Category: Vatican

Blog author: dpahman
Wednesday, March 14, 2012
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The Journal of Markets & Morality is planning a theme issue for the Spring of 2013: “Integral Human Development,” i.e. the synthesis of human freedom and responsibility necessary for the material and spiritual enrichment of human life. According to Pope Benedict XVI,

Integral human development presupposes the responsible freedom of the individual and of peoples: no structure can guarantee this development over and above human responsibility. (Caritas in Veritate 17)

There is a delicate balance between the material and the spiritual, the institutional and the individual, liberty and responsibility undergirding this concept.

This tension can be felt in a similar sentiment from the Russian Orthodox Church’s Basic Teaching on Human Dignity, Freedom and Rights:

A society should establish mechanisms restoring harmony between human dignity and freedom. In social life, the concept of human rights and morality can and must serve this purpose. At the same time these two notions are bound up at least by the fact that morality, that is, the ideas of sin and virtue, always precede law, which has actually arisen from these ideas. That is why any erosion of morality will ultimately lead to the erosion of legality. (3.1)

And, again, among Protestants The Cape Town Commitment confesses a failure “to regard work in itself as biblically and intrinsically significant, as we have failed to bring the whole of life under the Lordship of Christ.” Indeed, in addition to the theoretical difficulty in articulating a coherent, Christian model for integral human development, there is the equally daunting task of practical implementation.

Read the full Call for Publications here.

Submission guidelines, subscription information, and digital archives are available at: www.marketsandmorality.com

For an example of the sort of submission we are looking for, see Manfred Spieker, “Development of the Whole Man and of All Men: Guidelines of the Catholic Church for Societal Development,” Journal of Markets & Morality 13.2. (Click on title to view PDF.)

The Journal of Markets & Morality is a peer-reviewed academic journal published twice a year–in the Spring and Fall. The journal promotes intellectual exploration of the relationship between economics and morality from both social science and theological perspectives. It seeks to bring together theologians, philosophers, economists, and other scholars for dialogue concerning the morality of the marketplace.

Kishore Jayabalan, the Acton Institute’s Rome office director, was interviewed by the Zenit news agency in an article titled, “Is Taxing the Church a Real Solution for Italy?” In the article, Jayabalan discusses the history of the Italian state and its imposition of property taxes on the Roman Catholic Church’s land holdings, residences and non-profit businesses.

Sometimes in the past, particularly under Napoleonic rule and before the Lateran Pacts, the institution of property tax was often a subject of state persecution of the Church in economic terms. Mr. Jayabalan answers critical questions about the reasons behind Italy’s evolving (or rather “revolving”) fiscal policies and historic land expropriations to the Church’s detriment.

The Church has traditionally been exempt from paying ICI [property tax] on non-commercial entities because they serve a social purpose. The old law actually exempted entitles that were ‘predominantly’ non-commercial. The new law exempts simply non-commercial entities, so there will be some re-defining of what is non-commercial or not by the Italian Ministry of the Economy. Jewish, Muslim, and other religious, and for that matter secular, non-profits were also ICI-exempt, so this was not a case of special pleading for the Catholic Church in Italy, even though Catholic institutions dwarf the others numerically…

Of course this is not the first time the Church has been muscled out of land. Napoleon’s massive cash taxes upon his conquest of Italy were designed to force noble families (generally with very close ties to the Church) out of their lands and titles. Napoleon spared the Church the niceties of taxes, choosing to simply expropriate the property. The unification of Italy as well saw Church lands, art and lives lost as the new nation was formed. But even this was nothing new. After all Nero had blamed the Christians for a fire he set to clear some land in downtown Rome, so in the end Sts. Peter and Paul and 900 other Christians were killed for a real estate deal.

To read Jayabalan’s full interview, go here.

In a new analysis in Crisis Magazine, Acton Research Director Samuel Gregg examines “the shifting critiques” of the pontificate of Benedict XVI including the latest appraisal that the world is losing interest in the Catholic Church particularly because of its declining geopolitical “relevance.” But how do some of these critiques understand relevance?

