Tuesday, December 23, 2008

World Economics & the Church, Part Two

I’m reading, what I consider the single best expression of the social teaching of the Church, the two volume work by Rodger Charles S.J., published in Great Britain in 1998, Christian Social Witness and Teaching: The Catholic Tradition from Genesis to Centesimus Annus (Volume 1) & (Volume 2) The Modern Social Teaching Contexts: Summaries: Analysis; and in Volume 2, I just read a section on the world economic crisis of 1929-1934, and the parallels to what we are now going through are astounding.

An excellent review of the full work is at the Acton Institute’s Journal of Markets & Morality, and the best place to find both volumes is either through Abe Books or through the publisher, Gracewing Publishing.

This is the second of three parts excerpted from volume 2 of Fr. Charles’ book.

Here is the excerpt.

“Germany had stabilized after the ruinous inflation of 1922-3; large loans were made available to her, America being the main creditor, and her economy flourished. It looked as though ‘normality’ had returned; for five years Europe was indeed peaceful and on the whole prosperous, while America enjoyed the ‘roaring twenties’. There it seemed that it was upwards all the way. Population and productivity grew, construction and the new industries, pre-eminently electrical appliances and motor vehicles, expanded enormously. Closer inspection however revealed that the pattern was very patchy. Older manufacturers were not booming, nor was agriculture; unemployment remained high and social security provisions were minimal. No matter: the illusion of never-ending prosperity had taken hold of the stock market, where from 1925 there raged a speculative boom which recalled all the manias from the South Sea Bubble onward.

“The idea of stocks and shares soberly valued by the market according to earnings went by the board. They became commodities which it was assumed would always rise in price and could be sold on a ‘bull’, that is a rising market. Every section of that market, brokers, traders, bankers, financiers, collaborated in ever more illegal, irresponsible and immoral ways to stoke it while the going was good. Sober warnings that it could only end in disaster were being made by those who had ears to hear. The Standard and Poors agency had always been cautious and skeptical, and the New York Times had tried to keep its readers in touch with reality, but their voices were drowned in the chorus of boundless optimism that issued from the press, the academies and business leaders generally, until on 24 October 1929 the bubble finally burst.

“America’s problems had been reflecting themselves in the world economy before 1929; the outflow of capital to Europe had been checked during the frenzy of the boom, while European capital had been attracted to the American market, undermining currencies and weakening industries. Now the USA registered a deep fall in prices, production, employment and trade; the protectionist Hawley Smoot tariffs of 1930 made matters worse, and Europe became protectionist too, magnifying the plunging decline in world trade. Falling prices meant reductions in production everywhere and declining production led to rising unemployment as workers were laid off. Then, just as the unlucky President Hoover was convincing himself the worst was over in 1931, the collapse of the Creditanstalt Bank of Vienna, a result of the destabilization of Europe’s financial system following on that of the American stock market, set off a new round of disaster. Britain’s abandonment of the gold standard marked the end of the old order and helped set off a further spiral of depression and unemployment which many thought presaged the end of the capitalist system that Marxists had been predicting.” (pp. 60-61)

(To be concluded on 12/24)