"As Trust Dissolves Before Our Eyes" - Linda Chavez

Larry Kudlow erupted Vesuvian like on me when I read from Joseph Ratzinger’s “The Future of the World Economy”[1] that market-supply-side economics “are not universally valid.” Ratzinger quoted from Peter Koslowski that “Economics is not only ruled by economic laws, but controlled by people…’ He went on to comment that “Even though free enterprise relies on individuals following a particular set of rules it cannot dispense with the individual; it cannot banish his moral freedom from the world of economics. It is becoming increasingly clear that the development of the world economy also involves the development of the world community, of the universal family of man, and that the development of the spiritual dimension of man is an essential component in the development of the world community. The spiritual dimension of man is also a factor in the economy: free enterprise can function only with the help of an underlying moral consensus.”

An essential component of that consensus is the consciousness of the existence and presence of God. The same Ratzinger assesses that “The Communist systems collapsed under the weight of their own fallacious economic dogmatism. Commentators have nevertheless ignored all too readily the role played by the Communists’ contempt for human rights and their subordination of morals to the demands of the system and the promise of a future. The greatest catastrophe encountered by such systems was not economic. It was the starvation of souls and the destruction of the moral conscience.”

“The essential problem of our times, for Europe and for the world, is that although the fallacy of the Communist economy has been recognized, its moral and religious fallacy has not been addressed. The unresolved issue of Marxism lives on: the crumbling of man’s original uncertainties about God, himself, and the universe. The decline of a moral conscience grounded in absolute values is still our problem, and left untreated, it can lead to the self-destruction of the European conscience, which we must begin to consider as a real danger –above and beyond the decline predicted by Spengler.”[2]

To those who consider remarks like these to be out of line with the autonomy of economics, and who is trying to make sense of the present malaise that has emerged from within our midst, I offer some remarks of Lind Chavez which appeared yesterday in the N.Y. Post.[3] She was commenting on the Madoff extravaganza of alluring 50 billion dollars out of the pockets of his friends. She wonders rhetorically, “How could so many savvy people be duped by the oldest trick in the book?” Her response: “But they trusted Madoff because many of them knew him personally…

“What fools, you say? I’d never hand over my money without checking the guy out. In fact, we do hand over our money, figuratively and literally, every day without hesitating. And we do so because we trust individuals, institutions, and our government. Trust is what makes the economic world go round.”

She then quotes from Niall Ferguson’s “The Ascent of Money: A Financial History of the World:” “When an American exchanges his goods or his labor for a fistful of dollars, he is essentially trusting … Hank Paulson … not to … manufacture so many of these things that they end up being worth no more than the paper they are printed on…

“Money is a matter of belief, even faith: belief in the person paying us; belief in the person issuing the money he uses or the institution that honors his checks or transfers. Money is… trust inscribed.”

"And once trust breaks down, the system itself collapses. What is worrisome in today’s troubled economy is that trust seems to be dissolving before our eyes.

"Why have banks stopped lending? Why are people pulling their money out of the stock market, driving down the Dow and NASDAQ? Why are people afraid to buy houses? It all boils down to trust.

"Banks don’t trust that debtors – companies, individuals, even other banks – will pay back the money they lend, so they stop lending. Investors don’t trust that companies will be able to earn profits in the near future, so they stop investing. Ordinary people don’t trust that the home they buy will be worth what they paid for it in a year or even a few months, so they hesitate buying.

"This breakdown in trust feeds on itself. Distrust becomes self-perpetuating and contagious.

"The challenge will be how best to restore trust – and to do so in ways that do not jeopardize freedom or the efficiencies of the market."

This is a perfect example of reason becoming unreasonable without faith. The question is, repeating the observation of Ratzinger: “The essential problem of our times, for Europe and for the world, is that although the fallacy of the Communist economy has been recognized, its moral and religious fallacy has not been addressed. The unresolved issue of Marxism lives on: the crumbling of man’s original uncertainties about God, himself, and the universe. The decline of a moral conscience grounded in absolute values is still our problem, and left untreated, it can lead to the self-destruction of the European conscience, which we must begin to consider as a real danger…”


[1] Catholicism in Crisis/March 1986 23.
[2] Pope Benedict XVI, First Things 159 (January 2006) 20. Cf. also Ratzinger’s “Europe Today and Tomorrow,” Ignatius (2007) 29-30.
[3] Saturday, December 20, 2008, p. 23