On one reading, it involves comparisons with Benedict’s heroic predecessor, who played an indispensible role in demolishing the Communist thug-ocracies that once brutalized much of Europe. But it’s also a fair bet that “relevance” is understood here in terms of the Church’s capacity to shape immediate policy-debates or exert political influence in various spheres.

Such things have their own importance. Indeed, many of Benedict’s writings are charged with content which shatters the post-Enlightenment half-truths about the nature of freedom, equality, and progress that sharply constrict modern Western political thinking. But Benedict’s entire life as a priest, theologian, bishop, senior curial official and pope also reflects his core conviction that the Church’s primary focus is not first-and-foremost “the world,” let alone politics.

Read “Benedict XVI and the Irrelevance of ‘Relevance’” on the website of Crisis Magazine.

While working on an article today, I read Joseph Cardinal Ratzinger’s 2005 homily right before the was elected Pope.

I wanted to recall a section about truth that cannot be repeated enough. It is especially pertinent in light of the Obama Administration’s so-called compromise on the HHS mandate. The compromise changes nothing. It is political sophistry. It still forces people to act against their conscience and support moral evil. The truth about good and evil cannot be swept away by an accounting trick.

The HHS mandate is a further example of the growing intolerance of liberalism that sees as a threat any vision of life which has transcendent ends and adheres to clear moral standards beyond current fashion. Liberalism is pro-choice only insofar as you stay within certain bounds. Outside that divergence will not be tolerated and no compromise will be made.

This is the famous Dictatorship of Relativism passage.

How many winds of doctrine have we known in recent decades, how many ideological currents, how many ways of thinking. The small boat of the thought of many Christians has often been tossed about by these waves – flung from one extreme to another: from Marxism to liberalism, even to libertinism; from collectivism to radical individualism; from atheism to a vague religious mysticism; from agnosticism to syncretism and so forth. Every day new sects spring up, and what St Paul says about human deception and the trickery that strives to entice people into error (cf. Eph 4: 14) comes true.

Today, having a clear faith based on the Creed of the Church is often labeled as fundamentalism. Whereas relativism, that is, letting oneself be “tossed here and there, carried about by every wind of doctrine”, seems the only attitude that can cope with modern times. We are building a dictatorship of relativism that does not recognize anything as definitive and whose ultimate goal consists solely of one’s own ego and desires.

We, however, have a different goal: the Son of God, the true man. He is the measure of true humanism. An “adult” faith is not a faith that follows the trends of fashion and the latest novelty; a mature adult faith is deeply rooted in friendship with Christ. It is this friendship that opens us up to all that is good and gives us a criterion by which to distinguish the true from the false, and deceipt from truth.

We must develop this adult faith; we must guide the flock of Christ to this faith. And it is this faith – only faith – that creates unity and is fulfilled in love.

Nothing more to add … except one thing: If you have not read it, take a look at Samuel Gregg’s fine piece in the American Spectator from several weeks ago where he analyzes the HHS mandate in light of the “dictatorship of relativism.”

Following my blog post and Acton News and Commentary piece “Obama vs. the Catholic Bishops,” I’d like to draw your attention to two Wall Street Journal editorial page articles in today’s edition that also criticize the bishops for their political and economic naivete.

WSJ columnist Daniel Henninger writes:

Politically bloodless liberals would respond that, net-net, government forcings do much social good despite breaking a few eggs, such as the Catholic Church’s First Amendment sensibilities. That is one view. But the depth of anger among Catholics over this suggests they recognize more is at stake here than political results. They are right. The question raised by the Catholic Church’s battle with ObamaCare is whether anyone can remain free of a U.S. government determined to do what it wants to do, at whatever cost.
[….]
With the transformers, it never stops. In September, the Obama Labor Department proposed rules to govern what work children can do on farms. After an outcry from rural communities over the realities of farm traditions, the department is now reconsidering a “parental exemption.” Good luck to the farmers.

