By Jim Coggins

What should Christians be doing about the current economic crisis? CC.com consulted a number of economic and socio-political leaders for faith-based perspectives on the subject. Second in a series.

Click here to read Part 1 | Part 3.

The current economic crisis has raised a number of questions.

Is there something inherently wrong with the capitalist system?

In the capitalist system, "there is an inherent tendency to lead to inequality unless there is state intervention," said Joe Gunn, Executive Director of Citizens for Public Justice.

Since the 1970s, there has been less state intervention as the international economy has been increasingly globalized and deregulated, said Mary Corkery and John Dillon of Kairos. (Corkery is Executive Director and Dillon is Global Economic Justice Program Coordinator of the organization, which is supported primarily by mainline Canadian churches.)

Globalization has resulted in the Canadian government lowering business taxes so that Canadian businesses can compete with the US and other countries, said Gunn, but there have also been other changes. A half-century ago, the owners and managers of large companies "lived and went to church in the same community" as their workers; now they may live in some other country. It is not that business executives are less ethical than their counterparts in the past but that their primary purpose now is to "provide shareholder profits." Even when churches and unions own stock in larger companies, they often invest in order to gain income, don't ask sufficient ethical questions or are told they have no right to ask ethical questions.

"Economy" originally meant "how a household is organized," said Corkery, and the Christian values on which an economy should be based are "valuing God's creation and people's contributions," not "the creation of wealth." People talk about the economic system as if it is "a framework from which we can't stray." But, she said, governments and companies planned and created the current system, and they can also plan an economy that operates "for the common good."

Elwil Beukes, Professor of Economics at King's University College in Edmonton, agreed that the economy should be about "the collective pursuit of the common good," but added, "That doesn't mean the government has to do it all."

Beukes favours "a responsible free enterprise economy, but added that "a responsible free enterprise economy is one that responds to human need." "The markets assist efficiency," Beukes continued, but "efficiency should not be pursued at all costs, disregarding all other values. You can have a very efficient killing machine, for instance."

The area of government control of the economy is one "where Christians differ quite a bit," said Carsten Hennings, Assistant Professor of Business Administration at Tyndale University College and Seminary in Toronto. "Christians have a strong investment in freedom," and there is a "creativity that comes from allowing people to pursue their goals," he said. No "planned/communist system" can achieve the efficiencies that a free market can. However, there is still "a need to set some boundaries." We simply can't assume that "the sum total of self-interested decisions" will produce good in the long run.

"Christians ought to have a preference for a market economy," said John Boersema, a Business Professor at Redeemer University College in Ancaster, Ont., and author of the book Political-Economic Activity to the Glory of God. However, he suggested that especially when economic entities get too large, it may be necessary to regulate them. Boersema also added that the free market system "doesn't require you to be selfish and greedy." Christians could use the freedom the market provides to serve others rather than trying to serve themselves.

How much intervention is best?

"Government is a huge part of the solution because government can help us be better," said Gunn. He pointed out a number of large-scale programs that only governments can do.

Many of the experts pointed out that Canada has escaped the worst of the current economic crisis because of better regulation. In Canada, "we have a mixture of free enterprise and government control." said Lorne Jackson, president of the Canadian National Christian Foundation.

For instance, while the US government was continuing to rack up annual budget deficits of hundreds of billions of dollars, the Canadian government has had surpluses in recent years. As well, Canadian banks are much more closely regulated than US banks. They didn't make as many risky loans, and they didn't buy enough risky loans from US banks to seriously affect their overall viability. "The Canadian systems are more tightly regulated, the banking culture is more conservative and the business climate is less open to risk taking," said Hennings.

Therefore, while the financial bubble has burst in the Canadian housing, commodity and stock markets, the financial crisis has not greatly affected the real Canadian economy. However, as the financial collapse elsewhere starts to affect the real economy there, it will inevitably affect Canada as well. In particular, Canada is going to feel the pinch as the US, Canada's best customer, stops buying Canadian products.

While all the experts we talked to agreed that there is a need for regulation, several also warned that this won't necessarily solve all problems. The collapse of the sub-prime housing market in the US was not caused by lack of regulation, but because the regulatory bodies in place failed to do their job, said Paul Williams, David J. Brown Family Associate Professor of Marketplace Theology and Leadership at Regent College in Vancouver.

In fact, part of this collapse was due to "government-mandated lending practices," said Hennings.

"The ability of government to fine-tune the economy is limited, "said Boersema, noting that governments have been unable to prevent periodic recessions.

