Global poverty and its alleviation are often subjects of heated debate. Join us for an AU Online lecture series that explores the theme of human flourishing as it relates to poverty, globalization, and the Church in the developed world. The Globalization, Poverty, and Development series is scheduled for December 6 through December 13, 2012. Online sessions will be held at 6:30 p.m. EST on Tuesdays and Thursdays. Visit auonline.acton.org for more information and to register.
In short, the EU’s transactions-tax scheme reflects a long-standing desire to “throw sand” in the wheels of financial globalization. Its origins lie in what’s called the “Tobin tax,” named after the American economist James Tobin, who argued in 1972 for the levying of a 0.5 percent tax on all spot-currency conversions. The point, for Tobin, was to discourage “speculators” who “invest their money in foreign exchange on a very short-term basis.”
Unfortunately for its advocates, there’s considerable evidence that Tobin-like taxes on financial transactions don’t reduce volatility. In the midst of financial crises, long-term and short-term investors behave in very much the same way — they get out, and transaction taxes don’t prevent them from abandoning ship. Greece, for example, currently applies a transaction tax to the sale of Greek-listed shares. That, however, isn’t doing much to prevent the present exodus of capital from Greece.
Taking the broader view, it’s hard to avoid concluding this latest EU harmonization boondoggle is about two things. First, it’s a way for EU officials and governments to appear to be punishing European financial institutions for their contributions to Europe’s economic crisis. Second, it reflects the general European failure to come to grips with some of the deeper problems contributing to Europe’s debt crisis.
Read “Financial Fiddling while the Euro Burns” by Samuel Gregg on NRO.
In this week’s Acton Commentary, “Contagious Community,” I look at the positive as well as the negative aspects of coordination and cooperation between human beings on a global scale. The film Contagion provided the occasion for these reflections, and I argue that
while the film is clear about the dangers of globalized human relationships, it also teaches a more subtle lesson. Even as disease represents a danger that can have worldwide impact, such dangers remain the exception rather than the rule. Indeed, the film portrays quite well how global networks of information and exchange are absolutely foundational for our contemporary world.
I was reminded of this uniquely human social characteristic again while reading through Abraham Kuyper’s Wisdom & Wonder: Common Grace in Science & Art this week. Kuyper makes the point that human pursuit of scientific knowledge is a communal endeavor. In fact, he writes,
Science is thus constructed not on the basis of what one person observes, discovers, imagines, and organizes into one system in his or her thinking. Rather, science arises from the fruit of the thinking, imagining, and reflecting of successive generations in the course of centuries, and by means of the cooperation of everyone.
What we have in the case of the development of human knowledge, then, is a communal endeavor defined not just in spatial terms (i.e. globally) but also temporally, including the successive ages of human beings from the past and their discoveries as they have been built upon and communicated to us today.
When discussing the idea of the invisible church, theologians include both the living and dead (who now enjoy the revelation of the blessed in the intermediate state) as making up “the communion of saints.” But similarly with respect to science as a common grace enterprise, we have a communion of common grace that likewise includes the living as well as the dead.
No single person can comprehend science in an “exalted sense,” which for Kuyper “originates only through the cooperation of many people,” the living as well as the dead. In the same way, no single person knows how to manufacture a pencil or build a chair, in part because none of us who are alive today got where we are on our own. We (and our civilization) are the products of those who have come before.
Recognition of this should instill in us a pretty healthy sense of humility and gratefulness for the graces of human community.
Since your wallets are probably a bit lighter due to Tax Day here in the United States, Acton wants to help out by giving you a free e-book: Globalization, Poverty and International Development. Just follow the link, Globalization, to get our monograph from Lord Brian Griffiths delivered free to your Kindle or e-reader. This offer is available beginning at 3 a.m. EST, 4/17/12 until 3 a.m. EST, 4/19/12.