The Catholic Church has stumbled into the central battle of the 2012 presidential campaign: What are the limits to Barack Obama’s transformative presidency? The Catholic left has just learned one answer: When Mr. Obama says, “Everyone plays by the same set of rules,” it means they conform to his rules. What else could it mean?

Anyone who signs up for more of this deal by assuming that it will never force them to fall into line is getting what they deserve.

And here’s University of Chicago professor John Cochrane:

Our nation is divided on social issues. The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society.

The critics fell for a trap. By focusing on an exemption for church-related institutions, critics effectively admit that it is right for the rest of us to be subjected to this sort of mandate. They accept the horribly misnamed Patient Protection and Affordable Care Act, and they resign themselves to chipping away at its edges. No, we should throw it out, and fix the terrible distortions in the health-insurance and health-care markets.

Sure, churches should be exempt. We should all be exempt.

Both articles claim that the Catholic bishops were exclusively and overly concerned with getting exemptions for Catholic institutions and did not adequately focus on the larger political and economic problems brought on by Obamacare and the entitlement state in general, i.e. a growing dependence on the state and a convoluted tax code that attempts to direct our individual choices towards “socially optimal” ends, regardless of the inevitable, unintended consequences.

Henninger also points out that the bishops initially opposed Obamacare because of the threat of federal funding of abortion, which ought to make one wonder: Are the bishops capable of applying the principles of Catholic social teaching beyond the obvious “non-negotiable” issues of Catholic teaching (abortion, euthanasia, embryonic stem-cell research, etc.) and speaking coherently, intelligently and persuasively on prudential matters that are still of great political importance? Should they? Or should this be the responsibility of the Catholic laity, who may be better formed in politics and economics but lack the authority of episcopal office?

In my opinion, these are open and difficult questions that require us to think more seriously about the role of Catholic leadership in a liberal democratic society.

I just completed a very short interview on Vatican Radio to discuss the current battle between the Obama administration and the United States Conference of Catholic Bishops. It didn’t permit me to say more than that the Obama administration is making a political mistake, so I’d like to say a bit more about the serious consequences that will likely result and how we ended up with this Church-State conundrum in the first place.

As Dr. Donald Condit has already explained, the Obama administration seems to be making a political calculation that this controversy will blow over before the November’s presidential election because the conscience exemption for providing and paying for abortion, sterilization and contraception will not take effect until later next year. But the miscalculation was predictable and is now evident, with not only Catholics, but Orthodox, Evangelical, Jewish and other religious leaders taking a stand. Unless the administration relents or the Obamacare law is ruled unconstitutional, Catholic hospitals and other institutions will be faced with a choice between not providing insurance coverage to their employees and thereby be fined by the government, or pay for the provision of services that they believe are morally evil.

A journalist friend in Rome just raised an alternative reading of the story to me on the street. What if Obama is actually making a principled argument that abortion, sterilization and contraception services are a fundamental aspect of women’s health that cannot and should not be denied to anyone, regardless of their own religious or individual convictions? Perhaps the White House believes, as most progressives do, that these stodgy, uptight opponents will eventually, inevitably, be overcome and we will one day wonder what all the fuss about. If so, the administration is doing much more than thinking about the next election; it’s redefining what the word “health” means to include measures that violently take away life from the most innocent and vulnerable persons, regardless of who pays for the services. This makes it much more than a religious freedom or a conscience issue and a matter of simple justice.

More generally, the whole Obamacare mess is a result of employer-provided health insurance. We would all be better off if our health insurance was decoupled from our employment, and we were free to purchase our own insurance according to our needs and wants. It is a result of state intervention in the economy, namely wage-and-price controls, that led to employers offering health insurance as a non-wage benefit to entice desired employees to their companies. Now we have the government mandating that all employers must provide comprehensive coverage to all their employees. What was once a prudential individual decision has become a government-mandated “right” that trumps the employer-employee, the doctor-patient, and perhaps even the priest-penitent relationship. Some progress.

