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Money and Justice

by Markus Vogt Wednesday, Apr. 27, 2011 at 11:14 AM

We live on credit, shift costs and risks into the future and make possible a prosperity with the help of a policy of cheap money that is paid for by others. An interest-free money system would be a counter model to the growth pressure inherent in the present system.


By Markus Vogt

[This article published in: Christ im Gegenwart CIG 7/2011 April 2011 is translated from the German on the Internet,]

The current financial crisis is not overcome. Future-friendly financial policy must save wisely and invest wisely. Theological ethics can contribute to formulating rules so money can serve a comprehensive prosperity.

The so-called Euro-crisis is more than a problem of heavily-indebted financial budgets like Greece, Ireland, Spain and Portugal. This is a crisis of trust in the stability of our economic- and financial system. The European bailout that amounted to 750 billion Euros may have to be expanded. In the United States, Treasury secretary Timothy Geithner currently discusses the possibility of a state bankruptcy. The US indebtedness amounts to 10.7 trillion Euros, a hardly imaginable sum. At the beginning of 2011, German state indebtedness rose to almost 1.9 trillion Euros, 23,100 Euro per person…

We are clearly living above our means. Acceptance of debts justified according to the economic theory of the important economist John Maynard Keynes (1883-1946) to overcome economic weaknesses and get the economy back on its feet has become a permanent state of affairs. That this cannot continue forever and a system breakdown must happen sometime or other seems obvious. We live on credit, shift costs and risks into the future and make possible prosperity with the help of a policy of cheap money that is paid for by others.


With all concern about budget deficits, we should not forget the worst effects of the financial crisis were overcome very well through fast and resolute action. A systemic collapse did not occur. The economy has recovered remarkably quickly. The labor market grows. Some already speak of a new German economic miracle. Greece has also carried out a comparatively strict austerity course. In the European Union, voices urging a stronger budget discipline and a new architecture of the financial markets become increasingly loud.

What ethical conclusions should be drawn from the indebtedness? This is in no way easy to answer. Making an abrupt exodus from the kind of monetary policy that we have pursued worldwide for decades is hardly possible. That would strangle the economy, force up debts even more and not guarantee better chances for repayment in any way. Despite and partly because of the crises, investments are necessary – in new technologies, protection of the atmosphere, education, health care and social integration. We have to save wisely and invest intelligently. Good financial policy in times of crisis seems like squaring the circle.

The financial crisis has revived the old discussion around interest prohibition. Skepticism toward the interest- and credit-system is grounded biblically in the Old Testament Book of Deuteronomy (23,20): “You shall not lend upon interest to your brother, interest on money, interest on food, interest on anything that is lent for interest.” Interest prohibition was in effect in the Catholic Church up to 1830. This prohibition is also in the Koran (Sure 2) and is partly practiced in Muslim communities today.

An interest-free money-system would be a counter model to the growth-pressure inherent in the present system and for many a contradiction to a long-term viable economy that is just to the generations. For example, the theologian Thomas Ruster advocates a negative interest. One would have to pay a fee for money possession. This motivates circulating money. Several regional currencies that support the local economy put this into practice.


The cause of the current crisis was the introduction of new financial products that uncoupled profit possibilities from entrepreneurial value creation, not the interest system as such. Rules are needed here that control the supply of money so both inflation and deflation are avoided and money has value through real economic innovations. Suspending the interest prohibition can be justified practically in that interest has a changed function in the modern economy. As a rule, the biblical prohibition is not aimed at consumer loans and fees that exploit an emergency but investment loans and a compensation for the elastic provision of actors with money without which the modern economy would be impossible. Interest has a threefold function today: it is compensation for the risk if the other does not repay the borrowed money; it makes possible profit-sharing and indemnification for renouncing on other exploitation possibilities of money; and finally establishes a minimum interest which central banks set and with whose help the economic fluctuations of the economy can be balanced.

