Regulating Finance: Poachers Turned Gamekeepers Patrick Riordan SJ Vatican watchers have been surprised recently by a new publication addressing issues of justice in financial affairs. What is surprising is not that the Vatican might express views on such a topic: that has been an essential element in the tradition of Catholic Social Teaching (CST). The novelty is that two different departments of the Vatican administration collaborate in a joint publication. The Congregation for the Doctrine of the Faith (CDF) and the Dicastery for Promoting Integral Human Development have together issued the document with the long but modest title Considerations for an Ethical Discernment Regarding Some Aspects of the Present EconomicFinancial System.1 Why the CDF would engage in such reflection is curious. Normally, this congregation is concerned with ensuring the orthodoxy of doctrine proposed to the faithful for their belief. The other dicastery replaces the former Pontifical Council for Justice and Peace (among other bodies), which has traditionally addressed such concerns as ethics in the economy. Why the CDF would now also concern itself with the ethics of finance provokes some questions. Is it to lend weight to the authority of CST on such matters? Is it to reinforce Pope Francis’s agenda of reforming the Vatican’s own banking and commercial practices? Or is it perhaps to underline the urgency of responding to the instability of global financial markets as we approach the tenth anniversary of the collapse of Lehman Brothers? The document’s reflection on the volatility of finance markets bemoans the lack of regulation, with resulting financial crises affecting the real economy (§§6, 14, 21). The unscrupulous behaviour of bankers has been revealed in a number of scandals which reached public attention, and sometimes prosecution and/or fines levied on the banks, as for instance the 2011 discovered manipulation of the LIBOR (London Interbank Offered Rate), and the marketing of expensive and unnecessary products such as PPI (Payment Protection Insurance) to trusting bank customers. The statement Patrick Riordan Studies • volume 107 • number 428 442 names such examples of abuse reflecting the inadequate regulation of the sector, remarking on the LIBOR manipulation: ‘The fact that this could have happened with impunity for many years shows how fragile and exposed to fraud is a financial system insufficiently controlled by regulations, and lacking proportionate sanctions for the violations which its stakeholders often encounter’ (§27). The repeated demand for more regulation echoes a shrewd comment by Pope John Paul II in his encyclical Centesimus Annus, in which he commemorated Leo XIII’s Rerum Novarum on its centenary in 1991. The context was the disintegration of the Soviet Union. Defenders of liberal markets were celebrating their triumph over their opponents, the advocates of planned or managed economies, as typified by socialism. Pope John Paul expressly raised the question: ‘Can it perhaps be said that, after the failure of Communism, capitalism is the victorious social system, and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this the model which ought to be proposed to the countries of the Third World which are searching for the path to true economic and civil progress? The answer is obviously complex. If by “capitalism” is meant an economic system which recognises the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector, then the answer is certainly in the affirmative … But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality, and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative.’2 The Pope’s answer is positive, specifying as a condition that economic freedom must be ‘circumscribed by a strong juridical framework’. What is that strong juridical framework? Is it sufficient that property rights be protected (commonly agreed to be a precondition for the market economy) and that contracts be enforceable? The temptation is to assume that...