There is some tragic irony to all this. We should not forget that many religious leaders have long-supported increasing the role of the state in health care and the economy at-large, perhaps thinking that conscience clauses would protect their institutions against any undue interference. Well, they were wrong; what the state giveth, the state taketh away. If you invite the state to “assist” more and more of your activities, it will eventually start telling you how to do things. Encouraging the Democratic Party’s efforts from Harry Truman on to socialize the health care system of the United States is likely to have dire consequences for Catholic and other religious-based social service providers. Economic ignorance among religious leaders comes at a very high cost to their own good works.

The Center for American Progress (CAP) has boldly rebutted the arguments of our own Kishore Jayabalan, director of Istituto Acton, concerning the Vatican’s note on a “central world bank.” It has done so by showing him to be lacking in “respect for the inherent dignity of human life.” … Yes, we are talking about that Center for American Progress.

In a feature on their website that purports to tie last month’s Vatican note to the Occupy Wall Street movement, CAP offers this smarmy response to the analysis Jayabalan gave.

Some conservative Catholic commentators are not as supportive, however….

Kishore Jayabalan of the conservative Catholic Acton Institute said that the note’s appeal to an international authority contradicts the church’s teaching that problems are best solved starting at local levels of authority, also known as the doctrine of subsidiarity.

What these conservatives are missing is that the note draws heavily from the tradition of Catholic social teachings on justice and respect for the inherent dignity of human life. This is where the Occupy movement finds an ally.

CAP has one-upped us doctrinally: where Jayabalan is concerned with minor theological nuances like the doctrine of subsidiarity, their minds are fixed on higher principles like respect for human dignity, the most immediate threat to which is the great and terrible free market.

“At heart, it is a moral enterprise,” say CAP’s Jake Paysour about Occupy Wall Street. Yes, except at the hearts of its camps, where women dare not go because their human dignity is respected only as much as strong men find it convenient.

CAP’s record on human dignity speaks for itself. Its position on the lives of unborn children, for example, could not be any more out of line with Catholic teaching on “justice and respect for the inherent dignity of human life.” It is shocking that CAP even uses those words: the suggestion that they give one hoot about Church teaching on human dignity is nonsense.

I will resist the temptation of a GetReligion-style dismantling of the feature, since it would sail right over their heads at CAP, but I must point out that the Church’s principles of social justice were not “set forth 80 years ago” in Quadrogesimo Anno, as the author claims, but rather 40 years before in Rerum Novarum (hence the second encyclical’s name — not that we should expect anyone there to have any Latin). I don’t mean to make an ad hominem argument, but if you can’t get that right, what are you doing trying to explain the relative weights of principles first explicated in Rerum Novarum?

In the future: If you’re going to use the words of an Acton Institute expert, it is expected that you will avoid the shameless contortion of facts and logic that CAP indulged in today.

Acton’s prolific director of research Samuel Gregg writes at Crisis Magazine about those who would modernize the Catholic Church (theologically): “Dissenting Catholics’ Modernity Problem.” His reflection centers on the thought of Pope Benedict XVI, whose recent visit toGermany brought the modernizers out of the woodwork, and whose speeches and writings have placed the faithful in their proper context.

Judging from the hundreds of thousands of Germans who attended and watched Pope Benedict XVI’s September trip to his homeland (not to mention the tsunami of commentaries sparked by his Bundestag address), the pope’s visit was — once again — a success. And, once again, it was also an occasion for self-identified dissenting Catholics to inform the rest of us what the Church must do if it wants to remain “relevant.” To no-one’s surprise, their bottom-line remains the same. The Church is “out of touch.” Why? Because it’s insufficiently “modern.”

