idea magazine

Banking on virtue

September / October 2010

Philip Davis, senior research fellow at the National Institute for Economic and Social Research and pastor of Penge Baptist Church, takes a broader view of the economic crisis...

The financial crisis is leaving deep scars on the nation's economy. There has been a good deal of attention paid to the origins of the crisis, but this has mostly measured the cause and effect of various events in economic terms. But this is a limited perspective on the situation. A broader view can be gained by looking at economics with a biblical understanding of humankind. This enables us to see not just how the immediate events preceding the crisis had such a damaging impact but why these events occurred at a deeper level and where responsibility lies. 

Taking risks

The crisis was preceded by an expansion of credit, financial innovation and widespread risk-taking. Since these were common features in past crises, why wasn't this one better forecast? The size and global integration of the US financial markets made it inevitable the crisis would become global, while the UK was particularly vulnerable because of its house-price boom.

An economic analysis of recent events would focus on the role of rational self-interest. This view of humanity can help us analyse policy issues and economic development, but is less useful for answering why the crisis occurred if everyone was supposedly behaving rationally. But focussing on efficiency ignores ethical judgements: in economic terms, irresponsibility and immoral behaviour can only be condemned if they irrationally conflict with individual self-interest.

Theology, like economics, looks at both how things are and how they ought to be. While made in the image of God, humanity is fallen. Choices and actions are often determined by self-interest, relationships can be spoiled by power and fear, humanity may exploit nature, and work can become toil. Wealth may be celebrated as indicating God's blessing, but it is the relationship with God that is central to a Christian understanding of well-being. Community life is a crucial aspect of humanity beyond the narrow ambition of individual fulfilment.

As beings created in the image of God, we have free choice but we also carry responsibility for our actions. The Bible has justice at its core, so taking a stand on economic issues should encourage godly stewardship, useful work, protecting the vulnerable and preserving family life. And while the state is ordained by God, its decisions should be scrutinised. 

Integrity required

The continued functioning of the banking system requires integrity and prudence on the part of bankers, and this was evidently lacking in recent years. A biblical view of human character shows a level of realism about our frequent irrationality that seems absent from much economic analysis.

The Bible speaks of irrationally idolatrous behaviour such as the Israelites worshipping handcrafted gods. And Jesus went further: "You cannot serve both God and money" (Matthew 6.24). The implication is that if our attitude to money is to see it as a goal in life - an end in itself - then it is ultimately an idol. Wealth can entice us into pride, selfishness and greed, leading society to wrongly value financial-sector employment above other forms of work.

Financial regulation tends to promote values that are essentially pious lists that can be ignored or circumvented. By contrast, theology highlights that values must be complemented with virtues such as honesty, diligence and putting others' interests first. These depend on character, which is only learned by example.

It is in this context that Christians are called to be salt and light in the banking system and throughout society. Conventional bank regulation is only part of the answer; it is not enough. It is essential that relationships are re-established as critical to generating a stable and socially beneficial financial system.

An alternative

In the run up to the crisis, consumer lenders actively encouraged the build-up of household debt, and the Church has a clear responsibility to offer a culture that offers an alternative to mere consumption. We must show our neighbours that that the desire for more should be tempered by long-term individual interests, wider social needs, environmental concerns and a focus on saving rather than borrowing. As Christians, we must consider whether we have become absorbed by a consumeroriented culture. And the Church must show mercy by offering support to those who are weak, vulnerable and in financial need.

Blame for the current situation should not solely be laid at the door of bankers; governments and households also showed greed, selfishness and impatience. Governments led the population into believing that economic growth was sustainable and gave the impression that risk had been abolished. And households were by no means obliged to take on so much debt, which for many led to catastrophe.

Banks and governments are often hailed as holding the answers to all our problems. But a biblical analysis of the current situation implies that all of us have a responsibility. We must recognise the idolatry in our economic system and condemn the structural injustices it generates. The aims of economics - wealth, consumption, power - stand in stark contrast to Jesus' proclamation of the kingdom of God: the law of love for God and neighbour and responsible stewardship. The Church should proclaim this vigorously.