Prof. Valerio De Luca, Visiting Fellow, London School of Economics, Department of Law.
President, International Academy for Economic and Social Development, Rome-Luxemburg.
The current global financial crisis, actually determined by financial engineering innovation and by deregulation policies, is collectively believed to have caused the “Wall Street” slump.
In this way, the free-market paradigm collapsed from the inside – meaning by free-market a mechanism able to self-regulate and generate well-being and development for all. The practice of economics has reflected this ideological focus and has sought to remove values and morality from economic discussions rather than seeking to integrate these concerns into creating a more effective and just financial system. This world view has created a society in which short-term economic and personal gains are made at the expense of others and have the effect of creating an individualism lacking recognition of the shared rights and responsibilities necessary to create a society respecting the dignity of all people.
How do we, living in a world at risk caught in an age of global financial innovation, respond to the differing needs of individuals and institutions ?
How should the financial sector respond not only to the current crisis but to the wider needs of the people it serves ? Does business has a duty to society that goes beyond the creation of profits?
And finally does open market capitalism remain our best hope for creating wealth that benefits all aspects of society ? These questions strike at the root of what we “belived”, as an ideology, for at least a quarter of a century under the name of the “Washington Consensus”.
The capitalist system is at its heart about trust. There has been a massive breakdown of trust: trust in banks, trust in business, trust in financial system, trust in politicians, trust in regulators, trust in media. If we are to restore trust and confidence in the markets, we must therefore address what is at its roots a moral question. The new paradigm of “capitalism needs to integrate values with value”.
This “surplus” goes well beyond the simple compliance to the laws or to the codes of conduct. As a matter of fact, without internal forms of solidarity and mutual trust, the market cannot completely fulfil its proper economic function. Market must not become the place where the strong subdue the weak and, therefore, the logic of profit must be directed towards the pursuit of the common good, for which the political community in particular must take responsibility. The commitments made at the G20 London Summit last and at the G8 Aquila Summit call for the need of a new paradigm based on the redirection of the national and global financial and economic systems towards the ethical principles of justice, solidarity and common good. In particular, the challenge launched by the Aquila G8 Summit will be whether world leaders can construct a shared vision of a global legal standard that preserve the dynamism of market forces while taming their excesses.
The “Aquila Consensus” toward a “Global Legal Standard” should be based on a “pluralism without relativism” and on the “min-max rule” : an agreement on a “minimum” fixed core principles plus a “maximum” degree of openness to all the different cultures and values (first of all , the asian values) to set an inclusively and collaboratively discussion both on the common interest (security, climate, poverty human rights, etc.) - and the “The Twelve Tables” on Propriety, Integrity and Trasparency.
This cultural challenge is common to the third encyclical of Pope Benedict XVI – “Caritas in Veritate” that highlights a reconsideration of values, principles and rules for a new model of economic and social development, careful to the requirements of solidarity, respectful of human dignity and at the service of an integral, creative and sensible freedom. Quoting the Pope “Globalization is a multifaceted and complex phenomenon which must be grasped in the diversity and unity of all its different dimensions, including the theological dimension. In this way it will be possible to experience and to steer the globalization of humanity in relational terms, in terms of communion and the sharing of goods.” Within this context, the encyclical provides important indications to lead to a third way of a “human-faced” capitalism that places man at the centre in his personal and community component.
Therefore, a “new paradigm of capitalism” is outlined, based on the primacy of the human person and on community principles, that actively involve all the sectors of the civil society in the implementation of objectives based on shared values and on the sense of the common good.
A new start from primary community links to create a new alliance with the religious element of public life. This must be the common objective onto which building the sound base of a new model of development, well-founded and inclusive of the global financial system’s reform, to act as grounds for a human and integral development of people and to head towards a common future open to hope.
To conclude with the Pope’s warning : “Development will never be fully guaranteed through automatic or impersonal forces, whether they derive from the market or from international politics. Development is impossible without upright men and women, without financiers and politicians whose consciences are finely attuned to the requirements of the common good. Both professional competence and moral consistency are necessary”.