Pope proposes new financial order guided by ethics

VATICAN CITY: Pope Benedict XVI called Tuesday for a new world financial order guided by ethics and the search for the common good, denouncing the profit-at-all-cost mentality blamed for bringing about the global financial meltdown.

In the third encyclical of his pontificate, Benedict pressed for reform of the United Nations and international economic and financial institutions to give poorer countries more of a say in international policy.

"There is urgent need (for) a true world political authority" that can manage the global economy, guarantee the environment is protected, ensure world peace and bring about food security for the poor, he wrote.

The document "Charity in Truth," was in the works for two years, and its publication was repeatedly delayed to incorporate the fallout from the crisis. It was released a day before leaders of the Group of Eight industrialized nations meet to coordinate efforts to deal with the global meltdown, signaling a clear Vatican bid to prod leaders for a financially responsible future and what it considers a more socially just society.

"The economy needs ethics in order to function correctly — not any ethics, but an ethics which is people centered," Benedict wrote.

The German-born Benedict, 82, has spoken out frequently about the impact of the crisis on the poor, particularly in Africa, which he visited earlier this year. But the 144-page encyclical, one of the most authoritative documents a pope can issue, marked a new level of church teaching by linking the Vatican's long-standing social doctrine on caring for the poor with current events.

While acknowledging that the globalized economy has "lifted billions of people out of misery," Benedict accused the unbridled growth of recent years of causing unprecedented problems as well, citing mass migration flows, environmental degradation and a complete loss of trust in the world market.

He urged wealthier countries to increase development aid to poor countries to help eliminate world hunger, saying peace and security depended on it. He specified that aid should go to agricultural development to improve infrastructure, irrigation systems, transport and sharing of agricultural technology.

At the same time, he demanded that industrialized nations reduce their energy consumption, both to better care for the environment and to let the poorer have access to energy resources.

"One of the greatest challenges facing the economy is to achieve the most efficient use — not abuse — of natural resources, based on a realization that the notion of 'efficiency' is not value-free," he wrote.

Benedict said that the drive to outsource work to the cheapest bidder had endangered the rights of workers, and he demanded that workers be allowed to organize in unions to protect their rights and guarantee steady, decent employment.

Benedict called for a whole new financial order — "a profoundly new way of understanding business enterprise" — that respects the dignity of workers and looks out for the common good by prioritizing ethics and social responsibility over dividend returns.

The Rev. Drew Christiansen, editor of the Jesuit monthly America and a leading social ethicist, said he was most intrigued by the pope's call for a new sector of society to work alongside government, market and civil society: for-profit entities that work for the common good, which Christiansen suggested could include "fair trade" product makers and micro-finance institutions.

"I am not sure these enterprises yet constitute a sector of economic life," Christiansen wrote on his blog. "But they are harbingers of a different, conscientious kind of economics that would not repeat the mistakes of the last 30 years."

Kirk Hanson, a business ethics professor at Santa Clara University, said that while the encyclical went into some detail about the rights of workers and the duties of the state in protecting those rights, there was precious little about how an actual CEO leader should go about business.

"It's almost as if the church has so little trust in business leaders that it speaks to the political leaders urging regulation and the consumers urging voting with their buying power," said Hanson, who chaired hearings leading up to a similar U.S. Catholic bishops' statement on capitalism and social justice in the 1980s.

Benedict has written two previous encyclicals in his four years as pope: "God is Love" in 2006 and "Saved by Hope" in 2007.

The pope's focus on world finance raised questions about the state of the Vatican's own books.

The Vatican was implicated in the 1980s collapse of Banco Ambrosiano, in which the Vatican's bank was the major shareholder, and it agreed to pay $250 million to Ambrosiano's creditors, while denying any wrongdoing.

At the start of the meltdown in October, a top Vatican bank official assured that its deposits were safe and had no liquidity problems, saying the bank had stayed away from derivatives, the financial instruments blamed in part for the crisis.

Other officials have said 80 percent of the Vatican's investments are in low-yield government bonds and 20 percent in stocks and that the Vatican does not invest in companies that produce arms or contraceptives.

The Vatican in its annual financial statement issued Saturday said it ran a deficit in 2008 for the second straight year, posting a euro900,000 ($1.28 million) loss, compared with a loss of euro9.06 million a year earlier.