CAT | economics
There are those who think that Europe’s appalling unemployment problem can be explained by overly rigid labor markets, the spiraling energy costs that greenery has brought in its wake and, of course, the ill-judged introduction of the euro.
Pope Francis has a different explanation:
“What can we say, when faced with the very serious problem of unemployment that affects various European countries?”, he asked. “It is the consequence of an economic system that is no longer able to create work, because it has placed at its centre the idol of money…”
It’s hard to work out what’s worst about that comment, its frivolity, its ignorance or its demagoguery.
Over at City Journal, Guy Sorman has something to say about the pope’s demagogic attack (although he’s too polite to describe it as such) on the free market:
In his December apostolic exhortation, Evangelii Gaudium (The Joy of the Gospel), Pope Francis had harsh words for “the new invisible tyranny of the market.” This familiar denunciation of capitalism brings to mind a famous text by the French economist Frédéric Bastiat, published in 1848. Addressing the socialists of his day, who were already attacking the market economy, Bastiat replied that it is easier to identify and criticize what one can see (poverty or inequality) than it is to discern what one cannot see: the relentless economic growth that the market engenders.
With all due respect to the pope, he has fallen into a rhetorical trap. In the name of the poor, to whom his life as a priest has been devoted, he denounces the visible and ignores the invisible…
That’s too kind. The pope did not fall into “rhetorical trap”. Francis is a smart man and he knew exactly what he was doing. And no, that says nothing good about him.
Then Sorman throws in some history:
One of Francis’s predecessors, John Paul II, also pronounced on political economy. When Poland was freed from the Soviet empire in 1990, John Paul tried to prevent his country from slipping into capitalism, which he then abhorred as much as does Pope Francis. John Paul II believed sincerely in a Third Way, neither socialist nor capitalist, which would lead Poles from poverty to prosperity and social justice. Lech Wałesa, who had moved from union leadership to the presidency of the Polish republic, was singing the same tune. Post-Communist Poland soon sank deeper into poverty. John Paul II, honestly concerned, then took some lessons in economics. He chose as one of his mentors Michel Camdessus, then managing director of the International Monetary Fund and a fervent Catholic. Camdessus helped convince him that the market economy was only a mechanism, which, however imperfect, was the most effective means ever discovered for reducing mass poverty. Poland, still Catholic and converted to capitalism, is now the only European country to have escaped the crisis of 2008. Average income there has doubled over 20 years.
Camdessus was right: we should judge the market economy by its results, not by its values. Thus, Pope Francis is mistaken when he claims, in Evangelii Gaudium, that “the market is held up as divine.” I know no one who considers the market “divine”—certainly neither economists nor entrepreneurs. Similarly, when Pope Francis recommends “returning the economy to the service of human beings,” we can only agree, while observing that the market never functions except in the service of human beings. What human beings do with the products of growth, as well as how they distribute them, is an entirely different matter, and the Church has a legitimate interest in employing moral suasion in this area.
Meanwhile, as the economic crisis deepens in his native Argentina, the pope has an excellent opportunity to see where the sort of economic policies and attitudes that he advocates tend to lead. It will be interesting to hear what, if anything, he has to say about it.
Comments off · Posted by Andrew Stuttaford in economics
Under first Nestor, and then Cristina, Kirchner, Argentina has been pursuing an economic policy that, in its suspicion of free markets, distrust of globalization and strong redistributionist vein, reflects a long Argentine tradition that extends far beyond the Kirchner camp, and, indeed, finds some reflection in some of the pronouncements of, ahem, one rather prominent Argentine now resident in the Vatican.
So how’s it working out?
The Guardian reports:
Following the sudden collapse in the peso this week, some Argentinians fear their country may be lurching into a new episode of the crises that seem to hit the country’s economy almost every decade. Scrambling to protect the country’s perilously low central bank reserves, which dropped 30% last year and fell below $30bn (£18bn) this month, the government of President Cristina Fernández de Kirchner seemed at a loss how to proceed. It started the week introducing tight controls on the purchase of online goods from abroad, to prevent Argentinians from spending dollars in ever larger quantities – especially on Chinese products which, as a result of 30% inflation, can be cheaper delivered to their door from abroad than bought at local stores.
But on Friday the government seemed to do a U-turn, saying it would relax its grip on the dollar. From next week it will remove some of the controls it introduced two years ago which banned Argentinians from trading their pesos for dollars, a customary practice in a country with a long history of inflation.The dollar freeze paralysed the property market, which operates in dollars, but failed to stem the rush away from the peso. Instead it created a black market where the dollar has risen from eight to 13 pesos in the last year while the central bank continued using – and losing – reserves trying to keep the dollar in check. Its battle was ultimately lost this week in view of the peso’s sudden collapse.
Seemingly oblivious to the country’s economic plight, Fernández has referred to the last 10 years – since her husband assumed Argentina’s presidency in 2003, and she took over in 2007 – as the “victorious decade”. But this week’s forced devaluation of the official exchange rate may make it difficult to continue repeating a slogan habitually used in speeches by government officials, printed on billboards and even emblazoned on a recent series of commemorative stamps.
