Our economies operate in cycles of boom and bust, and even though our government might state “A prudent and responsible approach to the public finances has seen the Government reduce borrowing, while releasing substantial resources for key public services. It is determined to avoid a return to the cycle of boom and bust that has characterised the economy in recent decades” (G. Brown, Budget Speech 2001 http://www.hm-treasury.gov.uk/bud_bud01_index.htm). This current crisis is just the latest of a series of crises such as tulip mania of 1637, the South Sea Bubble of 1720, railway mania of the 1840s, the Florida speculation of 1926 and the dot-com boom of 2001. Each of these crises has been the result of markets out of control; by the human desire to get rich quick. In each case, the market had become divorced from those that it was supposed to serve.

The Social Doctrine of the Church tells us that “A financial economy that is an end unto itself is destined to contradict its goals, since it is no longer in touch with its roots and has lost sight of its constitutive purpose. In other words, it has abandoned its original and essential role of serving the real economy and, ultimately, of contributing to the development of people and the human community. In light of the extreme imbalance that characterizes the international financial system, the overall picture appears more disconcerting still: the processes of deregulation of financial markets and innovation tend to be consolidated only in certain parts of the world. This is a source of serious ethical concern, since the countries excluded from these processes do not enjoy the benefits brought about but are still exposed to the eventual negative consequences that financial instability can cause for their real economic systems, above all if they are weak or suffering from delayed development.” (Compendium §369)

The Church is right to question the ethics of the markets. It is common for ethics in investment banking not to concentrate on the difference between right and wrong, but on what would damage the brand . The Church’s teaching on markets is closely linked to the principle of Solidarity, “One of the fundamental tasks of those actively involved in international economic matters is to achieve for mankind an integral development in solidarity, that is to say, ‘it has to promote the good of every person and of the whole person’”. This is the root of the Church’s teaching on free markets; that they are there to serve all people as part of the common good, and not just the rich.

The result of our current economic crisis will no doubt be a new legislative and regulatory framework for financial markets. Let us hope that such a framework takes into account the underlying purpose that markets are to serve.