Dr. Samuel Gregg is director of research at the Acton Institute, the author of several books and numerous articles, and a frequent contributor to Catholic World Report. He has written and spoken extensively on questions of political economy, economic history, ethics in finance, and natural law theory. Dr. Gregg has an MA in political philosophy from the University of Melbourne, and a Doctor of Philosophy degree in moral philosophy and political economy from the University of Oxford.
Dr. Gregg’s previous books on economics include Economic Thinking for the Theologically Minded (2001), The Commercial Society (2007), and Tea Party Catholic: The Catholic Case for Limited Government, a Free Economy and Human Flourishing (2013) as well as monographs including A Theory of Corruption (2004), and Banking, Justice, and the Common Good (2005). His most recent book is For God and Profit: How Banking and Finance Can Serve the Common Good (The Crossroad Publishing Company, 2016), which is described by Cardinal George Pell (Prefect of the Secretariat for the Economy), who wrote the Foreword, as “a formidable book, packed with interesting and regularly unacknowledged and unknown historical information, especially about the contribution of Christian thinking to the development of banking, the rise of the markets and Western prosperity.”
Dr. Gregg recently corresponded with Carl E. Olson, Editor of CWR, about the book.
CWR: Is it fair to say that Church teaching about money and economics is widely misunderstood and often misrepresented? If so, what are some of the reasons?
Dr. Samuel Gregg: Catholic social teaching outlines clear principles for people who want to addresses issues surrounding finance and economic life in a way that takes human flourishing seriously. These include the principles of the dignity of the person, solidarity, subsidiarity, the preferential option for the poor, the principle of common use, the principal of private property, to name just a few. These principles are drawn from Revelation and the natural law. But they are not well understood by some Catholics. One reason for this is that they tend to be buried—including, I must say, in the social encyclicals—amidst a range of historically-contingent reflections and the offering of prudential judgements on present-day affairs.
The English language version of Rerum Novarum (1891) is about 14,000 words. Laudato Si’ (2015) is approximately 40,000 words. More than one person has suggested that this partly reflects the magisterium entering into the details of far too many economic subjects, the vast majority of which Catholics are free to disagree about among themselves. If we’re interested in equipping lay Catholics to think through economic issues, more time should be invested in explaining principles of Catholic social teaching and how they relate to each other. Less time, I’d argue, should be spent addressing questions upon which Catholics may legitimately hold a variety, even sometimes quite different views.
CWR: What specific questions motivated you to write this book?
Dr. Gregg: There were three reasons I decided to write For God and Profit. First, our financial systems are not in good shape these days. The second reason is that modern Catholic social teaching says relatively little about money and the financial sector. This is a gap that, at the level of principle, requires filling. The third reason is that commentary on issues concerning finance and money requires some understanding of how these areas of the economy work.
It’s perfectly legitimate for the Church to speak about questions such as, for example, speculation. But to do so in a way that’s credible, it’s good for Christians to have some grasp of the roles played by speculation in modern market economies. Speculation, for the most part, serves to manage and even reduce risk in the economy over the long-term. Can speculation go wrong? Absolutely. Wholescale condemnations of speculation as a financial tool usually, however, indicate that the condemner doesn’t quite understand its function. An economy without speculation will be, I can assure you, far more unstable and less productive in the long-term.
CWR: As the subtitle indicates, this is in many ways a book about Catholic social doctrine. And what are some of the essential texts when it comes to money and related matters?
Dr. Gregg: The book is ecumenical in its outlook but, as many Evangelical and Eastern Orthodox Christians will tell you, Catholicism has the longest and most developed tradition of thinking through economic and social questions. So many of the book’s sources are Catholic. That said, the modern social encyclicals don’t have much to offer in reflecting upon money and finance. Rather, it’s the thought of medieval and early-modern scholastic thinkers that is by far the richest. Here you find very sophisticated analyses of money, money-markets, banking, the nature of usury, the role played by interest, etc. Ironically, some of the best were written by Franciscans—men vowed to poverty. Once you get past the anti-Semitic rants that often characterized these writings, you realize they contain much wisdom about the workings of money and how banking and finance can be made more fruitful.
Many of these reflections are contained in confessional manuals. They are also deeply imbedded in, first, natural law accounts of the morality of human choice and action and, second, a profound understanding of how these practices and institutions worked. The subsequent insights are just as applicable today as they were when capitalism first emerged: i.e., in the medieval European world.
CWR: You mentioned usury. Usury is an oft-mentioned and controversial topic when it comes to Church history. What exactly is usury and what has the Church taught about it? Has that teaching changed?
Dr. Gregg: Usury remains as wrong today as it was in the first century. The question is what constitutes usury. The Jesuit theologian Thomas Divine illustrated decades ago that blanket condemnations of charging any interest whatsoever on any loan whatsoever are hard to find.
Usury, to use the best and most concise definition, is the act of taking profit on a loan without just title. Those last three words are crucial. There are just titles to profit on loans. Christian thinkers have invested much time over the centuries discerning what is and isn’t a just title. Perhaps the most important developments occurred in the Middle Ages as surplus capital became widely available during what the economic historian Robert Lopez called the Commercial Revolution of the time.
Scholastic thinkers grasped that money-as-capital is very different from money-simply-as-a-means-of-exchange. The former is capable of being used to generate more wealth; the latter is not. When I loan someone my capital, I’m effectively giving up the profit I could have made by using that capital myself. Hence, I’m entitled to interest to compensate me for my loss. Many other titles were subsequently established over time as theologians studied different types of loans and developing their understanding of the nature of capital.
