Catholics and the morality of debt

Sam Gregg writes that with debt and deficits on everyone’s mind, the absence of sustained contemporary Catholic reflection on financial questions is puzzling. However, Pope Benedict XVI points to a deeper moral disorder associated with running up high levels of debt: The willingness of many to live “at the expense of future generations” . . .

Dr. Sam Gregg

Debt and deficits seem to be on everyone’s minds these days. Whether it be worries about the American government’s fiscal woes, the prospect of Greece defaulting, Europe’s fragile banking system or the debt-as-a-way-of-life culture that disfigures so many lives around the world, many people are seeking guidance on how to extricate themselves from this mess with their souls intact.

In this regard, Catholics instinctively turn to the Church’s social teaching for direction. Unfortunately modern social encyclicals have relatively little to say about strictly financial questions. Even the 2004 Compendium of Catholic Social Doctrine confines itself to very broad statements about finance and foreign debt, and never really addresses the moral dimension of private and public debt.

This absence of sustained contemporary Catholic reflection on financial questions is puzzling. Because once we get past the Dark Ages propaganda that distorts so many people’s vision of the Middle Ages and Catholicism more generally, we discover most of the practices of finance and banking took form in a medieval Christian world — one shaped and nourished by the Catholic Church.

Indeed, for many centuries, Catholic bishops and theologians invested considerable energy in understanding the world of money because of the usury question. Catholic thinkers were consequently among the first to identify money’s primary functions, illustrate how money in the conditions of economic freedom could assume the form of capital, demonstrate the moral legitimacy of charging interest on money-ascapital, and assess the moral status of different debts in different contexts.

Here it’s worth noting that early-modern Catholic theologians assailed governments that tried to escape their debts by measures such as inflating the currency or borrowing more money to pay for interest payments on existing public debt — or who spent large portions of the taxes they raised on servicing debt or on activities that were either morally evil or simply did not fall within the core functions of constitutionally limited governments.

Sound familiar?

Today one looks in vain for Catholic thinkers studying our debt and deficit problems from standpoints equally well-informed by economics and sound Catholic moral reflection. We don’t, for instance, hear many Catholic voices speaking publicly about the moral virtues essential for the management of finances such as prudent risk-taking, thrift, promise-keeping, and assuming responsibility for our debts — private or public.

Instead one finds broad admonitions such as “put the interests of the poor first” in an age of budget-cutting. The desire to watch out for the poor’s well-being in an environment of fiscal restraint is laudable. But that’s not a reason to remain silent about the often morally questionable choices and policies that helped create our personal and public debt-dilemmas in the first place.

One Catholic who has engaged these issues is none other than Pope Benedict XVI. In his 2010 interview-book Light of the World, he pointed to a deeper moral disorder associated with running up high levels of debt. The willingness on the part of many people and governments to do so means “we are living at the expense of future generations.”

In other words, someone has to pay for all this debt. And clearly many older Americans and Western Europeans seem quite happy for their children to pick up the bill. That’s a rather flagrant violation of intergenerational solidarity.

But Benedict then sharpens the argument. This willingness on the part of governments, communities and individuals to live off debt means that people are “living in untruth.” He writes: “We live on the basis of appearances, and the huge debts are meanwhile treated as something that we are simply entitled to.”

In fact, it’s possible to go further and argue that such attitudes reflect a mindset of practical atheism: living and acting as if God does not exist, as if the only life is this life, as if the future doesn’t matter. Only people who have no hope — no hope in God, no hope in redemption, no hope for the future — will think and act this way.

The economist John Maynard Keynes once famously wrote, “In the long run, we are all dead.” To be fair to Keynes, he was making a specific point about monetary theory. But his words are evocative of a mindset that should trouble Catholics and other Christians. If we choose to live our lives according to a perspective dominated by immediate gratification or pursue economic policies forever focused on the short-term (which is, more-or-less, the Achilles heel of neo-Keynesian economics and policies), then living off debt is entirely rational. But what does that say about our priorities and conception of human flourishing?

Taking on debt is not in itself intrinsically evil. In many circumstances, it’s an entirely reasonable decision. Most entrepreneurs who undertake a new endeavor or established businesses seeking to expand their activities need debt-instruments to do so. Many young people make a responsible choice to take on some debt so as to increase their human capital (and thus job prospects) in the marketplace.

Nevertheless a situation of inexorably increasing debt and a failure to confront its moral and economic causes can slowly erode our personal sense of responsibility for our freely undertaken obligations and severely tempt us to live in a world of moral and fiscal unreality. Such attitudes don’t just weaken economies. They immeasurably damage our personal moral well-being, not to mention entire societies’ moral ecology.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including “On Ordered Liberty,” his prize-winning “The Commercial Society,” and “Wilhelm Röpke’s Political Economy.”