To 68-year-old Aida Ender, after 40 days without power in her eighth-floor apartment in the middle-class neighbourhood of Almagro in Buenos Aires, the slogan grates like a bad joke. “There’s no plan, the president is out of touch with reality, she’s lost like Alice in Wonderland,” says Ender, who has had to move out of her apartment, where she has had no water, no working lift and no refrigeration since 16 December. Her plight is shared by thousands of neighbours and even hospitals, in the middle of unusual summer highs of close to 40C. Economic observers blame the government’s populist policies – including keeping utility prices artificially low to disguise inflation – for the power crisis. They say this has made it impossible for firms to invest in maintaining power lines.
The government denies the charges and says that inflation is fuelled by anti-government businessmen.
…At least 11 people were killed and hundreds injured last month when a wave of supermarket looting spread across Argentina, fuelled by a combination of rising food prices and a police strike for higher wages.
The Economist adds:
As of Monday January 27th, the government will supposedly lift this invisible “clamp”. Today’s announcement by Jorge Capitanich, the cabinet chief, lasted only a minute and left his audience with more questions than answers. He revealed only that the exchange restrictions will be lifted for individuals, not for businesses; and that Argentines will still need to present tax affidavits along with their requests for dollars. Those making dollar purchases for travel will be charged a 20% tax advance on such purchases, down from 35% now.
One explanation for the events of the past week is that the authorities can no longer afford to prop up the peso by using Central Bank reserves. Although the 2011 dollar restrictions succeeded in stanching capital flight, they failed to stop the fall of Argentina’s international reserves. In 2011, when the clamp was implemented, the reserves were around $47 billion. They have since dropped below $30 billion. With an energy bill of $15 billion and debt obligations of $10 billion to pay this year, the Central Bank cannot endure much more pressure.
On the other hand, letting the peso plummet as Argentines rush to swap their money into dollars could quickly lead to panic. Even if the Central Bank stops intervening, AFIP, Argentina’s tax agency, will continue to control dollar sales, meaning Argentines could still face rejection of their exchange requests without explanation. Despite this morning’s announcement several black-market exchange houses in Buenos Aires, unsure of what the next week might bring, are still hungrily buying and selling at a rate of roughly 12 pesos to the dollar, well above the official rate of 8.1.
But at least Argentines are being spared the horrors of the free market!
One of Saudi Arabia’s leading conservative clerics has said women who drive risk damaging their ovaries and bearing children with clinical problems, countering activists who are trying to end the Islamic kingdom’s male-only driving rules.
A campaign calling for women to defy the ban in a protest drive on 26 October has spread rapidly online over the past week and gained support from prominent women activists. On Sunday, the campaign’s website was blocked inside the kingdom.
As one of the 21 members of the senior council of scholars, Sheikh Saleh al-Lohaidan can write fatwas, or religious edicts, advise the government and has a large following among other influential conservatives.
His comments have in the past played into debates in Saudi society and he has been a vocal opponent of tentative reforms to increase freedoms for women by King Abdullah, who sacked him as head of a top judiciary council in 2009.
In an interview published on Friday on the website sabq.org, he said women aiming to overturn the ban on driving should put “reason ahead of their hearts, emotions and passions”.
Meanwhile, Recep Tayyip Erdoğan, Turkey’s prime minister and a figure that The Economist persists in describing as “mildly Islamist”, reminds an audience that Turkish women are not, in his view, having nearly enough children (the birth rate in Turkey is a little over 2, a tally that has, mercifully, fallen by more than a half since the late 1970s);
Turkish Prime Minister Recep Tayyip Erdoğan has urged a group of women in Mediterranean Turkish province of Denizli to have at least four children rather than his previously advised three…Erdoğan has noted in the past that Turkey’s annual population growth rate should be at least 2.5 percent and if Turkey continued with its existing trend, its population would rapidly become an aging one after the 2030s. Erdoğan has also linked aging populations and low birth rates in European countries to economic recession.
And that last sentence tells you all that you need to know about Erdoğan’s grasp of economics. The European recession has many causes, most notably a dysfunctional single currency, but the continent’s low birth rate is not one of them.
There are times, sadly, when the economic pronouncements of Pope Francis have more than a touch of Juan Perón about them.
This may be one of them.
“We don´t want this globalized economic system which does us so much harm. Men and women have to be at the centre as God wants, not money. . … The world has become an idolator of this god called money … It is not only a problem of Italy and Europe.. it is a consequence of a world choice, of an economic system that brings about tragedy, an economic system that has at its centre an idol which is called money”.
Warnings of the way that money can be a source of spiritual corruption are, of course, nothing new to Christianity (or, indeed, a good number of other religions). Just the other day the Pope was citing (with, I feel, a degree of approval) the fact that some early church fathers had described money as ‘the dung of the devil’, but the reference to the evils of a ‘globalized economic system’ contained within this latest comment seems to be something a little different, a nod to the notion of economic autarky that was such a notable characteristic of the Argentina of Pope Francis’s teenage years.
And, no, it didn’t work out so well.
It’s no great secret that the Vatican has never been particularly fond of the idea of free markets, but here is yet more nonsense from Benedict XVI to remind us of just that.
