Pope Francis 1, Wall Street 0
Say what you want about Pope Francis, he is certainly shaking up the staid Catholic Church in a most enlightened way.
The latest example of the pope’s fresh thinking can be found in his 224-page “Apostolic Exhortation” and, in particular, the paragraphs he devotes to the growing economic injustice that seems to be pervading many societies around the world today, including our own.
Pope Francis is especially concerned about the increasing number of people who are being excluded from the economic miracles occurring in such places as Manhattan and Silicon Valley.
“How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” he wonders. He could easily have also asked about the ink devoted to $100 million penthouse apartments overlooking Central Park or to the Francis Bacon triptych that sold for $142.4 million.
In our rush to celebrate the antics of billionaires, we seem to forget about those barely getting by. How else to explain, for instance, the Republican-controlled House’s decision this summer to cut $40 billion from the food-stamp program? Nary a peep has been heard about the ongoing gift to wealthy private-equity and hedge-fund moguls, whose substantial fees are taxed at the lower capital-gains rate instead of as ordinary income.
The pope has noticed. “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless,” he wrote. “As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape. Human beings are themselves considered consumer goods to be used and then discarded.”
The pope calls it “a globalization of indifference” that seems to have begun with Ronald Reagan’s devotion to “trickle-down” economics -- a theory “never confirmed by the facts,” the pope writes -- and claims that “almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”
He correctly blamed the recent financial crisis on greed. “We have created new idols,” he wrote. “The worship of the ancient golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.”
The pope went on to lambaste the rise of income inequality that can result from unfettered markets. “While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few,” he wrote. “This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from en joying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits.”
Some have dismissed the pope’s observations as the ranting of a Marxist lunatic. Stuart Varney, a Fox Business Network anchor, decried the pope’s criticisms of capitalism as mixing politics with spirituality. He was aghast. “I think free-market capitalism is a great liberator,” Varney said on his television show. CNBC anchor Larry Kudlow also weighed in. “Need I remind his Holiness, Pope Francis, that charity is a gospel value and that puts free-market capitalism on the right side of the Lord?”
Greg Mankiw, a Harvard University economics professor and the former chairman of the White House Council of Economic Advisers under George W. Bush, was equally offended. “Throughout history,” he wrote recently on his blog, “free-market capitalism has been a great driver of economic growth, and as my colleague Ben Friedman has written, economic growth has been a great driver of a more moral society.”
It’s bonus season again on Wall Street. We’ll soon be hearing about the hedge-fund and private-equity managers who have collected hundreds of millions of dollars (billions, in some cases) in compensation in 2013. During the first nine months of the year, Wall Street’s biggest banks had set aside some $91.4 billion for total compensation, suggesting that more than $100 billion would be paid out to many of the same people who have never been held accountable for the bad behavior that caused the financial crisis from which we are still digging out five years later.
Meanwhile, Congress seems poised to end extended unemployment benefits, the minimum wage remains stuck at a meager $7.25 an hour, and the food-stamp program remains gutted. (Some 3.8 million of the 48 million Americans on food stamps would be dropped from the program if House Republicans prevail.)
Not surprisingly, the pope is onto something big in his musings about capitalism’s flaws. What remains to be seen is whether we will have the courage to listen to him before the good things about capitalism are overwhelmed by the bad.
(William D. Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. He was formerly an investment banker at Lazard Freres & Co., Merrill Lynch and JPMorgan Chase.)
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