13th & 14th November 2013 Faith and economy and a perspective on the economic crisis By Johan Graafland Professor in Economics, Business and Ethics Tilburg University

Introduction Globalization and impotence Complexity Church must speak No concrete policy recommendation But broader analysis in relation to debate on church and society

Contents Backgrounds of economic crisis Christian values Responsibilities of Christians Concluding remarks

Backgrounds of economic crisis At the micro level Risky investments by banks Intransparent and complex financial products Inaccurate ratings by rating agencies Incentives to risk taking by bonus rewarding systems At the market level Deregulation inspired by neo-liberal economic thought (Friedman, Hayek)

Philosophical background Objectivism of Ayn Rand Rational self-interest is the cornerstone of society Altruism is a vice Never live for another person and never ask someone to live for you Redistributive policies are unjust Anti Christian philosophy Inspired Alan Greenspan

Theological background of Adam Smith Natural theology Invisible hand Well understood self-interest But embedded in moral framework Virtues (prudence, justice, benevolence) Smith insufficiently weights potential destructive forces of self interest

Christian values Common good Financial markets crowd out the social conditions that make people prosper Bonus culture has diminished motivation to serve the clients Justice Costs of risky investments were shifted to society (no reciprocity) Solidarity Particularly low income groups are hurt

Humility Attitude of admitting errors, openness to criticism and willingness to change. Then one can learn from crisis Related to simplicity; serves integrity and helps to focus on what is really of value. In modern economy complex financial products and economic systems have become autonomous and threaten life. Making things simpler gives more control of economic system. Grace Greed was not only present in financial sector The crisis is not only caused by a lack of individual responsibility, but also by systemic errors and lack of checks and balances. This indicates collective guilt. Still, there is also personal responsibility. Experience of God’s love creates room for insight into own failures and motivates to change

Concluding remark Call for reflection on our own responsibility in our economic choices and in economic institutions. What is the purpose of banking? What do we aim at? What will make us happy? Necessary in all our roles Macro: Government and political parties Meso: branch organizations Organizational: corporate governance Individual: As manager As household (responsible consumption, saving and investment)