The BBC reports on the Pope’s New Year address:
The Roman Catholic Church leader spoke at a Mass in the Vatican, then greeted a crowd outside St Peter’s Basilica.
He deplored “hotbeds of tension and conflict caused by growing instances of inequality between rich and poor”.
Those “hotbeds” also grew out of “the prevalence of a selfish and individualistic mindset which also finds expression in an unregulated financial capitalism”, as well as “various forms of terrorism and crime”, he said.
I don’t know what is worse. The ignorance (if there’s one thing that the financial markets were not, it was unregulated; whether they were sensibly regulated is a different question), or the clear signs of a visceral loathing for “financial” capitalism and, of course, the Pope’s attempt to smear it with guilt by association with “various forms of terrorism and crime”.
Via The Independent:
The G20 was under growing pressure to call an emergency summit on global food prices last night as the Vatican accused grain speculators of “hampering the poorest and neediest…
Yesterday the Vatican’s permanent observer at the UN in Geneva, Archbishop Silvano Tomasi, claimed “market activities” such as arbitrage [buying and selling goods to exploit price differences] and the use of derivatives trading in grain supply chains, are “hampering the poorest and the neediest”.
I don’t know what is worse: The attempt to play a populist card, or the profound ignorance of economics that the Vatican has, yet again, revealed.
In a very friendly & gentlemanly email, Nick Schulz assures me that his post on the AEI blog was meant as a fun tweak, not a sneer. My apologies to Nick.
After all those columns I’ve written about everyone being far too quick to take offense nowadays, perhaps I’ve inhaled a bit of the zeitgeist at last.
Mark Krikorian and I have been singled (doubled?) out for a sneer from AEI’s Nick Schultz. Are our heads exploding (he wants to know) at the news that Mexicans lead the world in “total minutes worked, paid and unpaid, per day”?
Mark is very well able to speak for himself. My own reaction on seeing the OECD chart Nick displays was that Mexicans are getting dismally little bang for the industrious buck. After five hundred years of toiling away for 594 minutes a day they have nothing much to show but a mediocre economy propped up by oil revenues and expatriate remittances, dysfunctional politics, and wellnigh zero achievement in the cultural or
A few minutes’ number-crunching confirms the impression. Remember how your Uncle Stan used to tell you that while working hard is good, working smart is better? OK, let’s create an Uncle Stan index. I’ll divide annual per capita GDP (from the CIA World Factbook) by the daily number of minutes worked to see how much annualized per capita GDP each minute generates. For Mexico I’m dividing $13,800 a head by 594 minutes, to get annualized $23.22 per person per minute worked in the day.
On the Uncle Stan Index (USI) Mexico ranks 27 out of 29 on the OECD list. That is to say, it’s one of the least efficient nations in the world at turning work into wealth.
Here’s the table. I’ve included a column for mean national IQ, these numbers taken from Tatu Vanhanen’s latest book. The last two columns correlate quite well: r = 0.47.
|Country||USI||Mean National IQ|
Now, see how unfair life is. Here’s me, a poor freelance drudge, doing all this math, while Nick Schultz has a nice cushy number at AEI where apparently he is required to do nothing but strike politically-correct moral poses. Nick doesn’t even bother to source his data: I had to Google for the spreadsheet link.
I guess Uncle Stan was right …
Lunchtime mail brought my April copy of The Dominion, “News of the Episcopal Diocese of Long Island.” The front page leader was by my local prelate, The Right Reverend Lawrence C. Provenzano, Bishop of Long Island. Titled “Budgets, Leadership, and Public Service,” it is an angry broadside against the cutting of public services — any public services.
The approach to addressing the fiscal crisis in New Jersey and in a host of other states across the country appears to be to assault those who do the public’s work as state employees, to imply that they receive benefits and salaries that go far beyond what they deserve and that they immorally avail themselves of these benefits.
His Grace recommends that his parishioners join in a new initiative from the religious left under the slogan “What Would Jesus Cut?” If you join in, you can get a WWJC bracelet!
Would Jesus cut Head Start — a bureaucratic extravaganza of no proven value whatever? Would he cut foreign aid — correctly described by Peter Bauer 30-odd years ago as “The transer of money from poor people in rich countries to rich people in poor countries”? Where would the Saviour have stood on defined-benefit vs. defined contribution pension plans? We know what he thought of tax collectors (e.g. Matt. 18:17), but where did he stand on tax payers vs. tax eaters?
We hear so much about the Religious Right, far too little about the Religious Left and its maleficent works — it is, for example, the main motive force behind the refugee resettlement rackets. From the Rev. Jeremiah Wright to the Right Rev. Lawrence Provenzano, what I mostly see in the pulpits are lefties.
The pity of it is that elsewhere in The Dominion and its national-level equivalent, Episcopal Journal, I read of good and commendable works by church groups in, for example, relief for victims of the recent earthquakes in New Zealand and Japan.
Do these Christian lefties not see the contradiction between encouraging voluntary charity and demanding that ever more of the work of comforting the afflicted be transferred to government functionaries whose benefit packages are written into their state constitutions?