Time For a Better Financial Stability Mechanism
Dominique Strauss-Kahn, head of the International Monetary Fund (IMF), has this last weekend called for a better plan to be drawn up to deal with government debts in Europe, and has criticised responses to individual crises so far which threaten to undermine investor confidence there.
As Britain prepares for a referendum on its voting system in which one argument being used against the switch to AV is its increased cost, wrangling continues over the creation of a European Stability Mechanism (ESM) to provide a €500billion bailout fund for spendthrift eurozone members. Even this is small change considering that Portuguese public transport providers alone have debts of over €17billion (were they filling the fuel tanks with Dom Perignon?), whilst Irish sovereign debt tops €1trillion.
The pretext for an ESM is to ‘calm the markets’. But ‘markets’ as such do not have behaviour susceptible of control, while flesh-and-blood people do. Reckless countries have bad credit ratings for the same reason as reckless people: they are known to behave in an untrustworthy manner when given money. For the record, Britain, with a national debt estimated at £138,360 per household (this figure excluding Network Rail’s debts and those of public projects funded by the Private Finance Initiative), certainly has no reason to gloat over the woes of Portugal, Ireland, and Greece.
To understand the national dimension, it is always necessary to start at the level of the individual. A financial exchange is an agreement between two individuals, or groups of individuals. National finances are nothing more than aggregates of such transactions which, however bewildering they might seem to the uninitiated, can be traced to the decisions of individuals, and as such are appropriate subjects of moral evaluation, however much some may bleat of economics and finance being ‘value-free sciences’.
Prudence was traditionally seen as a cardinal virtue alongside temperance, fortitude, and justice. Defined by Thomas Aquinas as ‘wisdom concerning human affairs’, prudence enjoyed a certain pre-eminence as the auriga virtutum (‘charioteer of the virtues’), as no other virtue could be exercised without it. If prudence is about selecting the right means to attain our goals, we need awareness of two things. Not only do we have to know which means to choose, but, and more importantly, we must have a proper order to our values and goals in life. If our goals are wrong from the outset, however shrewd we are in choosing our means, we shall not end up being made happy, which is after all the aim of the virtues, prudence included. Long experience has shown that setting up material wealth as the goal of human life fails to bring happiness and fulfilment, yet we continue to do so. Prudence has come to be sorely misunderstood, indeed seen as synonymous with miserliness and humbuggery.
With the decline of manufacturing and and increasing reliance by many Western economies on ‘service industries’, living within one’s means is ever more viewed not as prudent and virtuous but rather almost as a vice, an attitude most obvious at Christmas. In 2008, for example, the results of a survey were published claiming it would be ‘the worst Christmas for a generation’. What was the reason for such a claim? Looming natural disasters predicted by the weathermen? Had Santa been made redundant by the UN? Not quite. Rather, consumer spending was expected to fall by 7%. The implication behind the pious handwringing which is de rigueur in the financial news as Christmas approaches is that those who refuse to do their duty at Christmas by running up their credit-card bills are poisoning the national economic bloodstream, and should be viewed with the same unease as were ‘conchies’ during the World Wars. By happy coincidence, this means that those who wile away their time maxing out their MasterCards can tell themselves not to feel guilty as they are just doing their bit for the economy. The climax of the season for some is now no longer the religious services, or the joy of time spent with family, but the orgy of greed on Boxing Day as shoppers on occasion literally almost trample each other to death whilst grasping for bargains – so much for peace and goodwill to all men.
It is a graphic illustration of the iron grip that greed has on the West that the only solution being mooted to the present sovereign debt crises is for countries already groaning with debts to pour even more money away into the creation of supranational bailout funds. The better financial stability mechanism is to avoid unnecessary debt in the first place through cultivating the virtue of prudence.
Europeans contemplating their future might do well to reflect on something related about their ancestors by Mark Twain in The Innocents Abroad: ‘In one of these long Pompeiian halls the skeleton of a man was found, with ten pieces of gold in one hand and a large key in the other. He had seized his money and started toward the door, but the fiery tempest caught him at the very threshold, and he sank down and died. One more minute of precious time would have saved him.’
- The Loss of Virtue and the Economic Crisis
- Is the Euro a Spear Pointed at the Heart of the European Union?
- Christianity, the Crucifix, and European Values