In the journal Foreign Affairs, Acton Research Director Samuel Gregg offers an analysis of the Vatican’s recent pronouncements on economic policy, most notably the document issued in October titled “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority” (also called “The Note”). The Church, Gregg said, “wanted to attract the attention of world leaders as they assembled to discuss ongoing turmoil in financial markets at the G-20 Summit in Cannes and to add its voice to those arguing for capital controls (such as the “Tobin tax”) to discourage international financial speculation.” But, he argues, advocating a world economic authority could work against the interests of developing nations, including those heavily Catholic:
… a world authority could pit the economic interests of Catholics in developed countries against those in developing nations, creating challenges for how the Church presents its teachings about economic issues to Catholics throughout the world. Many countries throughout Latin America, Africa, and Asia are in a fundamentally different economic and geopolitical place from those of the ailing EU. The Church must thus deepen its appreciation of how the global operation of economic factors such as comparative advantage, incentives, and tradeoffs has different impacts upon Catholics living in very dissimilar economic circumstances. But this also has implications for the Church’s position concerning the economic functions to be assumed by a world authority. Such responsibilities, for example, could primarily concern promoting greater economic integration through removing obstacles to trade. This, however, would be incompatible with the Note’s theme that a world authority’s economic functions should be focused upon securing greater control over the pace of change through international regulations that, if implemented, would significantly impede the free movement of people, goods, and capital.
Read “The Vatican’s Calls for Global Financial Reform” by Samuel Gregg on the website of Foreign Affairs.
Last week in Rome the Acton Institute presented a promotional video for the PovertyCure initiative before an international audience of businessmen, scholars, journalists, graduate students and missionaries in attendance at the Institute’s May 18 development economics conference: “Family-Enterprise, Market Economies, and Poverty: The Asian Transformation.” The Acton Institute is one of many partners in this new initiative made up of a network of individuals and organizations looking for free-enterprise solutions to poverty.
The video caused quite a stir in the hearts and minds of the attendees. So I solicited some feedback from the audience, a great percentage of whom hailed from countries with developing and emerging markets.
A missionary Ph.D. student at the Pontifical Gregorian University told me after the presentation: “This brief trailer has already brought to my clear attention the real hindrances to economic growth in South America and throughout (other) developing and emerging markets. And more importantly, what impressed me was what we have to do — through our own pastoral outreach — to begin changing the pervasive dependency on government hand-outs.”
One of the Vatican beat journalists present at the showing, Edward Pentin (who contributes to the National Catholic Register and Zenit, among others) had the chance to interview Acton’s president, Rev. Robert Sirico, about the video’s purpose and potential impact on changing common opinions on failing aid-based development economic systems.
In responding to Pentin’s questions, Rev. Sirico said the video’s aim is “to challenge the development community to really focus on developing, that is, opening spheres of economic productivity and cooperation … allowing the others to contribute to their own prosperity.”
Below you can find the May 19 Zenit article (or go here) and the Poverty Cure video.
by Edward Pentin
Vast amounts of state aid and governments imposing endless regulations are not the way to solve global poverty; rather it will be done through trade, private enterprise and helping populations in poor countries to contribute to their own prosperity.
This is the view shared by members of PovertyCure — an international network of individuals and NGOs who are seeking to encourage anti-poverty solutions through fostering opportunity and unleashing the entrepreneurial spirit in the developing world.
A leading partner and one of the main organizers of the network is the Grand Rapids-based Acton Institute for the Study of Religion and Liberty. Its president and co-founder, Father Robert Sirico, told ZENIT there is “plenty of data across the board” that has long been known to create prosperity — namely low taxation, low regulation and increased market globalization. “This doesn’t come without some problems as the Pope and others have indicated, but this is the first time in human history where we know how to solve poverty.”
Father Sirico said one of the overarching aims of PovertyCure is “to challenge the development community to really focus on developing, that is opening spheres of economic productivity and cooperation,” allowing the others to “contribute to their own prosperity.” “When I put it like that it sounds so clear and simple,” he said, “but it is and that’s what’s frustrating.”
The American priest noted the challenges of overcoming a static mindset that believes government aid is the only real solution to global poverty. But he also highlighted a “perhaps more sinister” problem which is a “huge institutional vested interest in leaving the situation as it is.” He was referring to the thousands of people employed through aid program bureaucracies that are averse to change for fear it will put them out of a job. Father Sirico said it is “ridiculous to spend significant proportions of development money on supporting bureaucracies to administer programs.”
Instead he prefers what, in Caritas in Veritate, Benedict XVI calls “fiscal subsidiarity” — a form of creating credits in various nations not for foreign governments to invest in developing nations but for the citizens to invest in businesses in poor countries, and to have their tax burden lightened with respect to the investment that they give. “That’s one approach,” he said. “The other is to obviously drop the scandalous trade barriers that separate people and create pockets of interest in maintaining unfair portions of the market.”
When put to him that some aid agencies believe international aid should be a mix of private entrepreneurship and state aid, Father Sirico said governments should be “the last in and not be the most dominant” in a development situation which tends to always be very delicate. “The problem is that government is very heavy handed and bureaucrats develop self interest in justifying their existence,” he said. “So it sounds very reasonable to say you want to have a partnership but when the partner is a huge gorilla, and the other partners are small little enterprises, the gorilla has the say.”
