis. In a previous article, Gotti Tedeschi argued that the downturn is an opportunity for Italy to reform its economy and cut down on unnecessary public spending.
He now examines what the crisis means for the state of international finance and draws some unusual but noteworthy conclusions. In his view, the principal answer for improving global financial architecture cannot be provided by more government regulation.
Instead, Gotti Tedeschi interprets the crisis as a wake-up call to return to “other rules – older rules which restore the priorities of the banking profession.” These rules of sound economics have been partly eroded by an excessive lowering of interest rates by central banks, inducing other actors to take excessive risks in their financial operations.
The over-stimulation of markets led bankers and business leaders to abandon the path of solid long-term growth in favor of short-term gain: “Too often managers with a poor sense of responsibility have created the illusion of realizing miraculous growth and profitability.” They abandoned the search for “concrete results and above all, long-term sustainability.” His advice is to return “to what is real, responsible and durable.”
He suggests that what is needed is a spiritual refreshment to deepen the understanding of how a successful bank or business is run. This would enable people to resist temporary financial fashions and evaluate real risks and possible gains adequately.
Gotti Tedeschi is in a good position to combine the practical insights of the world of banking with a profound theoretical grasp of business ethics. While he is one of the most well-known bankers in Italy, he has also found the time to write books about the relationship between Christian values and economics.
His advice deserves to be taken seriously. As politicians around the world propose a whole range of new regulation in response to the credit crunch, it must not be forgotten that public authorities provided the markets with cheap money and excessive stimuli. The result was a widely distorted perception of risk and profitability. It would be unfortunate if a period of over-stimulation was followed by a period of over-regulation.
He now examines what the crisis means for the state of international finance and draws some unusual but noteworthy conclusions. In his view, the principal answer for improving global financial architecture cannot be provided by more government regulation.
Instead, Gotti Tedeschi interprets the crisis as a wake-up call to return to “other rules – older rules which restore the priorities of the banking profession.” These rules of sound economics have been partly eroded by an excessive lowering of interest rates by central banks, inducing other actors to take excessive risks in their financial operations.
The over-stimulation of markets led bankers and business leaders to abandon the path of solid long-term growth in favor of short-term gain: “Too often managers with a poor sense of responsibility have created the illusion of realizing miraculous growth and profitability.” They abandoned the search for “concrete results and above all, long-term sustainability.” His advice is to return “to what is real, responsible and durable.”
He suggests that what is needed is a spiritual refreshment to deepen the understanding of how a successful bank or business is run. This would enable people to resist temporary financial fashions and evaluate real risks and possible gains adequately.
Gotti Tedeschi is in a good position to combine the practical insights of the world of banking with a profound theoretical grasp of business ethics. While he is one of the most well-known bankers in Italy, he has also found the time to write books about the relationship between Christian values and economics.
His advice deserves to be taken seriously. As politicians around the world propose a whole range of new regulation in response to the credit crunch, it must not be forgotten that public authorities provided the markets with cheap money and excessive stimuli. The result was a widely distorted perception of risk and profitability. It would be unfortunate if a period of over-stimulation was followed by a period of over-regulation.
Comments
#1 2008-04-25 11:14 (Reply)
We can readily recognize the need to say “yes” to Solar Power and “no” to fossil fuels! But when will we become active? And who will lead us?
Your perspective is deeply appreciated; but it is evidently not shared by most of the leaders in my not-so-great generation of elders. Our behavior speaks louder than any words. Our behavior indicates with remarkable clarity that Earth and its environs are not nearly as important as the growth of, and profits derived from, the artificially designed, manmade construction called the global economy.
Your perspective appears to suggest that “It’s the ECOLOGY, STUPID!”; whereas the great majority of our leaders would say that “It’s the ECONOMY, STUPID!” Too many leaders think only of economic growth and profits. Earth’s ecology is an afterthought.
Perhaps time is short to make the necessary changes; and, indeed, time is not on our side.
The singer, Madonna, reports to all of us in her latest song that we have just “four minutes to save the world.”
We need to go far fast in a new direction. But, where do we find the leaders to take us in the direction we need to go? Most of our leaders appear to be engaged in idolatry of the global political economy, come what may for our children, biodiversity, a limited resource base, frangible ecosystem services and the Earth as a fit place for human habitation by coming generations.
Sincerely,
Steve
Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001