The “we-must-be-more-modern” argument reflects the workings of a logic that privileges whatever is considered “contemporary” (an ever-moving target) over the knowledge imparted by Christ to His Church from its very beginning.

Such reasoning often runs along the following lines. In modernity, X is considered not good; ergo, the Church must accept X is not good. Or, modern people regard X as good or licit; ergo, the Church should teach X is good or licit.

Hmm…

You don’t need to be a professional philosopher to recognize that these are what logicians call non sequiturs: arguments in which the conclusions don’t follow from the premises. The fact that something is considered modern tells us nothing about its goodness or evil, let alone whether it conforms to the truth found in Divine Revelation. It also produces very strange arguments such as the claim made in 1968 (of course) by the ex-Jesuit theologian John Giles Milhaven, that “modern people” (whoever they are) by virtue of their “modernity of spirit” (whatever that means) enjoyed a type of “standing dispensation” from God to pursue what they “feel” to be good.

Gregg sets this post-Enlightenment ethic of feelings against the Church’s foundation in reason, which makes it truly catholic. Those who would re-orient the Church,

marginalize the conviction that the fullness of Christian truth is to be found in the reasonable faith entrusted to and proclaimed by the Church. And the faith of that Church goes beyond the particular views held by us today to embrace the right belief (orthos-doxa) of the whole communio of believers, the living and the dead, from the apostles onward — the truth of which is confirmed by the consensus of the Church Fathers, the lives of the saints, the witness of the martyrs, and the teaching authority of the successors of Peter and the other apostles.

Of course, Catholicism doesn’t have an in-principle opposition to the post-Enlightenment world per se, any more than it allegedly locates everything that is good and true in the 13th century. Any effort to associate the fullness of Catholic faith with any one historical period risks relativizing those truths knowable by faith and reason that transcend time and bind Catholics across the ages.

Perhaps such a relativizing is what many dissenting Catholic activists want. If so, they should concede that this would mean making the Church in their own image rather than that of Christ the Logos. And there is no surer way of making the Church truly irrelevant in a modern world that desperately needs more reason and light than emotivism and darkness.

Full text here.

When the Pontifical Council for Justice and Peace needed an expert economist to assist in articulating the “Note” titled Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority to feisty journalists at an Oct. 24 Vatican press conference, it called on the University of Rome “Tor Vergata” economics professor, Leonardo Becchetti.

For an English translation of the professor’s remarks at the Vatican press conference, go to the end of this post.

Prof. Becchetti is a local celebrity of sorts, whose TV time has increased since the outbreak of the global financial crisis and growing cynicism on the future of the European Union. He has provided his expert assessments and criticism to Italian news channels and late night talk show programs, and has become a “go-to guy” when speaking on the relationship of economics to human happiness, central banking and monetary policy. See his interview of the monetary policy and inflation:

[youtube http://www.youtube.com/watch?v=woOyekGo89g]

No doubt, Prof. Becchetti was charged with the very difficult task of articulating and defending some the Note’s bold economic and political prescriptions – usually a “no-fly zone” for Vatican officials. Moreover, in all fairness, Becchetti removed his professor’s hat to his best ability, while speaking in relatively plain language to the journalists, most of whom, like myself, do not hold PhDs in international finance and monetary policy.

What follows is the unofficial English translation (actually my own) of the transcript of Prof. Leonardo Becchetti’s presentation. Becchetti’s technical debriefing on the Note last Monday raised a few eyebrows and provoked some critical thinking on what the Vatican document said (and didn’t say) regarding international financial and monetary reform.

For example the following finer points jumped out when translating Becchetti’s remarks:

1. The logic that a global economy requires global governance seems not quite right. What about the Church’s traditional support of subsidiarity, that is, crises should be resolved at the local level of problem. The financial crisis is a pandemic and will require massive effort to resolve it, but local symptoms and outbreaks of this financial disease are manifest in unique ways from nation to nation. A single global monetary and financial authority might simply enforce a “one-size-fits-all” policy that is not practical in most countries. This logic smacks of the 20th century centralized economic planning that has proven destructive in Eastern Europe.

