Does Finance Have a Soul?

By Satins, Antoine de | Review of Business, Summer 1998 | Go to article overview
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Does Finance Have a Soul?


Satins, Antoine de, Review of Business


Christianity has always been suspicious of the world of finance and money. Part of this comes from an incomplete understanding of the role of finance in a modern market economy. However, part of it comes from the ethical neutrality of finance. Finance is at best a means to an end and gets into trouble when it becomes an end in itself The Catholic social thought tradition suggests valid ends -- solidarity, the common good, universal destination of goods - which can provide finance with a meaningful end to strive towards.

To frame in this way the question of relating the Christian and financial worlds can seem provocative, since the Christian and financial worlds often look to each other with suspicion. We are still molded by a culture where the financial world is considered by definition one of immorality: "No one can serve two masters; God and Mammon," the Scriptures tell us. I believe we must move beyond this attitude of distrust or instinctive rejection in order to attempt to understand the functioning of this new economic world in which we all live to varying degrees, the world of globalization, marked notably by the developments in the financial sphere. But understanding also means bringing to light the underlying ethical stakes created by this new world's emergence. The growing awareness is that financial developments do not happen without posing ethical and moral questions. Financial markets have shown their influence in devaluing currencies. We've seen this in Europe and South America in recent years, and in Southeast Asia most recently. We have realized that an isolated "trader" has the power of modem finance techniques to ruin a financial institution, as seen in Singapore two years ago with the "Barings scandal." This growing awareness explains why we need to find some criteria of individual and collective judgment that can guide behavior.

I would thus frame my speech around three stages: I would try to show firstly that modem finance must not be subject to global condemnation but that, secondly, we must have a sharply sensitive conscience of the ethical risks associated with the modem financial world. I would propose to you, thirdly, and finally, some elements to answer the most difficult part of the question: what must we and can we do, as individuals, in the capacity of our different levels of responsibility, whether in finance or not?

Understanding the Role of Finance

I should begin with a comment on methodology: finance and money are two different realities. It is clear that when one speaks of finance one immediately thinks of money and of the relation we all have with money. The two subjects are connected, money being the raw material of finance, but modem finance presents recent characteristics that have greatly changed its nature and its influence.

The traditional role of finance is rather simple: imagine a kind of black box that allows the intermediation of, on one side savings, that is disposable capital, and on the other side investments, that is, the needs of the same capital. The role of finance is to ensure that the savings resources go to the needs of investment.

What has happened in the past twenty years? First, the size of the box has completely changed since the movement of capital has greatly increased, notably at the international level. Second, the composition of the box has also changed. It went the way of what happened previously in commerce. We went from retail commerce, with complicated networks (wholesaler, partial wholesaler, retailer), to the hypermarket. A whole series of intermediaries have been suppressed. In finance, we have been following the same process to a financial system without intermediaries. Savings and investment are face to face, more directly through what we call the "markets." Before, it took place essentially through banks. Of course finance intermediaries remain, but the weight of markets has greatly increased.

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