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1 May 2014
Pope Francis: Labour Day appeal to politicians to remember human dignity and the common good
on the day in which the Church celebrates the Feast of Saint Joseph the worker, the day when nations across the world celebrate International Workers Day, Pope Francis reached out with this tweet: “I ask everyone with political responsibility to remember two things: human dignity and the common good”
In a world in which over 202 million people are unemployed and daily news reports bear witness to the dramatic reality of so many people who are bearing the brunt of the global economic crisis, since the very beginning of his pontificate Pope Francis has reiterated his concern and expressed his strong position regarding the dignity of labour
Here are some excerpts from some of Pope Francis’ discourses and speeches to workers and to those in position of responsibility in this field.
Meeting with Italian Steelworkers on 20 March 2014:
In the current economic climate and the difficulties facing the work environment, the Pope said, “it is necessary to reaffirm that employment is an essential reality for society, for families and for individuals. Work, in fact, directly regards the person, his/her life, freedom and happiness. The primary value of employment is the good of the human person,” because, the Pope explained, it “realizes a person,” intellectually by making demands on his or her attitudes and creative and manual abilities. Employment, then, should not be considered simply as a means for obtaining profit, he continued, “but above all a purpose that affects man and his dignity. And if there is no work, this dignity is wounded! Anyone who is unemployed or underemployed risks, in fact, being placed on the margins of society, becoming a victim of social exclusion. Many times it happens that people out of work - I think especially of the many unemployed young people today - slip into chronic discouragement or worse, apathy.”
In his address during the General Audience in St. Peter’s Square on 1 May, 2013:
“I wish to extend an invitation to solidarity to everyone, and I would like to encourage those in public office to make every effort to give new impetus to employment, this means caring for the dignity of the person” (…) “I would like to add a word about another particular work situation that concerns me: I am referring to what we could define as “slave labour”, work that enslaves. How many people worldwide are victims of this type of slavery, when the person is at the service of his or her work, while work should offer a service to people so they may have dignity. I ask my brothers and sisters in the faith and all men and women of good will for a decisive choice to combat the trafficking in persons, in which “slave labour” exists”
In his apostolic exhortation Evangelii Gaudium published on 24 November 2013:
"Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills." And reminding the faithful that living and sharing the joy of the Gospel necessarily demands that Christians have a deep and active concern for the plight of the poor who suffer so many injustices from an economy that puts profit above people ne writes: “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape”. "Human beings are themselves considered consumer goods to be used and then discarded."
*See the original source of this article:
Pope Francis: Labour Day appeal to politicians to remember human dignity and the common good
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At the invitation of the World Public Forum "Dialogue of Civilisations", Prof. Mofid is to participate at the Altai Forum 2014 and to present a paper: ‘Spirituality and Environmentalism: A Better Path to a Better World’
Altai Forum May 28-31, 2014
Society, Humanity and Nature Co-Development
The Altai Forum’s objective is to form a new agenda of international cooperation regarding the issues of an ecologically and spiritually oriented civilization. The Forum aspires to become a constant platform for the discussion of “green growth” issues, the dialogue of civilizations regarding ecological responsibility and global cooperation.
The Altai Region is a unique natural and geopolitical region, a historically and culturally important place where Eurasian civilizations, peoples and cultures have always met.
This forum is dedicated to the ecological, spiritual and cultural aspects of cooperation among peoples in the name of a common better future, harmonious interaction and development of society, man and nature. The topics of ecologically and spiritually oriented development may be combined with intergovernmental cooperation issues of the Greater Altai.
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Hyman Minsky. Photo: news.bbcimg.co.uk
Thirty years ago, when most economists were extolling the virtues of financial deregulation, privatisation and innovation, amongst others, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Wall Street encouraged businesses and individuals to take on too much risk, he believed, generating ruinous boom-and-bust cycles. The only way to break this pattern was for the government to step in and regulate the moneymen.
Many of Minsky’s adversaries regarded his “financial-instability hypothesis,” which he first developed in the nineteen-sixties, as radical, if not crackpot.
However, today, with the subprime crisis and its continuing and deepening devastating consequences, Minsky’s wisdom is being revisited and references to him have become commonplace on financial Web sites and in the reports of Wall Street analysts. Minsky’s hypothesis is well worth revisiting.
Hyman Minsky (1919-1996)
The currently observed turmoil in financial markets, which is believed to have been ignited by the collapse of the subprime mortgage market, has recently brought to prominence the ideas of Hyman Minsky (1919–1996), a professor of financial economics at Washington University in St. Louis, and a distinguished scholar at the Levy Economics Institute of Bard College. Many commentators are of the view that Minsky's framework of thinking accurately anticipated the current financial crisis.