2. Becchetti’s analogy of the “long spoons” is not sensitive to the fact that, through human innovation, those same klutzy over-sized spoons can be creatively re-invented through human innovation to allow for self-feeding. For me, Becchetti’s long spoon analogy inspires ideas of spoon-feeding each other (i.e. receiving easy hand-outs) and not creative cooperation to resolve our financial crisis. If left to fend for ourselves, it might be a clumsy experience at first, but we will then be forced to find ingenious and independent ways of self-preservation.

3. It is true that our world is increasingly interdependent and this provides great opportunity for international solidarity and cooperation, but why use the term “formidable threat” when addressing the fact that first world job holders are feeling the heat of equally qualified laborers from developing countries? I like the thought that the first world feels the need to compete and intelligently find more efficient ways of production, but Becchetti’s subtle semantics seem to infer that Marxist class struggles are at play in devising a global financial peace plan .

4. Lastly, what evidence is there that a financial transaction tax on stock exchange activity will ease the pain and suffering of today’s struggling businesses and unemployed? How many ways have we tried to tax and redistribute our way to human fulfillment? Is this the missing link in international economic planning? Cannot someone speaking on behalf of the Church and who is an expert in economics and happiness, at least make some sort of plea for greater spiritual wealth and its redistribution (i.e. by becoming fulfilled in Christ evangelizing His Word)?

I am sure you will have more questions yourself. Please feel free to share your own opinions.

Translation of Prof. Leonardo Becchetti’s remarks (original Italian version)

The bright side of the [financial] crisis is that it represents a time of great opportunity.

The global financial crisis is an opportunity to reform the very architecture of the global financial system, strengthen the European Union in terms of harmonizing its fiscal policies, while progressing more swiftly toward a goal of political unity and increasing discipline over national fiscal policies.

The Vatican document focuses on two key issues:

i) Building a set of rules for global governance which, if possible, will be used as a framework [to guide] the actions of global institutions;

ii) Reforming the international financial system with a series of specific proposals.

Concerning point i), global governance is urgently needed to overcome the asymmetry caused by the globalization of markets, institutions and rules that remain predominantly national.

Globalization makes us increasingly interdependent and makes it practically impossible to ignore other countries whose problems once seemed so distant: Simul stabunt simul cadent [Latin for similar things fall together].

To give you a few examples, there are at least six fundamental elements of interdependence between economic and financial systems:

i) the American debt crisis is a problem that concerns not only [the U.S.] itself but savers around the world who have invested in it and in the largest economies, like China, that [in turn] have invested a substantial portion of their own reserves in [U.S.] treasury bonds;

ii) the Greek debt crisis and the likely reduction in the facevalue of this country’s bonds (between 20% and 60%) will result in serious losses on the balance sheets of the French and German banks that had invested in them;

iii) the presence of a huge mass of poor and underprivileged in the world, willing to work at wages much lower than those of our own employees (bearing equal credentials and who are also protected and unionized) is a formidable threat to the maintaining levels of wealth of high-income countries;

iv) exiting from the euro would have damaging effects not only on developing countries but also on Germany itself, which for years has enjoyed the advantage of exporting its goods to markets within the Eurozone without additional costs linked to exchange rates;

v) the coordination of central banks is now increasingly important in a globally integrated world; recently, developing countries have often complained that the expansionary monetary policies of American and European central banks (quantitative easing) have exported inflation into their countries;

vi) for some time now G-20 meetings have tried coordinate the policies of countries with deficits with those with surpluses to encourage the latter to adopt more expansionary policies to boost demand throughout the world.

The [current situation is like] a large table full of guests, each of which is given a very long spoon to eat with. The difference between hell and heaven in this familiar story is that in some guests use their spoons to clumsily and unsuccessfully feed themselves while others use their long spoons to feed each other. It is in the former situation which nation states find themselves in globally integrated markets as they try to pursue their own short-sighted and short-term interests. This becomes counterproductive, because it is only by cooperating with each other that we will be able to put an end to this financial crisis.