He therefore prefers to approach the issue “through the lens of subsidiarity.” Otherwise, he said, there’s a tendency on the part of government to “suck all the air out of the room” and not allow scope for enterprise.
He readily concedes, however, that what he is advocating is not a panacea, nor that the free market is naturally moral. “People caricature my approach, saying [I believe] the market is virtuous,” he said. “But the market will reflect all of the vices and virtues that people will reflect in their own private life because that’s in fact what the market is.”
For this reason, he calls “for a more robust form of evangelization.” It’s evangelization, he said, that “really shows us what we need to do rather than covering it over with regulations and giving the impression that if we made regulations then we’ve solved the problem. That’s simply not the truth in terms of human misery.”
Father Sirico was speaking on the sidelines of a May 18 Acton conference in Rome on the transformation of the Asian economy through the expansion of trade, commerce, and entrepreneurship. He said that Asia is one of the “great examples” that “really underscores our point.”
In its vision statement, PovertyCure states that Christ calls us to solidarity with the poor, but this means more than just material assistance. “It means seeing the poor not as objects or experiments, but as partners and brothers and sisters, as fellow creatures made in the image of God with the capacity to solve problems and create new wealth for themselves and their families. At a practical level, it means integrating them into our networks of exchange and productivity.”
The Acton Institute and its co-members of PovertyCure are inviting other partners and NGOs to join the network. More details can be found on its Web site at: www.povertycure.org
Over at the Comment site, I review Dambisa Moyo’s How the West was Lost: Fifty Years of Economic Folly—and the Stark Choices Ahead. In “War of the Worldviews,” I note that the strongest elements of Moyo’s work are related to her analysis of the causes and the trends of global economic power. “Faced with the combined might of the Rest,” writes Moyo, “the West is forced to grapple with a relentless onslaught of challengers from all corners of the globe. And all these countries are growing in confidence, gaining in competence, and jockeying for a frontline position in the world’s economic race.”
A recently released World Bank report echoes Moyo’s sentiments, which are broadly shared by many forecasts. As Motoko Rich at the NYT Economix blog summarizes, “A new report from the World Bank predicts that by 2025, China, along with five other emerging economies — Brazil, India, Indonesia, South Korea and Russia — will account for more than half of all global growth, up from one-third now.”
One way of understanding these trends is that it is simply what you get in an age of global competition. Nations like China, India, and Brazil are increasingly able to make sustained GDP gains because of increased access to global markets, particularly the US. And the US is forced to adapt to remain competitive, and in many cases this hasn’t happened. It’s not clear at all why all this is such a bad thing. After all, it’s not that the US will cease to be affluent in the foreseeable future. It’s just that other nations won’t be as relatively poor.
Even so, Moyo can’t help but cast these developments in negative terms for the West: “…even while globalization could contribute to a rising tide for all boats, it is clear that the relative quality of life will almost certainly have to decline in the West to accommodate a rise in the Rest.” Thus the relatively greater quality of life enjoyed in the West will decline compared to the Rest. But why must this be so dire for the West?
The weakest part of Moyo’s project comes through in her attempts to provide prescriptive guidance for the West to avoid this “precarious path of forecast decline.” All you really need to know about her suggestions appears in this line: “there is, after all, nothing inherently wrong with a socialist state per se if it’s well engineered and designed and can finance itself.”
Moyo wants the US to adopt the Chinese model of state-directed markets because of the “the speed with which policies can be taken and implemented.” Deliberative democracy is just too slow, too cumbersome, and too captive to special interests. We need a lean, mean set of government committees to run the economy properly and efficiently.
What’s difficult for me to understand is why, given the West’s historical success by embodying “a fully fledged capitalist society of entrepreneurs,” we should abandon that model. Moyo should instead be calling the West back to its strengths, its foundations in “democracy and the sanctity of the rights of the individual elevated above all else,” instead of issuing the siren song of state-driven capitalism. If it is really a competition between state-run and entrepreneurial “capitalism,” it’s not clear at all (as Moyo seems to think) that the statists will win.
It seems to me that the West will only truly be “lost” when we give up our commitments to the inherent dignity and rights of the individual, the rule of law, freedom of association, exchange, religion, and expression. The thrust of Moyo’s book is a classic, “It became necessary to destroy the West to save it,” project, and that’s one that’s simply not worth fighting for.