Minsky considered himself a Keynesian. He rejected conventional economic ideas such as the efficient market hypothesis in favour of what he called the financial instability hypothesis. Minsky held that, over a prolonged period of prosperity, investors take on more and more risk, until lending exceeds what borrowers can pay off from their incoming revenues. When over-indebted investors are forced to sell even their less-speculative positions to make good on their loans, markets spiral lower and create a severe demand for cash—an event that has come to be known as a "Minsky moment."
Minsky grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented.
Today, as Duncan Weldon has noted, his long out-of-print books are suddenly in high demand with copies changing hands for hundreds of dollars - not bad for densely written tomes with titles like Stabilizing an Unstable Economy.
Senior central bankers including current US Federal Reserve chair Janet Yellen and the Bank of England's Mervyn King began quoting his insights. Nobel Prize-winning economist Paul Krugman named a high profile talk about the financial crisis- The Night They Re-read Minsky.
Here are five of Minsky’s ideas:
Stability is destabilising
Minsky's main idea is so simple that it could fit on a T-shirt, with just three words: "Stability is destabilising."
Most macroeconomists work with what they call "equilibrium models" - the idea is that a modern market economy is fundamentally stable. That is not to say nothing ever changes but it grows in a steady way.
To generate an economic crisis or a sudden boom some sort of external shock has to occur - whether that be a rise in oil prices, a war or the invention of the internet.
Minsky disagreed. He thought that the system itself could generate shocks through its own internal dynamics. He believed that during periods of economic stability, banks, firms and other economic agents become complacent.
They assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.
Three stages of debt
Minsky had a theory, the "financial instability hypothesis", arguing that lending goes through three distinct stages. He dubbed these the Hedge, the Speculative and the Ponzi stages, after financial fraudster Charles Ponzi.
In the first stage, soon after a crisis, banks and borrowers are cautious. Loans are made in modest amounts and the borrower can afford to repay both the initial principal and the interest.
As confidence rises banks begin to make loans in which the borrower can only afford to pay the interest. Usually this loan is against an asset which is rising in value. Finally, when the previous crisis is a distant memory, we reach the final stage - Ponzi finance. At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. Again this is underpinned by a belief that asset prices will rise.
The easiest way to understand is to think of a typical mortgage. Hedge finance means a normal capital repayment loan, speculative finance is more akin to an interest-only loan and then Ponzi finance is something beyond even this. It is like getting a mortgage, making no payments at all for a few years and then hoping the value of the house has gone up enough that its sale can cover the initial loan and all the missed payments. You can see that the model is a pretty good description of the kind of lending that led to the financial crisis.
Minsky moments
The "Minsky moment", a term coined by later economists, is the moment when the whole house of cards falls down. Ponzi finance is underpinned by rising asset prices and when asset prices eventually start to fall then borrowers and banks realise there is debt in the system that can never be paid off. People rush to sell assets causing an even larger fall in prices.
The Minsky moment: Like the moment when the cartoon character
realises they're running on thin air
Photo: news.bbcimg.co.uk
It is like the moment that a cartoon character runs off a cliff. They keep on running for a while, still believing they're on solid ground. But then there's a moment of sudden realisation - the Minsky moment - when they look down and see nothing but thin air. Then they plummet to the ground, and that's the crisis and crash of 2008.
Finance matters
Until fairly recently, most macroeconomists were not very interested in the finer details of the banking and financial system. They saw it as just an intermediary which moved money from savers to borrowers.
This is rather like the way most people are not very interested in the finer details of plumbing when they're having a shower. As long as the pipes are working and the water is flowing there is no need to understand the detailed workings.
To Minsky, banks were not just pipes but more like a pump - not just simple intermediaries moving money through the system but profit-making institutions, with an incentive to increase lending. This is part of the mechanism that makes economies unstable.
Preferring words to maths and models
Since World War Two, mainstream economics has become increasingly mathematical, based on formal models of how the economy works.
To model things you need to make assumptions, and critics of mainstream economics argue that as the models and maths became more and more complex, the assumptions underpinning them became more and more divorced from reality. The models became an end in themselves.
Although he trained in mathematics, Minsky preferred what economists call a narrative approach - he was about ideas expressed in words. Many of the greats from Adam Smith to John Maynard Keynes to Friedrich Hayek worked like this.
While maths is more precise, words might allow you to express and engage with complex ideas that are tricky to model - things like uncertainty, irrationality, and exuberance. Minsky's fans say this contributed to a view of the economy that was far more "realistic" than that of mainstream economics.
*The above excerpts are taken from an article by Duncan Weldon, which was first published at the BBC News Magazine on 24 March 2014
BBC News - Did Hyman Minsky find the secret behind financial crashes?
For further reading:
The Inconvenient Truth: Capitalism with No Moral Compass
The Destruction of our World and the lies of Milton Friedman