On the second point (the rules of financial markets), the document adopts some proposals already launched by the Dodd-Frank legislation in the United States and by the Vickers Commission in the United Kingdom, but which have not yet been implemented and are not in force due to a number of obstacles.

It is fundamental that the world of finance returns to its role of serving the real economy. To do so it is necessary to:

i) reduce the leverage of banks that are “too big to fail” (the disproportionate 30:1 leverageratio between short-term liabilities and long-term assets is among the main causes spreading the subprime crisis throughout the world).

ii) adopt the so-called Volcker Rule which prevents banks from doing proprietary trading with customer deposits.

iii) more severely regulate the trading of derivatives born from insurance instruments. In the real economy insurance policies are purchased when someone owns an actual asset to be insured, while in financial markets this occurs in no more than 5 percent of cases. For this purpose, there is an EU proposal to achieve this objective regarding the credit default swaps of government bonds.

A fourth proposal concerns the instituting of a tax on financial transactions for reasons explained in the following paragraph.

It is important to ask why the position on taxing financial transactions of economists and civil society (a majority EU citizens in fact are in favor) has changed radically in recent years.

Last year, 130 Italian economists signed an appeal in support [of the proposition], which garnered further support with a similar appeal put forth by 1000 economists from 53 countries and delivered to the Finance Ministers of G20 countries attending the 2011 Summit held in Washington, D.C. last April 14-15 (among the prominent signees were highly respected leaders such as Dani Rodrik, Tony Atkinson, Joseph Stiglitz and Jeffrey Sachs) See: http://www.guardian.co.uk/business/2011/apr/13/robin-hood-tax-economists-letter
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There are two reasons for this change of opinion: the events of the global financial crisis and further evidence that has helped to alter some [former] prejudices.

Upon the advent of the global financial crisis, the public finances of some major Western countries have been severely weakened while bailing out banks and, consequently becoming new targets themselves of speculative attacks.

A part of the financial world has thus privatized profits, socialized losses, and then utilized public funds used to bailout those who had come to the rescue in the first place.

It is, therefore, understandable why the majority of public opinion believes that those working in the financial markets should, therefore, help pay for the costs of this crisis, the burden of which has been currently shared by the most vulnerable [taxpayers in society].

From this point of view the FTT responds to the simple demands of justice, which seems urgent, given the most recent current events, in order to maintain social cohesion within the Community.

The second reason for increased favor for such a tax stems from the shedding of prejudice.

Until recently the tax was considered inappropriate and not globally applicable should it involve capital from the country in which it was enforced.

This bias is unfounded, as documented in research conducted by the International Monetary Fund, because there are at least 23 countries today that unilaterally apply a transaction tax (which is none other than a stamp tax) without there ever having been any [from their respective countries]. (See. T. Matheson , Taxing Financial Transactions. Issues and Evidence, IMF WorkingPaper No 11/54, March 2011, 8).

The United Kingdom is the country with the highest tax transaction with the application of its Duty Stamp Tax on one single type of financial asset (0.005% duty on the value of shares owned and listed on the London Stock Exchange).

This tax raises about 5 billion pounds in revenues each year.

By way of this evidence [EU Commission President] Barroso’s proposal to establish such a tax in the EU correctly addresses a “harmonization” of taxes throughout Europe on financial transactions –and not of their first introduction.

The London [Stock Exchange] tax has provided an interesting example of tax avoidance, as some operators have exited the stock market to invest in new OTC derivatives (contracts for differences) which essentially consist of bets on variations in share prices.

It is interesting to note, therefore, that the transaction tax has now split the market into two: those really interested in investing in company shares and those who bet on short-term variations in prices.

