Fixing the economic crisis

The Economic CrisisWhat should Christians be doing about the current economic crisis? consulted a number of economic and socio-political leaders for faith-based perspectives on the subject. Second in a series.

Click here to read Part 1 | Part 3.

The current economic crisis has raised a number of questions.

Is there something inherently wrong with the capitalist system?

In the capitalist system, “there is an inherent tendency to lead to inequality unless there is state intervention,” said Joe Gunn, Executive Director of Citizens for Public Justice.

Since the 1970s, there has been less state intervention as the international economy has been increasingly globalized and deregulated, said Mary Corkery and John Dillon of Kairos. (Corkery is Executive Director and Dillon is Global Economic Justice Program Coordinator of the organization, which is supported primarily by mainline Canadian churches.)

Globalization has resulted in the Canadian government lowering business taxes so that Canadian businesses can compete with the US and other countries, said Gunn, but there have also been other changes. A half-century ago, the owners and managers of large companies “lived and went to church in the same community” as their workers; now they may live in some other country. It is not that business executives are less ethical than their counterparts in the past but that their primary purpose now is to “provide shareholder profits.” Even when churches and unions own stock in larger companies, they often invest in order to gain income, don’t ask sufficient ethical questions or are told they have no right to ask ethical questions.

“Economy” originally meant “how a household is organized,” said Corkery, and the Christian values on which an economy should be based are “valuing God’s creation and people’s contributions,” not “the creation of wealth.” People talk about the economic system as if it is “a framework from which we can’t stray.” But, she said, governments and companies planned and created the current system, and they can also plan an economy that operates “for the common good.”

Elwil Beukes, Professor of Economics at King’s University College in Edmonton, agreed that the economy should be about “the collective pursuit of the common good,” but added, “That doesn’t mean the government has to do it all.”

Beukes favours “a responsible free enterprise economy, but added that “a responsible free enterprise economy is one that responds to human need.” “The markets assist efficiency,” Beukes continued, but “efficiency should not be pursued at all costs, disregarding all other values. You can have a very efficient killing machine, for instance.”

The area of government control of the economy is one “where Christians differ quite a bit,” said Carsten Hennings, Assistant Professor of Business Administration at Tyndale University College and Seminary in Toronto. “Christians have a strong investment in freedom,” and there is a “creativity that comes from allowing people to pursue their goals,” he said. No “planned/communist system” can achieve the efficiencies that a free market can. However, there is still “a need to set some boundaries.” We simply can’t assume that “the sum total of self-interested decisions” will produce good in the long run.

“Christians ought to have a preference for a market economy,” said John Boersema, a Business Professor at Redeemer University College in Ancaster, Ont., and author of the book Political-Economic Activity to the Glory of God. However, he suggested that especially when economic entities get too large, it may be necessary to regulate them. Boersema also added that the free market system “doesn’t require you to be selfish and greedy.” Christians could use the freedom the market provides to serve others rather than trying to serve themselves.

How much intervention is best?

“Government is a huge part of the solution because government can help us be better,” said Gunn. He pointed out a number of large-scale programs that only governments can do.

Many of the experts pointed out that Canada has escaped the worst of the current economic crisis because of better regulation. In Canada, “we have a mixture of free enterprise and government control.” said Lorne Jackson, president of the Canadian National Christian Foundation.

For instance, while the US government was continuing to rack up annual budget deficits of hundreds of billions of dollars, the Canadian government has had surpluses in recent years. As well, Canadian banks are much more closely regulated than US banks. They didn’t make as many risky loans, and they didn’t buy enough risky loans from US banks to seriously affect their overall viability. “The Canadian systems are more tightly regulated, the banking culture is more conservative and the business climate is less open to risk taking,” said Hennings.

Therefore, while the financial bubble has burst in the Canadian housing, commodity and stock markets, the financial crisis has not greatly affected the real Canadian economy. However, as the financial collapse elsewhere starts to affect the real economy there, it will inevitably affect Canada as well. In particular, Canada is going to feel the pinch as the US, Canada’s best customer, stops buying Canadian products.

While all the experts we talked to agreed that there is a need for regulation, several also warned that this won’t necessarily solve all problems. The collapse of the sub-prime housing market in the US was not caused by lack of regulation, but because the regulatory bodies in place failed to do their job, said Paul Williams, David J. Brown Family Associate Professor of Marketplace Theology and Leadership at Regent College in Vancouver.

In fact, part of this collapse was due to “government-mandated lending practices,” said Hennings.

“The ability of government to fine-tune the economy is limited, “said Boersema, noting that governments have been unable to prevent periodic recessions.