Pierre de Lauzun won an award from the Vatican for “Finance, un regard chrétien”. The French banker’s book, not yet translated into English but whose title means “Finance: A Christian Perspective”, is relevant beyond enthusiasts for Catholic social teaching and specialists in the history of usury. He presents a cogent challenge to the dominant view of markets, and to the typical practices of the financial industry.
When economists talk of markets, they are almost invariably thinking of the abstract interactions of what they call rational actors, people who wish to maximise their wealth and leisure time, and minimise the labour needed to acquire those coveted goods. In the standard economist’s model, the participants are expected to obey the law, but the markets themselves are mechanical, not moral.
De Lauzun presents a quite different vision, based on the actual history of markets and the reflections of pre-modern philosophers. In this analysis, virtue is at the centre, not the periphery. Markets are not supposed to be places where selfish individual sellers and buyers fight it out, but communities in which all strive to establish fair prices. For a market to work well, the participants must share a commitment to justice.
Profits are legitimate, but they should neither be unduly high nor the highest goal of participants. The main purpose of business, as of any part of human life, should be to do good. While individuals will always fall short of that standard, without the common ideal markets will serve only the greedy and become social tyrants.
Goodness and self-interest are not exactly contradictory, but de Lauzun argues that healthy markets require a shared spirit of social solidarity and even sacrifice. He approvingly cites the 12th century draper Omobono Tucenghi, declared a saint only two years after his death because of his fair dealing and generosity to the poor.
The defence of real markets against the distorted version presented by economists is persuasive, but the book’s main goal is even more ambitious. De Lauzun wants to defend his own trade, finance, from the common accusations of being rapacious and structurally anti-social.
His case is based on the valid social purposes of finance. It allows people to create a bridge between the present and future economy, by funding investments and protecting against adversities. It permits numerous individuals to share in fruits of prosperity. It can encourage the responsible use of society’s assets.
De Lauzun argues that, like any market, financial ones are undermined by a too narrow vision of purpose, and by greed. For finance to work, it must be treated as a helpful tool, not idolised. Participants should strive to find just prices, and should not expect enormous rewards.
The vision is both tempting and somewhat persuasive. Certainly, the modern economy would not have been able to produce its great prosperity without finance. Also, as de Lauzun argues, financial markets are not necessarily less fair or more corrupt than governments or even banks. Trading in stocks, like trading in ribbons and spices, can promote prosperity and protect integrity.
His basic ethical argument is also appealing. The widespread social approval of vast gains from financial speculation, whether on house prices or stock markets, undercuts the generally virtuous mission of the business. And, as de Lauzun recognises, the inevitable uncertainty of tomorrow leaves too ample space for greedy dreams.
It is far from clear, however, that the current structures of finance could be cleaned up simply by integrating, or re-integrating, a commitment to virtue and social responsibility. Too much of the existing system relies on unrealistic claims of knowledge of the future, on promises of returns that are not justified by risks, and on allowing the house to gain from the gambling instincts of their clients.
In addition, de Lauzun pays little attention to the appropriate role of finance in modern economies, where companies fund almost all their investments through retained profit and governments can issue money rather than debt to cover fiscal deficits. Perhaps the first step towards a more virtuous financial sector is backwards, towards a smaller role for this activity.