Continue article >>

Sometimes, Williams said, we are "using the government as a surrogate conscience--we can't discipline ourselves, so we get the government to do it." He added that Christian faith "speaks to our desires and self-control. The church liturgy is about shaping us to desire what God wants, to be satisfied with God and what God provides." The economic crisis, therefore, is "a deeply spiritual problem" that cannot be easily solved by the government.

What should the government do?

All the experts agreed that the Canadian government needs to do some things to ease the current crisis, but what should it do.

For one thing, the government needs to "bolster consumer confidence," said Boersema, because if people lack confidence, they will stop spending, and this will make the downturn in the economy worse. "Expectations are as important as what the economy is really doing," added Paul Rowe, Associate Professor of Political and International Studies at Trinity Western University in Langley, B.C.

"Governments also have to do something to protect the vulnerable," Hennings said.

Gunn suggested that those unemployed need better access to Employment Insurance.

Even more important than providing a stimulus is for governments to not do anything that would make the crisis worse, said Rowe. What made the Great Depression of the 1930s so bad was not just that governments cut spending (the opposite of a stimulus) but that they also followed isolationist and protectionist policies that tried to export the problem. This attempt to "beggar thy neighbour," devastated worldwide trade and made everyone poorer

Should governments bail out financial institutions?

Corkery and Dillon pointed out that the $10.6 trillion bailout for banks in the US and Europe is over a hundred times the amount spent on development assistance to the global south last year.

Bailing out companies that got into trouble for making risky financial decisions will encourage them to make more risky decisions in future, said Boersema.

However, "we all need a dependable banking system," said Hennings. "Individual businesses can take risks, but banks shouldn't because we all rely on them."

Should the government bail out the big three automakers?

"One of the things the market does very well is to discipline poorly run companies," Hennings said. If the automakers can't become competitive and produce good products at a good price, it would be better to "let the market perform its discipline."

"Monopolies are inefficient," said Rowe, and unless the North American automakers make very significant changes, bailing them out will be futile. "The more subsidies they get, the more they will become Lada (the nationalized Russian automaker)."

But, Boersema added, "from a Christian perspective, if we look at the jobs losses and spin-off effects," the automakers are "too big to be allowed to fail." Therefore, guiding "an orderly run-down" of inefficient companies might be preferable.

Should the government stimulate the economy and how?

Boersema stated that the government should stimulate the economy as long as whatever it does has an immediate effect. Stimulus is needed now, but creating programs that wilkl continue into the long term will only create long-term debt. He also warned that money be spent wisely, on already approved infrastructure projects and highways, and not wasted on "things not crucial."

Boersema also noted that what is needed in one part of the country may not be needed somewhere else--a slowdown may actually help Alberta by making labour and housing more affordable there, while the slowdown causes real problems in the Ontario heartland and Newfoundland.

While recognizing the need for governments to spend to stimulate the economy and get it out of the current recession, Williams said a financial stimulus will solve the short-term problem but make the long-term problem worse. It will deepen the debt that is the cause of the long-term problem. Therefore, a short-term government deficit could be a good thing, but it is important that it does not become permanent.

How any stimulus package is spent is also crucial. "From a Christian perspective, we want to put more emphasis on employment," said Boersema.

"The most effective use" of deficit spending, said Hennings, would be to build "large-scale infrastructure, things that have lasting value. It would create jobs and leave something behind." Rowe said this is why the New Deal, which hired the unemployed to build parks and roads during the Great Depression, was a wise policy. Gunn also suggested that now would be the time to spend money on "visionary things" that would help the environment--retrofitting houses, building fuel-efficient cars, expanding public transit. Dillon noted that investing a million dollars will create 37 jobs in the renewable energy sector but only 7 jobs in the oil and gas sector. This would be good because, with the current focus on the economy, "there is a significant danger that the environmental issue is going to be shelved," warned Rowe.

Gunn also suggested that the stimulus should be directed to projects that help the most vulnerable, such as building social housing. He also suggested that now would be a good time to put a billion dollars into a national childcare program, which would create 20,000 jobs and allow parents to look for other work. He observed that the best economic stimulus is to help the poor. If government gives money to the poor, they spend it locally, while the middle and upper classes are more likely to save it or spend it elsewhere.

Corkery added that it is also important not to neglect the global south. The global south has been experiencing for decades much of the same economic dislocation the West is experiencing now, and for much the same reason--excessive debt foisted on the poor countries in the name of development aid. And the situation there is much worse--"they would be happy to have our problems."

December 11/2008