Such [tax] avoidance is already implicitly considered in the Barroso proposal, which would extend taxation to derivatives (and thus also to contracts for differences). Such problems can also be countered by banning contracts for differences as is already the case in a major financial market, like the United States.

From a scientific perspective, there are numerous ways to measure the elasticity of volumes of transactions upon introducing such transaction taxes, demonstrating a conservative coefficient rather than supporting the capital hypothesis.

Another reason for why the cannot occur is that a very high frequency of financial operations benefit from being in close proximity to the Stock Exchange’s physical location, where the information is released firsthand electronically. (See: New York Times (2009): Stock Traders Find Speed Pays, in Milliseconds). Moving away from the live center of market operations would mean losing such a [critical time] advantage.

One seemingly unfounded objection is the impact the tax will have is on the overall cost of capital.

To set the rate proposed by the Barroso tax proposal, calculations based on the capitalization models of expected future asset values show that this cost is basically null (See again: Matheson 2011).

The other objection is based on reduced liquidity caused by the tax within markets. This is a matter of opinion. How much cash do we really need? Dean Baker, in his commentary on this issue, says that the tax would spell a return to transaction costs and to the state of liquidity of some ten years ago – that is to say, returning to a period that was far more flourishing than the times we are currently experiencing.

The truth is that there is no solid evidence on the effects of this tax on [total] liquidity, but only a series of different models with opposing results depending on the particular type of microstructure of financial markets and competition models hypothesized by intermediaries.

Summing up the four main objections to the institution of such a tax ([1] the tax cannot be imposed except on a global level, [2] there would be no control over the , [3] the tax significantly increases the overall costs of capital, and [4] the tax reduces market liquidity, they are either are false or unsubstantiated based on factual evidence (the first two) or lack of proof (the latter two).

Regarding the above arguments, the transaction tax (certainly not a panacea for all evil) may just represent an important step in recalibrating the relationship between financial institutions and other reforms that can help to prevent a new financial crises, as advocated by the Dodd Frank legislation [in the U.S.] and the Vickers Commission in the United Kingdom (cf. the Volcker Rule, the deleveraging of “too big to fail” intermediaries, and penalizing capital requirements for riskier investments as opposed to ordinary credit) and the restoration of civil society’s confidence in the financial institutions we so urgently now depend on.

In the Wall Street Journal, Acton Institute President and Co-Founder Rev. Robert A. Sirico looks at the recent “note” on economics released this week by the Vatican. The document, titled “Toward Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority,” was published with an eye toward the upcoming G-20 meeting in Cannes, France, on Nov. 3-4. This 18-page document has, Rev. Sirico observes, “been celebrated by advocates of bigger government the world over.”

But what’s missing from the popular analysis is that the Vatican document “embraces a sound economic theory concerning the cause of the world financial crisis: the breakdown of the postwar Bretton Woods monetary system and the unleashing of fiat currencies and central-bank printing presses.”

Rev. Sirico:

We went from a hard-money regime, in which there were restrictions on the power of central banks and financial institutions to create money and credit, to one where money became purely paper. There were no restrictions remaining on the power of governments to finance unlimited debt. Banks could create credit seemingly without limit. Central banks became the real power in the world economy.

None of this was true under a gold standard. That system limits the expansion of credit by an indelible physical fact. There was a limit, a check, a rule that went beyond the whim of financial masters and politicians. The Vatican seems to understand this.

But discerning the disease and finding the cure are very different undertakings, and here the document falls short. It imagines a new world central bank and political authority that will rule without “any partial vision or particular good” but rather seek “the common good.” Its decisions should “be made in the interest of all, not only to the advantage of some groups, whether they are formed by private lobbies or national governments.”

Somehow, with an intelligence never before discovered in government bureaucracies, these proposed global authorities would create “socio-economic, political and legal conditions essential for the existence of markets that are efficient and efficacious.”

Read “The Vatican’s Monetary Wisdom” on the website of the Wall Street Journal (may require registration).