On this background a general skepticism toward the interest system and its monetary policy is not ethically sustainable. Money makes possible future actions. It is a marked freedom as the philosopher and sociologist Georg Simmel (1858-1918) emphasized. Theoretical criticism is first appropriate when money becomes the meaning-endowing medium and the logic of exchangeability becomes a world view. Then money becomes mammon which one cannot serve along with God (Matt 6,24). However deriving a prefabricated judgment about all money affairs from the cult criticism of the “dance around the golden calf” (Ex 32) would be a categorical mistake. Theology is not released from the claims of a concretely differentiated practical argument.

Political attempts at strengthening the financial branch began at the end of the 1970s in Great Britain and the United States. Increased growth to master indebtedness and inflation was the goal. National governments fell more and more under pressure through poor coordination and internationalization of markets consolidated by new communication technologies. Since the 1990s, regulations for the financial market were gradually loosened. Banking transactions became the financial industry that treated money like a commodity with view to different profit expectations. The economy was trimmed to fast profit maximization. Between 1980 and 2007 daily global financial transfers soared from billion to .5 trillion. A predominance of the money economy over the so-called real economy arose. This becomes problematic when the money markets force value creation into its abstract, fast-moving, short-lived and “virtual” logic of shareholder value instead of serving the dynamic of entrepreneurial value creation.


The enormous money streams that circle round the globe daily have influenced the economy and the life chances of countless people since the middle of the 1990s. The high speed of worldwide innovations was made possible by those streams. At the same time the systemic risks increased on account of this positive feedback between actors’ expectations, the system tends to an unstable dynamic of boom and bust, upswing and economic crisis. The current financial crisis had social precursors, 1992/93 in Scandinavia, 1994/95 in Mexico, 1997/98 in Asia, the New Economy crisis of 2000 and the 2008 US real estate crisis which expanded into a worldwide financial and economic crisis. The instability of the financial markets and the economy is the result of structures that were systemically created in the last two decades. This instability has to be answered ethically-politically and is not simply fate. A fundamental reform of the financial regulatory system is necessary if we do not want to fall very soon in a similar crisis. In the past a reform was only promised but not converted.

Supporters of Christian social ethics have long pointed to risks of the financial sector. The social encyclical “Quadragesimo anno” (1931) that arose as a reaction to the worldwide economic crisis at that time touched the sore point. One main actor was the Jesuit Oswald von Neil-Breuning (1890-1991) who published his dissertation “Characteristics of Stock Market Morality” in 1928. The huge concentration in power and economic authority in the hands of individuals who are often stewards or administrators of entrusted goods with virtually absolute power and not owners is most striking, not only the concentration of capital. With credit, they control the (blood) circulation of the whole economic body. Economic life is under their power so no one can even dare breathe without their approval” (“Quadragesimo anno,” Nr. 105f). This diagnosis of a deficient balance of power in the political-economic structure is still burning today.


Money is not a reality free of value judgments but bears a high measure of responsibility in nearly all areas of life on account of its marked influence. In the church and society, there is a considerable need for raising awareness of the ethical dimensions of money which because of its “anonymous character” are often overlooked. From a theoretical perspective on justice, the ethical problems of the financial crisis and criteria for its mastery can be analyzed on the basis of three dimensions: legal justice, distribution justice and exchange justice.

For understanding the financial crisis, the moral failure of individuals – greed and corruption – has less significance than the overarching institutional regulatory deficits. Legal justice requires a strong state, makes possible transparency and effectively controls financial transactions. Financial products and financial markets that cannot guarantee such control are not ethically allowed. Establishing a new global legal framework to secure the public interest will be a precedent economic-political task of the next years.

Enormous redistribution was and is occurring in Germany and in many other countries in the shadows of the financial crisis. Profits are privatized and risks collectivized. System-relevant banks were secured with public funds post record profits again while the state sees itself forced with the arising deficits to save disproportionally in the social area. Developing- and threshold countries which have a poor creditworthiness suffer very intensely. Distribution justice in the financial system requires critically analyzing and limiting its redistribution effects. This is true both nationally and internationally and also refers to the distribution of chances and risks.