The usury question is a great example of an authentic development of doctrine, not least because it involves no contradiction in what had been previously stated on the subject. That’s one of the sure signs that a change represents a doctrinal development rather than a corruption of church teaching.
CWR: You point out that Christianity played a key role in the rise of modern economies, especially regarding capital. What are some examples of this Christian influence on the Commercial Revolution?
Dr. Gregg: Through exploring the usury issue, Christian theologians, as the medieval historian Diana Wood observed, “sanctioned many of the monetary considerations that underlie modern economies.” Among other things, these include money-markets, sophisticated insurance contracts, and risk-sharing. Another historian of the period states that “it is probable that the scholastic theory may have encouraged bankers to participate as risk-sharers in commercial ventures.” Without this risk-sharing and understanding how to mitigate risk, intensive economic development would have been much, much slower.
But the general effect was to help shift the epicenter of economic life away from a focus upon natural resources and agriculture to one in which capital, and finance played a central role. It thus steered liquid capital away from consumption loans and towards economically productive enterprises. That translated into economic growth and a breakaway from the static economic arrangements and mass poverty that had prevailed for centuries.
CWR: How is the Church’s understanding of financial markets and capital different from the capitalism about which the Church has said many critical things since the late 1800s?
Dr. Gregg: If anything, the Church’s grasp of financial markets and capital was much stronger in the past. Another present gap in knowledge is the role played by monetary policy in economic life. Modern encyclicals don’t indicate deep reflection on these matters. That’s odd because the financial sector plays an even bigger role in economic life today than it did, say, forty years ago. As we all know, finance can become severely dysfunctional. But most Christian commentary on these matters doesn’t even engage the principles that should guide people working in this area of the economy.
My book doesn’t try and provide all the answers. But it does try to remind Christians of their rich history of thinking through the myriad questions surrounding money and finance. It also seeks to provide a framework, grounded in Revelation and natural law, for engaging these matters today.
CWR: In what ways can work in the financial sector serve the common good?
Dr. Gregg: From the beginning of the first forms of capitalism in Northern Italy, Flanders and other parts of medieval Europe from the eleventh century onwards, many merchants involved in finance wrote the words Deus enim et proficuum (For God and Profit) in the upper corners of their accounting ledgers. Others began the writing of contracts with the formula A nome di Dio e guadangnio (In the Name of God and Profit).
This wasn’t some type of prosperity gospel. One of the best scholars of this period, the Belgian economic historian Raymond de Roover, observes that such scribbles were neither “an expression of cynicism” nor “a sign of materialism.” They reflected their authors’ conviction that banking and finance were not only economically useful endeavors. In pursuing profit, they were in some way giving glory to God by helping to unfold the full potential of the universe He created.
Another way of thinking about it is through what the Church calls “the universal destination of material goods.” This has nothing to do with socialism or even social democracy. The principle of common use shouldn’t be understood as some type of end-state of affairs in which a perfect distribution of material wealth is achieved once and for all and never changes. This would be to deny the truth of human freedom and the fact that our responsibilities, obligations and holdings of wealth are in a constant state of flux.
What matters is that we put our wealth to work so that the conditions that promote the flourishing of every person and community are enhanced. Some of this should be occur through Christians using their resources for charitable purposes. But another way of deploying such wealth is through investment. Those working in finance put the surplus capital of millions of people to work in ways that benefit millions of others. It establishes links between the economic present and economic future of individuals and communities. It also manages risk and develops methods for continually enhancing the management of risk over the short, medium and long-term.
None of these functions are exercises in radical individualism. Finance certainly helps make us independent. Yet it also increases, and is a sign of, humans’ interdependence. Without people, companies, and institutions willing to invest in each other, sell financial products and services to each other, loan to and borrow from each other, or speculate on the products and services produced by other people, there would be no financial markets. There’s no reality to financial markets beyond these individual and institutional relationships.
Herein lies the fundamental legitimacy for modern finance systems. Insofar as they help to facilitate the allocation of resources among individuals, households, entrepreneurs, businesses, and governments, finance can help us to realize the principle of common use on a national and international scale. Through private finance, anyone can invest their surplus capital in investment firms that place capital in businesses whose work helps to spur economic development throughout the world. The same person can also invest some of his capital in a retirement fund designed to help pay for his retirement. Likewise the financial system allows government institutions to, first, issue bonds that attract some people’s surplus capital, and, second, use the capital raised through bond-issues to invest in projects ranging from public works to national defense and debt-restructuring. In this way, governments can increase their revenues in ways that don’t require extra taxation.
CWR: And the future?
Dr. Gregg: The financial sector and capital markets aren’t in good shape right now. Reform is needed. I don’t think, however, that more regulation is the best way. It is often counterproductive. But if there is anything that I hope Christians take away from the book, it’s that we need dynamic financial sectors and capital markets, especially if we want to get and keep people out of poverty.
Pointing out the obvious moral and economic problems in much of the financial sector today is vital. But passionate, even wild denunciations of finance by religious leaders who clearly have very little knowledge of the area is unhelpful. Providing ethical guidance to people working in these sectors requires some understanding of the financial sector. It makes far more credible efforts to help people understand the good that can be realized through finance: a good that goes beyond the economic and embraces the all-round human flourishing to which God calls all of us.