Considered systemically, the financial crisis is above all a problem of exchange justice because payment systems broke down and the simultaneity of giving and taking in economic interactions is not guaranteed any more. Through the enormous loss of stock assets, jobs were destroyed and large parts of the economy paralyzed. Many developing countries have lost their fair share in global exchange markets and cooperation connections. In the arising plights, real estate businesses, banks, arable land and raw materials are sold far below their value. Exchange justice, the equality of giving and taking demands a stable and transparent financial system.


Financial policy that is just to the generations must stand the test in all three dimensions. It needs a stable legal framework. Future generations may not be burdened through debt overload and the reduction of social- and nature capital. As the central medium of exchange, money should make possible economic development, cooperation of participation of as many as possible and thus become a dynamic force of justice.

The financial crisis touches fundamental questions about our model of prosperity. It is closely connected with an understanding of the economy one-sidedly directed to quantities of goods and profits so that social and ecological dimensions of quality of life often cannot be immediately expressed in cash values fall from view. The costs of economics are shifted to other succeeding generations. Economic success should be measured in a comprehensive and long-term understanding of the prosperity of the actors. The conventional measurements, the gross domestic index that prefers assets measurable in money should at least be supplemented by the so-called index of sustainable Economic welfare that includes sustainability factors like resource quality and education. The specific contribution of the churches to mastering the financial crisis lies in pointing to such fundamental ethical-cultural connections. “Without a cultural chance, we have no change for a permanent positive development,” the chairperson of the central committee of German catholic Alois Gluck concludes.


Interpreting the financial crisis only as an example for scarcity to be overcome through draconian austerity measures would be wrong. Investments should be given a new direction and measure so that financial management serves the real economy instead of drawing the real economy into the spell of speculations. The “golden rules for budget consolidation” formulated in the 2009 coalition agreement of the German government are an important step to an economics that is just to the generations. In addition the financial system must be organized in an error-friendly way, particularly the refinancing mechanisms. Increasing capital-holding requirements, independent rating agencies that evaluate creditworthiness and a safety standard or technical control board for new financial products are obvious measures.

Beyond the risk-limiting measures, we need financial- and economic reforms that help protection of the atmosphere, food security, education, labor and health so the scarcities of today become the innovation-markets of tomorrow. The individual measures must be harmonized to each other and embedded in a long-term concept. The introduction of an “eco-social market economy” on the world plane is a model. Without this, a financial- and economic policy just to the generations is ultimately impossible.


The financial markets are part of a complex economic system that as a whole produces or destroys assets and prosperity. Therefore the income gained on capital markets is not a private affair or only value creation but a skimming off of profits and consequently obliged to the public interest. Even the successful speculator Warren Buffet calls for higher taxation of capital because capital comes about through accidents and certain possibilities of skimming off excess profit, not only through individual work. A transaction tax for the financial markets is supported by German chancellor Angela Merkel, not only by many representatives of the churches and may not be swept aside. The factors labor, energy (raw materials) and capital should be balanced and drawn upon to finance public tasks corresponding to their value creation capacities.

The skill of dealing withy money lies in connecting discipline in saving and courage in investing – in favor of people and processes that open up the future. In many areas despite high growth rates for decades, the one-sided dominance of the capital market logic has led to an economics at the expense of the future. If the financial crisis helps overcome this dislocation, it will prove in retrospect to be a salutary “dis-appointment” as the end of the deception that an economy that borrows money and other forms of capital from future generations can be permanently stable. The financial crisis has shown that a large part of what we call solid material “capital” is very immaterial and fragile. The most important form of capital is trust.


“The Dangerous Doctrine of Justification” by Dieter Potzel

“Elijah, Amos and Jeremiah” by Dieter Potzel

“Believing without Seeing” by Margot Kassmann

“Lilies of the Field” by Margot Kassmann

“Only the One who Cries for the Jews may Sing Gregorian” by Franz Segbers

Video: Michael Hudson and Richard Wolff on Debts and Recession, April 2011 Michael Hudson and Richard Wolff discuss the theatrics of the debt debate in Washington and why debt does matter

Video: Dean Baker: “GOP Budget Ends Medicare,” April 2011 Media is failing to report how radical Republican budget is.

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